2007 REPORTS AND FINANCIAL STATEMENTS

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Credito Valtellinese Società Cooperativa Registered Offices in Piazza Quadrivio 8 — Sondrio, Italy

Tax code and Sondrio Company Register No. 00043260140 — Register of Banks No. 489 Parent Company of the Credito Valtellinese Banking Group — Register of Banking Groups No. 5216.7

Web address: http://www.creval.it E-mail: creval@creval.it Data as at 31/12/2007: Share Capital EUR 562,060,674 – Reserves EUR 923,576,649

REPORTS AND FINANCIAL STATEMENTS AS AT 31 DECEMBER 2007

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REPORTS AND CONSOLIDATED FINANCIAL STATEMENTS OF THE CREDITO VALTELLINESE BANKING GROUP

- Highlights and Financial Statement Ratios of the Group - Creval Group organisational model - Company Officers of Creditor Valtellinese - Notice of Call - Chairman’s Letter

BOARD OF DIRECTORS’ REPORT ON GROUP OPERATIONS

MACROECONOMIC REFERENCE CONTEXT

MAP OF THE GROUP AND THE AREA OF JOINTLY CONTROLLED AND ASSOCIATED COMPANIES

MANAGEMENT PERFORMANCE IN THE PERIOD - ANALYSIS OF THE MAIN BALANCE SHEET AGGREGATES

MANAGEMENT PERFORMANCE IN THE PERIOD - ANALYSIS OF THE MAIN INCOME STATEMENT AGGREGATES

STRATEGIC PLAN OBJECTIVES AND RESULTS FOR THE PERIOD

ANALYSIS OF RESULTS AND OPERATIONS BY BUSINESS SEGMENT

HUMAN RESOURCES MANAGEMENT AND NEW LEGISLATION

QUALITY AND SOCIAL RESPONSIBILITY

RATINGS OF THE CREVAL GROUP COMPANIES

STOCK MARKET PERFORMANCE OF LISTED SECURITIES AND FINANCIAL INDICATORS

HIGHLIGHTS FOR THE SUBSIDIARIES

AUDIT

SIGNIFICANT EVENTS OCCURRING AFTER THE CLOSE OF THE FINANCIAL YEAR

BUSINESS FORECAST

CLOSING REMARKS CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEET CONSOLIDATED INCOME STATEMENT STATEMENT OF CHANGES IN CONSOLIDATED SHAREHOLDERS’ EQUITY CONSOLIDATED CASH FLOW STATEMENT – DIRECT METHOD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

PART A – ACCOUNTING POLICIES

PART B – INFORMATION ON THE CONSOLIDATED BALANCE SHEET

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PART C – INFORMATION ON THE CONSOLIDATED INCOME STATEMENT

PART D – SEGMENT REPORTING

PART E – INFORMATION ON RISKS AND HEDGING POLICIES

PART F – INFORMATION ON CONSOLIDATED EQUITY

PART G – BUSINESS COMBINATIONS

PART H – TRANSACTIONS WITH RELATED PARTIES

PART I – SHARE-BASED PAYMENTS

OTHER DOCUMENTS

CONSOLIDATED FINANCIAL STATEMENTS DISCLOSURE PURSUANT TO ART 81-TER OF CONSOB REGULATION NO. 11971 OF 14 MAY 1999, AS AMENDED INDEPENDENT AUDITORS’ REPORT

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CREDITO VALTELLINESE REPORT AND FINANCIAL STATEMENTS - Highlights and Financial Statement Ratios BOARD OF DIRECTORS’ REPORT ON OPERATIONS PARENT COMPANY CENTENARY

MANAGEMENT PERFORMANCE IN THE PERIOD - ANALYSIS OF THE MAIN BALANCE SHEET AGGREGATES MANAGEMENT PERFORMANCE IN THE PERIOD - ANALYSIS OF THE MAIN INCOME STATEMENT AGGREGATES

MANAGEMENT AND INSTITUTIONAL ASPECTS PROPOSALS TO THE SHAREHOLDERS’ MEETING

CLOSING REMARKS

SEPARATE FINANCIAL STATEMENTS

BALANCE SHEET INCOME STATEMENT STATEMENT OF CHANGES IN EQUITY CASH FLOW STATEMENT – DIRECT METHOD

NOTES TO THE FINANCIAL STATEMENTS

PART A – ACCOUNTING POLICIES

PART B – INFORMATION ON THE BALANCE SHEET

PART C – INFORMATION ON THE INCOME STATEMENT

PART D – SEGMENT REPORTING

PART E – INFORMATION ON RISKS AND HEDGING POLICIES

PART F – INFORMATION ON EQUITY

PART G – BUSINESS COMBINATIONS

PART H – TRANSACTIONS WITH RELATED PARTIES

PART I – SHARE-BASED PAYMENTS

OTHER DOCUMENTS

REPORT OF THE BOARD OF STATUTORY AUDITORS TO THE SHAREHOLDERS’ MEETING

CORPORATE GOVERNANCE REPORT

SEPARATE FINANCIAL STATEMENTS DISCLOSURE PURSUANT TO ART 81-TER OF CONSOB REGULATION NO. 11971 OF 14 MAY 1999, AS AMENDED

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INDEPENDENT AUDITORS’ REPORT ATTACHMENTS

STATEMENT OF REVALUATIONS

STATEMENT OF SIGNIFICANT EQUITY INVESTMENTS IN UNLISTED COMPANIES

STATEMENT OF FEES PAID FOR INDEPENDENT AUDITOR SERVICES

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Guide to consultation

The Credito Valtellinese consolidated and separate financial statements as at 31 December 2007, with related accompanying documents, together form a true “information system”.

They were prepared in accordance with IAS/IFRS international accounting standards adopted by the European Union, with format and information according to Bank of Italy Circular no. 262 of 22 December 2005, also taking into account CONSOB’s regulations for listed companies.

This information system aims not only to meet formal legal requirements, but is also the means of informing Shareholders, the financial community and the general public as a whole of the bank and Group's operations.

Consequently, in its detailed illustrations of the different management aspects, the document intends to represent corporate events for the 2007 financial year.

To facilitate reading, the chapters are preceded by a brief note on the reference regulations and its objectives.

We wish you pleasant reading.

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REPORTS AND CONSOLIDATED FINANCIAL STATEMENTS OF THE CREDITO VALTELLINESE BANKING GROUP

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Highlights and Financial Statement Ratios of the Group

BALANCE SHEET DATA 31/12/2007 31/12/2006 % change

(in thousands of EUR) Loans to customers 13,754,333 11,445,785 20.17%

Financial assets and liabilities 1,346,699 1,329,898 1.26%

Investments in associates and companies subject to joint control 201,690 166,830 20.90%

Total assets 17,228,262 14,901,453 15.61%

Direct deposits from customers 13,708,656 12,073,699 13.54%

Indirect deposits from customers 12,137,335 12,370,896 -1.89%

of which: - Managed savings 5,870,400 6,043,053 -2.86%

Total deposits 25,845,991 24,444,595 5.73%

Shareholders’ equity 1,576,655 881,859 78.79%

BALANCE SHEET RATIOS 31/12/2007 31/12/2006Indirect deposits from customers / Total deposits 47.0% 50.6%

Managed savings / Indirect deposits from customers 48.4% 48.8% Direct deposits from customers / Total liabilities 79.6% 81.0% Customer loans / Direct deposits from customers 100.3% 94.1% Customer loans / Total assets 79.8% 76.3% Cost/Income ratio 58.6% 63.6%

CREDIT RISK 31/12/2007 31/12/2006 %

change

Net impaired loans (in thousands of Euro) 186,582 180,392 3.43%

Other net doubtful loans (in thousands of Euro) 212,540 202,065 5.18%

Net impaired loans / Loans to customers 1.4% 1.6% Other net doubtful loans / Loans to customers 1.5% 1.8% Hedging of impaired loans 68.1% 68.3% Hedging of other doubtful loans 7.2% 7.7%

FIGURES PER EMPLOYY (thousands of EUR, number of employees at year end) 31/12/2007

31/12/2006

% change

Operating income / Number of employees 195 178 9.55%

Total assets / Number of employees 4,952 4,471 10.76%

Personnel expenses / Number of employees 66 65 1.54%

OTHER INFORMATION 31/12/2007

31/12/2006

% change

Number of employees 3,479 3,333 4.38%

Number of branches 389 368 5.71%

Banc@perta line users 106,717 95,247 12.04%

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INCOME STATEMENT DATA 2007 2006 % change

(in thousands of EUR) -

Interest margin 445,974 347,375 28.38%

Operating income 678,106 593,502 14.26%

Operating costs -397,257 -377,374 5.27%

Net income from banking activities 280,850 216,128 29.95%

Income (loss) before tax from continuing operations 198,373 150,024 32.23%

Income after tax from continuing operations 102,114 80,084 27.51%

Net income for the period 85,773 68,614 25.01%

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CREVAL GROUP ORGANISATIONAL MODEL The Credito Valtellinese Group adopts a banking operations model based on the development of localisation and preferential relations with its customers and territory through a network formed from a series of local banks, specialised and complementary companies, enhanced by consolidated partnerships with qualified banking and financial organisations. Creval’s DNA, in fact, is based on the archetypal matrix of the cooperative bank. A hundred years after the Parent Company’s foundation, the philosophy behind corporate activities is still centred on territorial origins, so as to become a clear and constant reference point for the local community and to act in close synergy with its economic and social fabric. So as to soundly implement this vision, the Group has an organisational and corporate structure that includes companies focused on banking business, the provision of specialist financial services and support, with the aim of pursuing scale and specialist economies and high levels of service. The Creval Group operates in the reference territory through the following retail banks (the "Market Sector"):

- Credito Valtellinese S.c., parent company, cooperative bank listed on the MTA market organised and managed by Borsa Italiana S.p.A., whose business is centred on principles of solidarity and strongly targeted to guaranteeing improved economic, cultural and social well-being in the reference territory. Credito Valtellinese’s distinguishing mark is its constant attention to the territory and to small-sized businesses. A historic trade name operating in the Italian provinces of Sondrio, Lecco, Como, Varese, Bergamo and Verbania, and with a total of 112 branches as at 31 December 2007.

- Credito Artigiano S.p.A., established in 1946 in Milan. In 1995 it became a member of the Credito Valtellinese Group and was admitted to listing on the stock exchange in July 1999. As at the end of 2007, the Bank had 117 branches in Milan, Rome, Florence, Prato and, more recently, also in the provinces of Pavia, Pistoia and Novara.

- Credito Siciliano S.p.A., a bank established in 2002 from the merger by incorporation of the Banca Popolare Santa Venere S.p.A. and Leasingroup Sicilia S.p.A. into Banca Regionale Sant’Angelo S.p.A. On 1 July 2002, Credito Siciliano also acquired the Cassa San Giacomo branch network to become one of the largest banks in Sicily. The Credito Siciliano mission is to actively participate in the economic and

Specialised Finance

Bancaperta Aperta SGR

Mediocreval Finanziaria San Giacomo

Aperta Fiduciaria

Creset Servizi Territoriali

Specialised Finance

Bancaperta Aperta SGR

Mediocreval Finanziaria San Giacomo

Aperta Fiduciaria

Creset Servizi Territoriali

Production Deltas Bankadati Stelline

Market Credito Piemontese

Banca Artigianato e Industria

Credito Siciliano

Credito Artigiano

Credito ValtellineseMarket Credito

Piemontese

Banca Artigianato e Industria

Credito Siciliano

Credito Artigiano

Credito Valtellinese

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collective development of the island through its own commercial network, present in all Sicilian provinces with a total of 136 branches.

- Banca dell’Artigianato e dell’Industria S.p.A., established in Brescia at the end of 1997, on the initiative of an organising committee composed of local tradesmen, businessmen and professionals, with the aim of contributing to economic development in the Brescia area. In 2000 it became a member of the Credito Valtellinese Group. The Brescia-based bank, without neglecting reinforcement of its traditional reference territory, is also expanding into the Veneto region, implementing a project that envisages extension of the Credito Valtellinese Group influence to this region through the opening of 40 new branches. As at the end of 2007, the Bank operates in the provinces of Brescia, Vicenza, Verona and Padua with 24 branches.

- Credito Piemontese S.p.A., which with effect from 25 February 2008 acquired 23 branches – 10 in the city of Torino, 9 in the Torino province and 4 in the province of Alessandria – from the Intesa Sanpaolo Group (ISP) as part of the sale of 198 branches launched by ISP in execution of the Antitrust Authority for competition and the market (AGCM) order of 20 December 2006.

Also forming part of the group are a number of companies active in specialised finance business (the “Specialised Finance Sector”):

- Bancaperta S.p.A., a bank specialised in financial asset management services, private banking, property finance, eBanking and payment systems, and coordinates the activities of its subsidiaries and associated companies (Aperta SGR, Aperta Fiduciaria and Aperta Gestioni).

- Aperta SGR S.p.A., an asset management company 100% controlled by Bancaperta and registered in the special register held by the Bank of Italy. In October 2005, the asset management business formerly handled directly by Bancaperta was transferred to Aperta SGR.

- Aperta Fiduciaria S.r.l., a company authorised by the Italian Ministry of Productive Activities to perform static fiduciary services, including third party asset administration, fiduciary registration services, intervention in the exercise of related rights, and shareholder and bondholder representation.

- Mediocreval S.p.A., a bank specialised in the provision and management of medium/long-term financing and business financing services. The Group’s credit business is concentrated in Mediocreval, the objectives of which are the design and development of financing products in line with the most recent market developments.

- Finanziaria San Giacomo S.p.A., a company registered since April 2006 in the general register of intermediaries operating in the financial sector pursuant to art. 106 of the Consolidated Law on Banking. The company became a member of the Credito Valtellinese Group on the same date. Consistent with the aims expressed at the time of its establishment, the Company purpose is the exercise of financial activities consisting in the purchase, management and disposal of non-performing loans.

- Creset Servizi Territoriali S.p.A., established in 2006 in line with the strategic plan to reinforce the Credito Valtellinese Group in the payment systems and public authority services sector. The company was formed following the tax collection reform (Art. 3, Italian Legislative Decree no. 203 of 30 September 2005) from a business branch split from Rileno S.p.A., former concessionary for the provinces of Como and Lecco.

The Group's scope also includes a number of companies to provide services complementary to banking business, with a view to achieving synergies and scale economies ("Production Sector"):

- Deltas S.p.A., which provides support to the Parent Company in defining group strategies. In addition, Deltas plays a coordination and monitoring role to ensure that the various business areas of the Group are standardised to the guidelines identified by Credito Valtellinese as in the interests of the Group's growth and stability. This role, under the title of “Corporate Center”, involves the provision of support with regard to administration, planning, human resource management, organisation, marketing, audit, legal affairs and risk management.

- Bankadati Servizi Informatici S.p.A., a company specialised in the maintenance and development of application software, is the member of the Group responsible for IT management and development. Bankadati also provides specialised services to banks not forming part of the Group, such as the Istituto Centrale Banche Popolari Italiane (ICBPI) and Banca di Cividale.

- Stelline Servizi Immobiliari S.p.A. manages the property and artistic assets of all companies in the Group. The company also performs other activities, such as the preparation of property estimates and assessments in support of credit allocation by the Territorial Banks, and the development of initiatives in favour of the local communities.

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Company Officers of Credito Valtellinese Board of Directors Chairman • Giovanni De Censi Vice Chairman • Giuliano Zuccoli Board members • Fabio Bresesti • Gabriele Cogliati

Michele Colombo Giovanni Continella • Mario Cotelli Paolo De Santis Aldo Fumagalli Romario

• Franco Moro Angelo Palma

Valter Pasqua Maurizio Quadrio Alberto Ribolla Vico Valassi • Members of the Executive Committee Board of Statutory Auditors Chairman Roberto Campidori Permanent Auditors Angelo Garavaglia Alfonso Rapella Substitute Auditors Aldo Cottica Gabriele Villa Panel of Arbitrators Permanent Arbitrators Emilio Berbenni Francesco Bertini Emilio Rigamonti Substitute Arbitrators Adriano Bassi Silvano Valenti General Management General Manager Miro Fiordi Substitute Vice General Manager Giovanni Paolo Monti Vice General Manager Franco Sala Vice General Manager and Executive responsible for the preparation of corporate accounting documents Enzo Rocca Independent auditing firm Reconta Ernst & Young S.p.A.

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Notice of Call

The Shareholders of Credito Valtellinese are called to an ordinary Shareholders' Meeting on 18 April 2008 at 9.30 a.m., on first call and, if necessary, the following Saturday, 19 April 2008 at 9.00 a.m. on second call, at the “Don Bosco” Meeting Room in Sondrio, with entrance from Piazza San Rocco no. 8, to resolve upon the following Agenda: 1. Reports of the Board of Directors and the Board of Statutory Auditors on the 2007 financial year;

presentation of the financial statements as at 31 December 2007 and the proposed allocation of net income; related resolutions.

2. Determinations pursuant to art. 12 of the Articles of Association (acquisition and disposal of treasury shares); related resolutions and delegation of powers.

3. Appointment of a Director to replace a Director no longer in office and authorisation pursuant to art. 2390 of the Italian Civil Code.

Shareholders entitled to participate in the Shareholders’ Meeting and exercise the right to vote are those who have been registered in the Shareholders’ Ledger for at least ninety days, and who have communicated to the headquarters of Credito Valtellinese, at least two banking days prior to the date set for the meeting on first call, the notice that the intermediary assigned to the accounts is required to make as per art. 34 bis of Consob resolution no. 11768/1998. This obligation of notification is not assigned to shareholders who have their shares subscribed in an account with Credito Valtellinese or at one of the other banks in the Credito Valtellinese Group. It should be specified that pursuant to art. 33 of the Articles of Association the rules on list-based appointment of the Board of Directors do not apply to shareholders’ meetings such as this, which are expected to appoint directors in accordance with art. 2386 of the Civil Code. In this case, the Shareholders’ Meeting decides by majority vote in accordance with the Shareholders' Meeting Regulation in relation to candidates presented in compliance with art. 32, final subsection of the Articles of Association. For the information of the Shareholders, it is noted that:

– the Board of Directors’ report regarding topics on the agenda shall be made available to the public at the company headquarters and at Borsa Italiana S.p.A. fifteen days before the date set for the Shareholders’ Meeting. Shareholders shall have the right to obtain a copy of such documents. This report shall also be published on the Credito Valtellinese web site, www.creval.it;

– with regard to point 1 on the agenda, the separate and consolidated financial statements approved by the Board of Directors shall be made available at the Bank’s headquarters and at Borsa Italiana S.p.A. as from 31 March 2008 and shall also be published on the Credito Valtellinese web site.

Sondrio, 26 February 2008 The Chairman Giovanni De Censi

This notice of call was published in the Italian Gazzetta Ufficiale no. 32 on 15 March 2008.

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Chairman’s Letter Dear Shareholders, it is an honour and a privilege for me as Chairman of Credito Valtellinese to present these “Centenary Financial Statements”. 12 July 2008 in fact marks a century of the Parent Company, now celebrating its hundredth financial year. An important birthday, which we would first of all like to dedicate to you, our Shareholders, the focal point and heart of our operations, and which we have decided to celebrate with a series of meaningful initiatives, detailed in this report and in the separate Financial Statements. An anniversary that invites us to “take stock” of our existence as a bank, now a Group, of cooperative extraction. We can proudly confirm, and with gratitude to our predecessors – directors, employees and shareholders – that we have remained faithful to that day, 12 July 1908, in spite of tension from constant adaptation to increasingly global scenarios and the search for better competitive approaches, and the principles that inspired our founding fathers: that is the principles of localisation, cooperation and solidarity. Even today, Credito Valtellinese, and likewise the other banks in the Group – now five after the “birth” of Credito Piemontese on 25 February 2008 – confirms and demonstrates its vocation as a local bank, attentive and proactive not only towards its customers, but in the wider social and economic context of its areas of operation. The economic and equity figures in the Directors’ Reports on separate and consolidated operations indicate continuation along the path of continued growth, with a significant increase in volumes traded, but always with a view to sustainable medium/long-term development and social responsibility. In occasion of this Centenary, to you our Shareholders I would like to pay special tribute, in acknowledgement of the trust you have always placed in the bank in return for the attention always reserved to you, according to the dictates of the Articles of Association, with tangible demonstrations of affection. I refer, amongst other things, to your constant support of action taken from time to time to strengthen equity, and which have always allowed their related objectives to be achieved in full. In this respect I take this occasion to say a special thank you for the total commitment to the share capital increase resolved by the extraordinary shareholders’ meeting on 10 February 2007. In a highly difficult context, characterised by an uncertainty that risks becoming systematic in spreading from the United States to Europe, the trust element becomes increasingly important to safeguarding and extending relations with the corporate and customer bases, maintaining an appropriate degree of good reputation, so we may be determined and realistic in facing the challenges of the competitive scenario, remaining faithful to our identity and our values. It is upon these values – cooperation, autonomy, independence, openness to change, moral integrity, sense of responsibility, consistency, solidarity and subsidiarity – that our Group is founded: a Group “designed to grow” that has now achieved visibility at national level. In this Centenary year we therefore hope to celebrate not only the past, but above all the future, preparing to face the challenge of increasingly tough competition, by appealing strongly to our original values, values that remain timeless.

Giovanni De Censi

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Guide to consultation

This report accompanies the consolidated financial statements as at 31 December 2007 of the Credito Valtellinese Group, its purpose being to describe the management performance of all companies included in the consolidation area (intended as a single economic entity), both overall and in the various business sectors, together with the main risks and uncertainties faced.

The document was prepared in accordance with art. 3, Legislative Decree no. 87 of 27 January 1992 and instructions contained in Bank of Italy Circular no. 262 of 22 December 2005, “Banking financial statements: schedules and guidelines" (paragraph 3.7.1).

Also included are further disclosures required by law and regulations, even where not specified in the aforementioned provisions.

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Board of Directors’ Report on Group Operations

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MACROECONOMIC REFERENCE CONTEXT INTERNATIONAL AND EUROPEAN SCENARIO 2007 was the fourth consecutive year in which global GDP increased by over 4%, recording 5.1%, just one decimal point lower than the previous year. This vigorous growth, which until last year had no significant impact on inflation, was accompanied this year by heavy price increases in energy and raw materials on the international markets.1 Added to this in the second part of the year was a consistent instability of the financial markets. The resulting slowing of growth was slight, but it is presumed that the greater negative impact has still to become evident. Though fears are increasing, in forecasts prepared by most opinionists and leading research centres, pessimism is still not predominant.2 In the breakdown of contributors to global growth among the leading economic blocs, the weight of the Eurozone has increased, less than last year but after many years at a rate higher than that of the United States, which has slowed even further. Japan continues along its curve of a rather limited recovery, which for growth experts in the Asian scenario is dominated by the Chinese and Indian dynamics.

Table 1 Gross Domestic

Product (Percentage

variation)

Unemployment rate (Percentage of

workforce)

Inflation (Percent variation of

consumer prices)

2006 2007 2008 2006 2007 2008 2006 2007 2008

United States 2.9 2.2 2.0 4.6 4.6 5.0 3.2 2.8 2.7 Japan 2.2 1.9 1.6 4.1 3.8 3.7 0.2 0.0 0.3 Eurozone 2.9 2.6 1.9 7.7 6.8 6.4 2.2 2.1 2.5

Total OECD 3.1 2.7 2.3 5.9 5.4 5.4 2.3 a 2.3 a 2.1a

a GDP deflator Source: OECD, Economic Outlook no.82, Statistical Annex Tab.1, 13, 16, 18; December 2007.

As illustrated in Table 2 below, among the leading Eurozone countries the highest growth figure was again recorded by Spain, maintaining the previous year's levels, whereas Germany, which weighs most on the average, has slowed most, also as a result of the increased VAT coefficient. Three features distinguish the 2007 international scenario and forecasts for the coming years: - the financial crisis triggered by serious problems in the US sub-prime mortgages sector and related

downturn in the property sector; - the increase in raw materials prices; - uncertainty regarding the performance of the US economy and risk of recession. 1) The financial crisis The financial crisis had an immediate effect, causing the strong downturn in property markets in almost all the leading countries, with more or less harsh brakes on both property investments and prices, but it was particularly strong in the United States. In 2007 the average US house prices reduced in real terms (-0.5%) for the first time in many years, and investments in the construction sector dropped by around 20%.3 In addition to weakening the US economy in other ways, this placed the sub-prime mortgages sector in difficulty, no longer having the option of refinancing or, more simply, unable to meet the physiological

1 Prometeia, Rapporto di previsione, January 2008, Table 1.2 2 For example, in both OECD and Prometeia forecasts, the most likely scenario is one of a slowing down, but not a fall in growth rates. Decisive in this respect are current developments in the US economy, with the risk of recession, which will be discussed below. 3 OECD, Economic Outlook, no. 82, November 2007, p.17.

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deterioration of the initial favourable conditions. The multiplication of the crisis was nevertheless mainly due to the widespread use in the sector of innovative financial instruments to securitise and transfer credit risk which, though they increase the system’s capacity to support risk - by fragmentation, tend to separate the identity of the risk bearer from those able to monitor borrower solvency. The crisis hit strongly at the beginning of August with a declining faith and strong grip on liquidity in the money markets and interbank market, characterised by a consistent and rapid increase in the market interest rate-official benchmark spread. The overtly concerted action of the leading central banks, normally characterised by direct cash input, allowed them to effectively cope with worries regarding financial stability, substantially avoiding the bail-out operation being seen as an inducement to incautious behaviour. Regardless of its extent, on which opinionists have found difficulty in agreeing on forecasts, the direct effect on growth prospects of the financial crisis, concentrated mainly in the United States, should be modest. The indirect effects, however, are expected to be stronger, with a deterioration in the terms for business funding and household loans. If for the first of these the satisfactory profit performance in recent years in most OECD countries lead to the opinion that the capacity to face temporary crises is solid, the impact on the spending power of households, particularly in countries with a strong consumer credit tradition, could lead to a significant drop in demand, especially if this is associated with the negative effect on wealth due to a slump in property values. In more general terms, the financial sector still seems to be characterised in both the US and Europe by consistent margins of uncertainty, and therefore vulnerable to shock, which could result in an even deeper crisis than that already seen. Uncertainty is also the dominant trait in the financial sector of emerging countries, whose share prices have in some cases, as in China, seen such a strong upward trend as to arouse some perplexity, even given a true economy that is apparently solid. 2) The increase in raw materials prices The second factor characterising 2007 was the heavy increase in energy and raw materials prices. At the end of the year, oil came close to reaching USD 100 per barrel, an increase of approximately 70% on 2006, and went over the USD 100 mark at the start of 2008. This increase, even considering the significant parallel depreciation in the dollar and a strengthening of geopolitical tension, can only be attributed for the most part to the strong increase in demand from emerging countries, with China in the lead - now the second largest oil consumer at global level after the United States. The forecasts based on such an increase give little hope of consistent reductions in the coming years. These pressures, which depend on economic factors, are also accompanied by operations of a financial nature, to which the underlying trends cannot however be attributed. Until now the major countries have handled the crude oil price increase well, also as a result of the gradual diversification of energy sources and, in the Eurozone, due to favourable exchange rates. Nevertheless, further increases could have a considerable downward effect on growth, estimated by the OECD as 1 or 2 tenths of a percentage point for the member states aggregate4, but which could be more consistent for the more exposed countries. To partly offset the increase in energy costs, increased earnings in producing countries have stimulated manufacturing import-export, particularly exports from the Eurozone and imports into Russia. The gradual appreciation of the Euro has, however, reduced these beneficial effects. Another phenomenon in part linked to the increasing dynamics on Western financial markets of Sovereign Funds, many of which relate to producing countries, kindling some worries of the risk of an arbitrary re-publicisation of privatised companies, becoming foreign State-owned, and above all of a considerable lack of transparency in a number of such operations. Strong bullish pressure has also characterised the international markets of other raw materials, such as industrial minerals and metals, nickel for example, and agricultural and food products, the prices of which were not only influenced by the increase in global demand – this also explainable by the expanding role of emerging countries - but also by weather conditions in some of the major producing countries. The main risk connected to such a bull trend in prices of raw materials at global level is not only the strengthening of inflationary phenomena as such, but their association with a potential slowdown in the major blocs which as such would need to be combated by reduced margins in support of monetary policy. 3) Uncertainty regarding the performance of the US economy The final element characterising the economic scenario is the uncertainty regarding the United States’ true economic conditions, the answer to which will probably be decisive in outlining the scenarios for several years to come. At least until the third quarter of 2007, the slowdown in US GDP growth had no dramatic effect. Despite the heavy drop in the property sector, as already mentioned, domestic consumption remained stable and the gradual weakening of the dollar exchange rate reinforced the net contribution of exports, which recorded an annual increase of 10%, also improving the deficit situation in accounts 4 OECD, Economic Outlook, no. 82, November 2007, Table 1.5, p.17.

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balances, which decreased to 5.5% of the GDP (from 6.75% in 2005). The latest signals are readable from both the consumer and labour market trends, with the unemployment rate back to over 5%, and more recently from a marked monetary policy action by the Federal Reserve, lead to the belief that in the first part of 2008 the USA will hit bottom and that the risk of its technically being in recession cannot be ignored. The recession could be caused by a further and more significant weakening of the property market, which would affect domestic consumption, or by financial market difficulties even greater than those already emerged. Such a scenario, according to Prometeia, could lead to a downgrading of growth prospects for the global economy with respect to the OECD forecast illustrated in Table 1. The United States would close 2008 with a slight increase of 0.5% in GDP instead of 2%, the Eurozone would increase by 1.2% rather than 1.9% and Japan 0.7% as opposed to 1.6%. More consistent and persistent would be the consequences on the growth rates of emerging countries, which would nevertheless maintain their highly dynamic growth curves.

Elements characterising the 2007 international economic scenario

FINANCIAL CRISIS

INCREASE IN RAW MATERIAL PRICES

UNCERTAINTY OF US ECONOMY

PERFORMANCE

INTERNATIONAL ECONOMICSCENARIO

FINANCIAL CRISIS

INCREASE IN RAW MATERIAL PRICES

UNCERTAINTY OF US ECONOMY

PERFORMANCE

INTERNATIONAL ECONOMICSCENARIO

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THE ITALIAN SITUATION In terms of economic growth, 2007 was less positive than expected with a final GDP of 1.7% which had gradually slowed with respect to the initial forecasts of almost 2% to 1.5% in the more recent estimates. Our downward deviation of approximately one percentage point from the EMU and EU remained significant, whilst that of Spain and the United Kingdom was much more marked. This gap cannot be justified by either the deterioration in the international context in the second half of the year, or by the strengthening of the Euro which penalised Italy, but is also partly protected by the oil price increase. Our weakness is mainly due to persistent structural factors. With regard to contributions to growth on the demand side, household spending slowed due to inflation and higher mortgage costs, whilst investments recorded a better performance in terms of both manufacturing modernisation and construction. The climate of consumer confidence nevertheless stabilised during the year, whilst that of industry declined in the last quarter. The foreign balance (exports less imports) recorded a slight negative change, but there was a clear improvement in the average unit value of our export figure and in the positive manufacturing balance, unfortunately strongly offset by the negative energy figures. For 2008 it is felt that there will be a slowdown in growth, the initial forecast of 1.1% expected to drop to no more than 0.3% if the barrel price for oil stays around the USD 100 mark for the entire year. The unemployment rate dropped to 6%, however, the lowest level among the major EU countries apart from the United Kingdom. Both male and female activity rates and employment rates also increased, albeit still at comparatively low levels compared to the more advanced EU countries. In turn, labour productivity shows improvement, though at modest rates. Inflation trends were limited, and better than the EMU and EU averages. The strength of the Euro contributed to containing imported energy and raw material prices. However, the gap between inflation according to the ISTAT consumer price index and actual inflation remains wide. The gap is also confirmed by ISTAT’s “high-frequency purchase goods” index, which in January 2008 recorded a 4.9% increase over the 2007 figure. Table 2

Gross Domestic Product

(Percentage variation)

Unemployment rate (Percentage of

workforce)

Inflation (Percent variation of

consumer prices)

2006 2007 2008 2006 2007 2008 2006 2007 2008

Germany 3.1 2.6 1.8 9.8 8.4 7.6 1.8 2.3 2.6

France 2.2 1.9 1.6 9.2 8.3 8.1 1.9 1.6 2.4

Italy 1.9 1.7 1.1 6.8 6.0 5.8 2.1 1.8 2.5

Spain 3.9 3.8 2.6 8.5 8.2 8.1 3.6 2.8 3.3

EMU (12 countries)

2.9 2.6 1.7 8.3 7.4 7.1 2.2 2.1 2.6

United Kingdom 2.8 3.1 2.3 5.3 5.4 5.9 2.3 2.3 2.2

EU (25 countries) 2.8 2.7 1.9 n.a n.a n.a 2.1 2.0 2.5

Source: Prometeia, Rapporto di Previsione, January 2008, table 2.4 p.27, table 2.3.6 p. 39, table3.4.1 p.74, table 2.4.1 p.43, table 2.3.7 p.42, table 2.3.8 p.42 and table 2.3.8 p.42.

For public finance, 2007 was a year of positive results that led to the imminent repeal of the excessive deficit procedure launched by the European Commission in June 2005. The deficit/GDP ratio fell by 2% despite certain expansion undertaken during the year. The main reason for this performance and the dynamics of tax pressure, which reached 43% of GDP even with recoveries on tax evasion and tax dodging to be better proven in the long term. Current spending also decreased marginally from 44.5% to 44.3%, nevertheless representing only an initial reduction in an item that weighs heavily on

25

public accounts. It is significant, however, that a good primary surplus has been recreated. Therefore the debt/GDP ratio has begun to fall, recording 104.9 against the 106.8 of 2006. Table 3

Public sector deficit (-) Public sector debt

% del PIL % of GDP

2006 2007 2008 2006 2007 2008

Germany -1.6 0.0 -0.6 67.5 64.5 62.8

France -2.5 -2.6 -2.8 64.2 63.8 64.4

Italy -4.4 -2.0 -2.3 106.8 104.9 104.1

Spain 1.8 1.6 0.6 39.7 35.8 34.1

EMU -1.5 -0.8 -1.2 68.8 66.3 65.3

United Kingdom -2.8 -2.6 -3.0 44.0* 44.7* 46.3*

Source: Prometeia, Rapporto di previsione, January 2008 table 2.4 p.27, table 2.3.4 p.36; except * OECD, Economic Outlook, no.82, December 2007, Annex Table 62.

This leads to conclusive considerations regarding the 2008 Finance Law, composed of various linked measures including welfare reform with abolition of the “income ladder”. Prometeia feels the Finance Law is in line with budget policy guidelines from mid-2007, tending towards a gradual absorption of the deficit into a reallocation of the main tax resources by action to reduce the burden on certain lower-income taxpayer categories and increased public spending of a higher quality.5 In line with the Stability Programme presented by the EU at the end of 2007, the accounts are expected to balance out by 2011 whilst the debt/GDP ratio should fall to below 100% in 2010. The programmed scale can be seen as positive, but it is subject to a good growth performance which is instead proving to be far weaker than expected.

5 Prometeia, Rapporto di previsione, January 2008, p.149.

26

LOCAL ECONOMIES IN THE GROUP’S OPERATING AREAS This section briefly analyses the 2007 performance of the economy at regional level, with regard to real and productive aspects, with particular attention to the areas in which the Group operates. Specifically, in this analysis the key indicator was represented by the demographic trend of companies, subdivided by sector (Infocamere, 2007, Movimprese database), and foreign trade as complementary signs of local economy performance (Istat 2007, Coeweb database-Statistics on foreign trade). Lombardia This region that drives the national economy in 2007 showed signs of slowing down. Against the marked decrease in the manufacturing company figures (-1.7%), which this year recorded the highest drop in the last 10 years, there is no corresponding increase in the number of new companies in the services sector. The overall result for the Lombardia economy is therefore essentially one of stability (0.2%). The traditional and strong district-related sectors, such as textiles-clothing (-3.8%), timber-furniture (-2.7%) and even more so the leather industry (-6.4%) have recorded a considerable decrease in the number of active companies at regional level. However, even the more capital-intense and technology-intense sectors - chemical (-2.2%) and mechanical (-1.4%), for example - show negative new business figures. The only manufacturing segment recording positive balances in company opening-closure terms is the food industry (+2.9%). The most significant difference compared to previous years is based on the fact that the above figures cannot be interpreted as merely an indication of continued outsourcing of the Lombardia economy. Important outsourcing sectors such as trade (-1.6%) and transport (-4.2%) recorded such negative balances that they cannot be offset by performance in growing sectors such as tourism (0.6%), financial brokerage (+0.7%), real estate activities and IT services (+2.3%). Imports increase at a faster rate than exports (with a difference of around 2%) and account for the increase in deficit of the regional trade balance. Tuscany Movements in the manufacturing industry structure in Tuscany show an increase in the number of companies (+0.8%) involved in an outsourcing process. In Tuscany also, the manufacturing segments feel the impact of the dual influx of a weak domestic demand combined with a local companies’ loss of international market competitiveness. The effects in company opening-closure terms on secondary companies speak for themselves. Against a decline in total manufacturing (-0.9%) only two segments recorded a growth – food (+1.7%) and machinery (+0.2%) – whilst timber-furniture (-3.3%), textile-clothing (-1.3%), leather (-0.9%) and chemicals-plastics (-0.9%) all showed a marked decrease in production. The services sector, however, shows certain signs of vitality (+0.7%), particularly tourism (+1.8%), financial brokerage (+1.7%) and real estate-IT activities (+3.2%). The positive performance of the Tuscan economy is confirmed by an analysis of the trade balance figures: exports are increasing at a significantly higher rate than imports, thereby improving the balance. Veneto In 2007 the Veneto economy recorded overall stability of its business structure. Manufacturing held steady, its slight drop (-0.5%) confirming the gradual adjustment trend after the strong decreases of 2004-2005, and services are on the increase (+1.5%). A more detailed examination of company opening-closure figures for manufacturing shows that the food industry is growing (+2.2%), machinery (0.3%) and textiles-clothing (0.1%) are essentially stable, whilst the leather (-1.8%), timber-furniture (-1.6%) and chemical industries (-1.3%) are down. The growth of outsourcing in this region is driven by performance in tourism (+4.5%), significantly overturning the drop of the previous year, and real estate-IT consulting (+4.4%). Still positive, but to a lesser extent, is the performance in the financial brokerage sector (+2.3%), whereas transport has decreased considerably (-2.5%) and trade remains steady. Imports are growing at a slightly higher rate than exports, as is the trade balance of assets. Lazio The Lazio economy recorded a marked expansion of its productive base in 2007, with a 2.7% increase in the total number of companies compared to 2006. This trend was more evident in the services aggregate, which recorded a 3.2% increase, mainly the effect of a 10.9% leap in real estate activities. The latter therefore reinforced the growth trend of the last few years. The increase was also considerable (+6.2%) for the

27

monetary and financial brokerage segment, this also for some time recording a positive trend. Another growing services sector in 2007 was hotels-commercial businesses. The Lazio manufacturing sector instead showed an overall increase (+0.7%), the result however of a significant increase in the food-tobacco (+4.0%) and chemical (+2.3) industries, against a decrease in other sectors. Specifically, the “Made in Italy” sector companies (textiles-clothing –1.7%, leather-footwear -2.5%, timber-furniture -1.7%). This confirms the outsourcing trend of the Lazio economy, particularly in Rome. From an international trade balance point of view, the region recorded a notable deterioration, from EUR 10.7 billion in 2006 to almost EUR 12 billion in 2007. Sicily Companies active in the Sicilian economy recorded a slight overall increase in 2007 (0.7%) compared to 2006. The aggregate figure, however, shows a rather strong performance difference between the manufacturing industry and services. The latter showed an overall increase of 0.8%, deriving from highly significant increases in monetary and financial brokerage (+9%), real estate and hotels-commercial businesses, both increasing by around 3.5% over the 2006 figure. The reduced weight of these sectors on the Sicilian services economy, however, was not sufficient to generate a significant increase overall. The company opening-closures data for the manufacturing industry was particularly negative, in which all sectors proved negative, resulting in an overall -1.6%. Specifically, negative results were recorded in the “Made in Italy” segments, with decreases of 9.4% in active leather-footwear companies, 3.9% in timber-furniture and 3.7% in textiles-clothing. For manufacturing this was the worst performance of recent years. In foreign trade terms, the Sicilian balance reduced by around EUR 400 million between 2006 and 2007, from approximately EUR -6 billion to EUR -6.4 billion. Piedmont The Piemonte productive structure overall remained essentially stable in 2007. The number of active companies increased slightly by 0.4%, the result however of rather different performances in the services and manufacturing sectors. Manufacturing companies, in fact, reduced by 1.3% compared with 2006, as a result of the general negative trend in all sectors except the food and beverage industry. Specifically, 2007 saw a reduction in the number of companies in the three “Made in Italy” macro-segments (-6.2% leather-footwear, -3.7% textiles-clothing, -2.6% timber-furniture), confirming the 2006 trend. Growth in the services industry overall was however positive, though slight (+0.7%), the figure reflecting a fairly general trend the only exception to which are companies in the transport-communications sector, which fell by 2.8% between 2006 and 2007. On the other hand, a growth was recorded by companies active in real estate activities (+2.0%) and hotels-commercial businesses (+2.2%). In foreign trade terms, the positive balance of the Piemonte economy changed only slightly, from approximately EUR 5.7 billion to EUR 5.9 billion.

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Table 4

Annual changes in no. of operating businesses

(%)

Trade balance

(in millions of EUR)

Geographical area MANUFACTURING SERVICES TOTAL

ITALY –0.68 2.17 1.38 –7,734

LOMBARDIA –1.71 -0.23 0.23 –23,3991

PIEMONTE –1.30 0.66 0.39 5,951

TUSCANY –0.94 0.70 0.80 3,593

VENETO –0.52 1.49 0.25 6,173

LAZIO –0.67 3.24 2.70 –11,991

SICILY -1.64 0.83 0.67 –6,430 Source: Infocamere, 2006, Movimprese, http://www.infocamere.it/movi_search.htm; Istat, 2006, Coeweb–Statistics on foreign trade, http://www.coeweb.istat.it/.

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THE SITUATION IN THE ITALIAN BANKING SYSTEM6 Provided below is a summary of the analysis carried out by the Italian Banking Association with respect to trends in the main aggregates of the banking sector. Deposits ABI’s initial estimates for December 2007 predict an adjustment phase in Euro deposits for all Italian banks. The tendential growth rate was +6.7%, decreasing from the +7.6% at the end of 2006 and at the same level as November 2007 figures. In absolute terms, direct deposits (consisting of current accounts, savings deposits, certificates of deposits and bonds) amounted to EUR 1,270.5 billion at the end of 2007, for an increase of around EUR 79 billion over the 2006 figure. More specifically, considering the various funding components, the end of 2007 saw a downward trend in deposits from resident customers (represented by current accounts, savings deposits and certificates of deposit) with a tendential growth rate of +2.9% (+5.2% at the end of 2006), and an acceleration in bank bonds which continue to record steady growth rates, increasing from +11.4% in 2006 to +12.3% in 2007. With regard to foreign funding, significant figures were recorded – in October 2007 this component totalled around EUR 607.8 billion resulting in a tendential growth rate of approximately 31.2% (+19.3% in October 2006). The foreign funding share of total funding as at October 2007 was 31.3%. In terms of flows, the net increase in foreign funding between October 2006 and October 2007 was approximately EUR 144.5 billion. Italian bank deposits and bonds

DEPOSITS DEPOSITS BY RESIDENT CUSTOMERS (1) BONDS

Date €/millions Annual

growth rate €/millions Annual growth rate €/millions Annual

growth rate

Dec-06 1,191,264 7.58 709,749 5.16 481,515 11.37

Jan-07 1,176,060 7.50 691,523 4.39 484,537 12.27

Feb-07 1,181,440 7.52 684,404 3.89 497,036 12.96

Mar-07 1,194,434 7.05 691,439 3.69 502,995 12.05

Apr-07 1,210,931 6.86 702,861 3.16 508,070 12.45

May-07 1,216,090 6.91 702,589 2.98 513,501 12.79

Jun-07 1,223,617 7.58 704,973 3.78 518,644 13.22

Jul-07 1,213,225 6.94 694,788 2.96 518,437 12.78

Aug-07 1,199,492 7.00 679,348 3.05 520,144 12.64

Sep-07 1,215,781 6.36 697,581 3.18 518,200 10.97

Oct-07 1,227,539 6.88 699,745 3.16 527,794 12.26

Nov-07 1,220,800 6.72 689,000 3.38 531,800 11.39

Dec-07 1,270,500 6.65 730,000 2.85 540,500 12.25 (1) Current accounts, savings deposits and certificates of deposits. Source: Centro Studi e Ricerche ABI processing of Bank of Italy data, SI-ABI Security investments The total consistency of securities custodied by Italian banks as at October 2007 was EUR 1,727.4 billion (+1% compared with October 2006). Specifically, data analysis by financial asset type shows that in October

6 Source: ABI Monthly Outlook, Evolution of financial and credit markets, January 2008.

30

2007 there was an annual increase in BOT (+25.2%), BTP (+9.7%), CCT (+0.8%), certificates of deposit (+27.4%) and bonds (+10%), compared to a drop in shares (-21.9%) and mutual funds (-15%). Asset management Asset management by banks recorded a decrease. In October 2007 this component totalled EUR 141.1 billion, indicating a negative downward turn of almost 11%. Compared to the total securities held for resident customers, again as at October 2007, the bank asset management share was 8.2% (9.3% in October 2006). Mutual investment funds In December 2007 the total Italian and foreign mutual funds and open-end UCITS decreased to around EUR 570.2 billion, compared to the EUR 577.8 billion in November 2007 and EUR 609.2 billion at the end of 2006 (-6.4% over the year). This assets total was composed of 56.5% Italian funds, 35.4% roundtrip funds7 and 8% foreign funds. Specifically, compared with November 2007, there was a decrease of EUR 3,438 million in bond funds, EUR 2,499 million in equity funds, EUR 921 million in flexible funds, EUR 723 million in balanced funds and EUR 235 million in hedge funds. On the other hand, cash funds recorded a EUR 181 million increase. An analysis of the breakdown of assets by fund type shows that, in the last year, the share of cash funds rose from 13.7% in November 2006 to 16.5% in December 2007, the share of flexible funds from 8.5% to 11.7% and hedge funds from 4.6% to 6.4%. The share funds quota instead decreased from 25.9% to 23.7%, balanced funds from 6.9% to 5.9% and bond funds from 40.4% to 35.8%. In 2007 the total net deposits for mutual investment funds established by Italian intermediaries was negative at EUR -53,077.9 million, dropping further from the EUR -18,613 million result for 2006. Loans The changes in loans granted by banks showed a phase of adjustment: the initial estimates recorded a tendential growth rate in total loans of +10.2% (+11.2% as at the end of 2006). The increase in Italian bank loans in particular was EUR 1,455 billion. In flow terms, there was a net increase in new loans for a total of approximately EUR 133 billion compared to the 2006 figure. Loans in Euro recorded a tendential development rate of +10.2% as at the end of 2007 (+11.6% at the end of 2006). Loans in currencies other than Euro at the end of 2007 recorded a change of +11%, a complete turnaround of the figure for December 2006 (-16.2%). It is important to emphasise, however, that the loans component in currency other than Euro represents only 1.2% of total loans. The positive change in loans continues to be sustained by both long-term and short-term loans. According to initial estimates, in fact, as at December 2007 there was an increase of 11.5% in the medium/long-term segment (+11.6% at the end of 2006) and 7.9% in short-term loans (+10.5% in December 2006). An analysis of loans by counterparty type shows that the total loans to households and non-financial businesses recorded a tendential growth rate of 12.3% in November 2007 (+10.4% as at November 2006), significantly higher than the nominal GDP growth rate in Italy. Worthy of mention also is the growth rate in the funding of non-financial businesses, 14.5% at the end of November 2007 (+10.5% in November 2006). A breakdown of loans based on economic business segment shows that, as at October 2007, the most significant increases were in the energy products segment (+82.3%), transport (+17%), hotels-commercial businesses (+10.5%) and agricultural-industrial machinery (+10.4%). Also of note is the -24.6% change recorded for the telecommunications services segment.

7 Italian funds: harmonised and non-harmonised funds registered in Italy; Roundtrip funds: harmonised and non-harmonised funds registered outside Italy and purchased mainly by Italian investors; Foreign funds: harmonised and non-harmonised funds registered outside Italy and not purchased mainly by Italian investors;

31

Italian bank loans8

TOTAL LOANS IN EURO

LOANS IN OTHER

CURRENCIES Date

€/millions Annual growth rate €/millions Annual

growth rate €/millions Annual growth rate

LOANS / DEPOSITS %

Dec-06 1,322,196 11.20 1,307,783 11.64 14,413 -16.16 110.99

Jan-07 1,331,683 11.30 1,315,972 11.60 15,712 -6.55 113.23

Feb-07 1,337,443 11.50 1,321,749 11.76 15,694 -7.67 113.20

Mar-07 1,344,338 10.70 1,329,129 10.93 15,210 -4.83 112.55

Apr-07 1,358,442 11.00 1,343,854 11.27 14,588 -10.18 112.18

May-07 1,364,911 10.60 1,350,276 10.76 14,635 -4.92 112.24

Jun-07 1,385,635 10.20 1,371,039 10.53 14,596 -12.35 113.24

Jul-07 1,395,939 10.50 1,381,425 10.71 14,514 -3.52 115.06

Aug-07 1,393,587 10.60 1,377,612 10.63 15,974 7.63 116.18

Sep-07 1,403,802 10.40 1,388,086 10.49 15,716 -0.30 115.47

Oct-07 1,426,518 11.50 1,411,418 11.71 15,100 -2.42 116.21

Nov-07 1,451,000 11.40 1,434,500 11.35 16,500 12.60 118.86

Dec-07 1,455,000 10.20 1,439,000 10.16 16,000 11.01 114.52SOURCE: ABI, processing of Bank of Italy data, SI-ABI. Impaired loans As at the end of October 2007, net impaired bank loans totalled EUR 17,107 million, an increase of EUR 385 million over the September 2007 figure and EUR 479 million less than the total as at October 2006. The tendential variation was -2.7% as at October 2007 (-2.3% for September 2007 and -10.2% as at October 2006). The net impaired loans/total loans ratio as at October 2007 was 1.2%, showing a slight decrease from the figure for the same period in the previous year (1.4%). Further confirmation of the continued high quality of credit is reflected in the net impaired loans/regulatory capital ratio, amounting to 6.4% in October 2007 (7.3% in October 2006). Interest rates In December 2007 the weighted average rate on the total of household and non-financial business loans is estimated by ABI to have increased slightly, as a result of ECB monetary policy and changing conditions in the interbank market, to 6.7% (8 basis points above the November 2007 level and 78 basis points above the December 2006 figure). With regard to interest rates on new business, in December 2007 the interest rates on loans in Euro to non-financial companies was 5.3% (5.2% in November 2007), whereas the rate on home buyer loans in Euro, summarising the fixed and floating rate performances and also affected by the change in breakdown of fixed rate and floating rate loans granted, was 5.72% (5.66% in November 2007). With regard to the two price indicators for deposits and loans to households and non-financial companies produced by ABI, the mark-up recorded an increase and the mark-down a decrease.

8 The % changes take into account changes in the financial companies sector.

32

Regarding the margin on deposits, the mark-down on the average rate on euro deposits from households and non-financial businesses with respect to the weighted average return on BOT (government treasury bonds) outstanding in December 2007 was 1.9 percentage points (2.06 pp in November 2007). The average mark-up rate on euro loans to households and non-financial companies compared to the return on BOT, on the other hand, was 2.2 percentage points in December 2007 (2.01 pp in November 2007). An analysis of the changes in these indicators for December 2006-December 2007 shows that the mark-up has increased, from 2.05 points to 2.22 points. In the same period, however, the mark-down decreased slightly, from 189 basis points to 187 basis points. To summarise, the spread increased by 15 basis points: from 394 bp in December 2006 to 409 bp in December 2007. As at December 2007 the differential between the average rate of interest-bearing assets in Euro of households and non-financial businesses, and the average rate on deposits in Euro from customers represented by households and non-financial businesses was 3.07 percentage points (4 basis points higher than that recorded in November 2007).

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MAP OF THE GROUP AND THE AREA OF JOINTLY CONTROLLED AND AFFILIATED COMPANIES COMPOSITION OF THE GROUP The consolidated network structure of the Credito Valtellinese Banking Group as at 31 December 2007 consists of four territorial banks, seven specialised companies operating in the financial sector (three of which are banks) and four service companies. The traditional lending operations are provided within the respective local areas of competence – which cover six regions – by the parent company Credito Valtellinese S.c., Credito Artigiano S.p.A., Credito Siciliano S.p.A. and Banca dell’Artigianato e dell’Industria S.p.A. The Group companies specialised in financial activities are the following: - Bancaperta S.p.A.; - Mediocreval S.p.A; - Finanziaria San Giacomo S.p.A; - Creset Servizi Territoriali S.p.A.; - Aperta Fiduciaria S.r.l; - Aperta SGR S.p.A.; - Credito Piemontese S.p.A., formerly Creval Banking S.p.A. Lastly, the Group’s complementary companies are: - Bankadati Servizi Informatici S.p.A.; - Stelline Servizi Immobiliari S.p.A.; - Deltas S.p.A. At the end of 2007, the Group was structured as follows: (*) New name of Creval Banking S.p.A. (with effect from 16 January 2008)

BANCA DELL’ARTIGIANATO E DELL’INDUSTRIA

CREDITO ARTIGIANO

BANCAPERTA

65.71% 20.81%

PRODUCTION COMPANIESTERRITORIAL BANKS BANKS AND SPECIALISED COMPANIES

STELLINEDELTASBANKADATI

24.45% 63.44%

20% 20%50%

80% 80%50%

CREDITO VALTELLINESE Parent company

40.26%

31.29%

35.79%CREDITO SICILIANO

12.11%

39.31%

100%APERTA

FIDUCIARIA

31.23%

MEDIOCREVAL

CRESET100%

APERTA SGR

100%

CREDITO PIEMONTESE

(*)99.78%

FINANZIARIA SAN GIACOMO100%

37.45%

BANCA DELL’ARTIGIANATO E DELL’INDUSTRIA

CREDITO ARTIGIANO

BANCAPERTA

65.71% 20.81%

PRODUCTION COMPANIESTERRITORIAL BANKS BANKS AND SPECIALISED COMPANIES

STELLINEDELTASBANKADATI

24.45% 63.44%

20% 20%50%

80% 80%50%

CREDITO VALTELLINESE Parent company

40.26%

31.29%

35.79%CREDITO SICILIANO

12.11%

39.31%

100%APERTA

FIDUCIARIA

31.23%

MEDIOCREVAL

CRESET100%

APERTA SGR

100%

CREDITO PIEMONTESE

(*)99.78%

FINANZIARIA SAN GIACOMO100%

37.45%

34

The main change made to the Group structure, with effect from 1 May 2007, was from the merger by incorporation of Crypto S.p.A. into Bankadati Servizi Informatici S.p.A., which then became the Credito Valtellinese Banking Group’s only centre for ITC management and development. It should be mentioned that this operation had no effect on the shareholder structure of the merging company, Bankadati Servizi Informatici S.p.A., but allowed a simplification of the organisational set-up of the Group’s IT sector, centralising all IT system management and development into a single structure with the aim of guaranteeing a higher level of management coordination. The financial statements of the companies listed in the table above were consolidated with those of the parent company Credito Valtellinese on a line-by-line basis. ASSOCIATES AND COMPANIES SUBJECT TO JOINT CONTROL The following companies were assessed using the equity method: - Banca di Cividale S.p.A., with registered office in Cividale del Friuli (Udine) and share capital of EUR

62,625,000, in which Credito Valtellinese holds a 25% equity investment; - Istituto Centrale delle Banche Popolari Italiane S.p.A., with registered office in Milan and share capital of

EUR 33,148,239, in which Credito Valtellinese holds 22.5% of voting rights that can be exercised at Ordinary Shareholders' Meetings;

- Banca della Ciociaria S.p.A., with registered office in Frosinone and share capital of EUR 180,000, in which Credito Valtellinese holds 37.96%;

- Aperta Gestioni S.A., with registered office in Lugano (Switzerland). Bancaperta holds a 48% equity investment in the share capital of CHF 3,500,000;

- Global Assistance S.p.A., an insurance company, with share capital of EUR 2,583,000, in which the parent company has a 40% equity investment;

- Global Assicurazioni S.p.A., a company operating in the insurance intermediation sector with registered office in Milan, in which Bancaperta holds a 40% equity investment in the share capital of EUR 120,000;

- Rajna Immobiliare S.r.l., established following the breaking up of the real estate business from Società Ripoval S.p.A. (control of which was transferred to Riscossione S.p.A. pursuant to Law no. 248/2006). Credito Valtellinese holds 50% of the share capital of EUR 20,000.

35

MANAGEMENT PERFORMANCE IN THE PERIOD - ANALYSIS OF THE MAIN BALANCE SHEET AGGREGATES RECLASSIFIED CONSOLIDATED BALANCE SHEET (in thousands of EUR)

ASSETS 31/12/2007 31/12/2006 % change

Cash and cash equivalents 158,387 133,880 18.31

Financial assets held for trading 1,284,560 1,287,473 -0.23

Financial assets available for sale 70,288 49,213 42.82

Financial assets held to maturity 1 1 0.00

Due from banks 760,025 879,784 -13.61

Loans to customers 13,754,333 11,445,785 20.17

Investments in associates and companies subject to joint control 201,690 166,830 20.90

Property, plant and equipment and intangible assets (1) 500,219 496,101 0.83

Other asset items (2) 498,759 442,386 12.74

Total assets 17,228,262 14,901,453 15.61

(1) Includes balance sheet items “120. Property, plant and equipment” and “130. Intangible assets”. (2) Includes items “140. Tax assets” and “160. Other assets”.

LIABILITIES AND SHAREHOLDERS' EQUITY 31/12/2007 31/12/2006 % Change

Due to banks 848,452 967,762 -12.33

Direct deposits from customers (1) 13,708,656 12,073,699 13.54

Financial liabilities held for trading 8,150 6,789 20.05

Other liabilities 626,256 559,477 11.94

Provisions for specific purpose (2) 243,159 208,336 16.71

Minority interests 216,934 203,531 6.59

Shareholders' equity (3) 1,576,655 881,859 78.79

Total liabilities and shareholders’ equity 17,228,262 14,901,453 15.61

(1) Includes items “20. Due to customers” and “30. Securities issued”. (2) Includes items “80. Tax liabilities”, “110. Employee termination indemnities” and “120. Provisions for risks and charges”. (3) Includes items “140. Valuation reserves”, “160. Equity instruments”, “170. Reserves”, “180. Share premium reserve”, “190. Capital”, “200. Treasury shares” and “220. Profit (Loss) for the period”.

36

Deposits Direct deposits At the end of 2006, direct deposits from customers9 amounted to EUR 13,708.7 million, an increase of 13.5% compared with EUR 12,073.7 million in the previous year. Breaking down its components, it is noted that amounts due to customers, standing at EUR 9,858.9 million, demonstrated annual growth of 8.4%, while securities issued, amounting to EUR 3,849.7 million, increased by 29.3%. In terms of breakdown by technical form, deposit repurchase agreements reached EUR 1,123.8 million (+30.1%), while current accounts increased by 3.3% over the previous year, amounting to EUR 7,719.8 million, and other loans of EUR 899.2 million recorded an increase of 33% over the 2006 figure.

Direct deposits

12,07413,709

10,489

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2005 2006 2007

EUR

/mili

ons

Indirect deposits As at 31 December 2007 the Group’s indirect deposits totalled EUR 12,137.3 million, down 1.9% on the EUR 12,370.9 million of the previous year. Managed savings, which comprise mutual investment funds, managed customer assets and insurance savings, amounted to EUR 5,870.4 million in 2007, a decrease of 2.9% compared to EUR 6,043.1 million at the end of December 2006. Administered savings, consisting of securities that customers deposit with the Group banks, came to EUR 6,266.9 million, a decrease of 1% compared to the same figure at the end of the previous year. It should be noted that asset management makes up 48% and managed savings 52% of the total aggregate of indirect deposits.

9 This figure comprises the financial statement items 20 "Due to Customers" and 30 "Securities issued".

+13.5%

37

Total deposits Total customer deposits, the sum of direct and indirect deposits, totalled EUR 25,846 million, an increase of EUR 1,401.4 (+5.7%) compared to EUR 24,444.6 million recorded at the end of the December 2006.

Total deposits

24,445 25,84622,076

4,000

8,000

12,000

16,000

20,000

24,000

28,000

2005 2006 2007

EUR

/mill

ion

s

This increase can be attributed entirely to direct deposit developments, which represent 53% of total deposits.

Loans Lending In a policy framework of absolute prudence and risk management adopted with regard to financial asset management, the Creval Group has no exposures or commitments for the allocation of subprime or Alt-A mortgages, nor investments in financial products with such mortgages as the underlying assets or which refer to such assets, or in relation to the issue of guarantees on such products. In a situation of market turbulence, therefore, the risk profile control that has always characterised Creval Group operations in the financial sector confirmed its worth. At the end of December 2007, loans to customers amounted to EUR 13,754.3 million, an increase of EUR 2,308.5 million (+20.2%) on the EUR 11,445.8 million at the end of 2006.

Indirect deposits

12,371 12,13711,587

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2005 2006 2007

EUR

/mill

ions

+5.7%

-1.9%

38

Financing was specifically focused on small and medium-sized companies, trades and households, which have always been the fundamental customer base of the Group. Within the lending process, significant attention was focused on specific features of the sectors and local areas.

Customer loans

11,44613,754

9,863

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2005 2006 2007

EUR

/mill

ion

s

A breakdown of the loans portfolio by technical form demonstrates a greater trend in the medium to long-term component (mortgages and financial leasing), which reached EUR 4,974 million, recording an increase of 21.4% compared to EUR 4,096 million in the previous year. Specifically, mortgages increased significantly by 23.6%, amounting to EUR 4,103.6 million. As at 31 December 2007, loans beyond the short term represented 36.2% of total loans to customers.

Technical form (in millions of EUR) 31.12.2007 31.12.2006 % ChangeCurrent accounts 5,642 4,633 21.8%Lending repurchase agreements 0 1 -100.0%Mortgages 4,104 3,319 23.6%Credit cards, personal loans and salary-backed loans 268 236 13.6%Financial leases 872 777 12.0%Other transactions 2,469 2,098 17.8%Impaired assets 399 382 4.4%Total 13,754 11,446 20.2%

Unsecured loans increased by 34.8%, from EUR 1,011.5 million at the end of 2006 to EUR 1,214.2 million as at 31 December 2007. The ratio of unsecured loans to cash loans is 9%. Financing operations are specifically aimed at retail customers (households, small and medium-sized enterprises, trades), which are the primary customers of the Creditor Valtellinese Group in the local areas where it operates. The breakdown of loans by business segment and goods type, according to the classification of the Bank of Italy, demonstrates that lending is mainly focused on companies manufacturing goods or providing services (non-financial companies and personal businesses), to which over 79.3% of total loans are disbursed. The economic categories most represented include services, which absorb 50.4% of loans disbursed to the entire production system, followed by construction, with a percentage slightly greater than 15%. No other sector reached significant percentages; all remaining below 5%. Nonetheless, particular importance is taken on by the share of loans disbursed to consumer households and non-profit organisations, which represent over 16% of total loans to customers. This segmentation clearly demonstrates the Group’s vocation towards retail customers and the real economy.

39

Sectors – economic categories 2007 2006 Financial companies 3.72% 3.47% Non-financial companies and personal businesses 79.28% 78.45%

Other services for sale 31.85% 29.61% Commerce 18.59% 20.10%

Construction 15.17% 13.17% Hotels and commercial businesses 4.30% 3.38%

Textiles, footwear, clothing 3.64% 3.43% Other groups 26.44% 29.88%

Consumer households and non-profit organisations 16.25% 17.45% External operators and other operators 0.75% 0.63% Total 100% 100%

Loans by business segment

Consumer households and non-profit organisations 16%

Non financial businesses and personal businesses 79%

Financial business 4%

Foreign operators and other operators 1%

40

Non-financial companies and personal businesses – Loans by economic segment

Quality of loans Impaired net loans to customers amounted to EUR 186.6 million, an increase of 3.4% compared to the previous year. The ratio of net impaired loans and net loans to customers was 1.4%, a decrease compared to the 1.6% of 2006 and essentially in line with Strategic Plan objectives. The ratio of total impaired loans to total non-performing loans also decreased; reaching 2.9% in 2007, compared to 3.3% at the end of 2006. Doubtful loans other than impaired loans (problem loans, due/overdue loans and/or restructured loans), net of value adjustments, amounted to EUR 212.5 million at the end of 2007, with a weight of 1.5% on net loans to customers, compared to the 1.8% recorded for the previous year.

Gross exposure

Value adjustments Net exposure

Gross exposure

Value adjustments Net exposure

(in millions of EUR) as at 31/12/2007 as at 31/12/2006 A. Non-performing loans 812 414 399 788 405 382 Impaired loans 584 398 187 569 388 180 Substandard loans 137 14 123 106 15 92 Restructured loans 4 0 4 2 0 2 Past due exposures 87 2 85 111 2 109 Country risk 0 0 0 0 0 0 B. Performing loans 13,429 73 13,355 11,128 64 11,064

Total 14,241 487 13,754 11,915 469 11,446 The coverage ratios of non-performing loans have the values indicated in the table below:

Coverage ratio 31.12.2007 31.12.2006

Impaired loans 68.1% 68.3% Substandard loans 10.2% 14.2% Past due exposures 2.3% 1.8% Non-performing loans 51.0% 51.4%

Other groups 26%

Commerce 19%

Other services 32%

Construction 15%

Hotels and public businesses 4%

Textile, footwear, clothing 4%

41

The financial position and investments in associates and companies under joint control Interbank position Net exposure of the Group on the interbank market, as a borrower of funds, amounts to EUR 88.4 million, essentially unchanged since the previous year (EUR 87.9 million). Financial assets and liabilities held for trading Also in 2007, the management of Group securities held for trading and cash and cash equivalents was assigned, through specific mandates, to Bancaperta, a specialised company within the Credito Valtellinese Group. In exercising this mandate, the company works closely with the General Management of the Banks, which is charged with the total oversight of the operational aspects and with taking specific decisions within the framework of the instructions handed down by the Board of Directors. Periodic reporting, generally on a monthly basis, and specifically in case of circumstances which may have a significant influence on the set management strategies, ensures constant monitoring of performance, risk profile, results and development strategies of financial asset management. Trading assets, which reached EUR 1,284.6 million, essentially unchanged since 2006, represent 94.8% of the Group’s total financial assets, equal to EUR 1,354.9. Trading liabilities, represented by derivative contracts, increased from EUR 6.8 million to EUR 8.1 million (+19.1%).

Financial trading assets/liabilities 31.12.2007 31.12.2006 %

Change Bonds and other debt securities 225.8 228.7 -1.3%Equity securities and UCITS 41.5 192.8 -78.5%Trading securities 267.3 421.5 -36.6%Derivative contracts 7.6 8.8 -13.6%Financial assets held for trading 274.9 430.3 -36.1%Assets sold and not cancelled 1,009.7 857.2 17.8%Trading assets 1,284.6 1,287.5 -0.2%Trading liabilities 8.1 6.8 19.1%Total financial trading assets/liabilities 1,276.5 1,280.7 -0.3%

Financial assets available for sale Financial assets available for sale amounted to EUR 70.3 million, compared to EUR 49.2 million at the end of December 2006, and a almost fully composed of share investments, which are not attributable to trading activities. Cash flow statement The consolidated statement of cash flows, drafted according to the direct method as recommended by the Bank of Italy, demonstrates that the Group’s operations in 2007 absorbed net cash flows of EUR 522.2 million, compared to the EUR 38 million cash generated in the previous year. This figure is justified by the marked increase in loans to customers, and a more limited increase in deposits. Investments absorbed net cash of EUR 42 million, compared with the EUR 72 million absorbed in 2006. The difference is attributed to a decrease in the purchase of property, plant and equipment. Funding generated cash of a total EUR 588.7 million, mainly from the share capital transaction executed by the Parent Company in 2007. Total net cash flows generated during the year amounted to EUR 24.5 million, an increase of 139% compared to 2006 (EUR 10.3 million); this led to an increase in cash and cash equivalents, from EUR 133.8 at the beginning of the year, to EUR 153.4 million at the end of 2007.

42

THE EQUITY POSITION Group shareholders’ equity As at 31 December 2007, the consolidated shareholders’ equity10 of the Group increased by 78.8%, from EUR 881.9 million to EUR 1,576.7 million. The share capital, fully subscribed and paid-up, is composed of 160,588,764 shares, with a par value of EUR 3.5. The considerable percentage increase in consolidated shareholders’ equity and related changes are, in addition to allocation of the previous year’s result, related to the following events occurring in the first half of 2007, to be discussed in detail in the separate report on operations: - conversion in mid-April of the third and final tranche of the “Credito Valtellinese 2.8% 2004-2007

convertible bond loan; - Parent Company share capital increase against payment in the period 21 May-22 June 2007. The ratio of Parent Company’s shareholders’ equity to net income for the year, as recorded in the financial statements as at 31 December 2007, and the corresponding values resulting from the consolidated financial statements on the same date, is illustrated below.

Shareholders' equity

of which: net profit for the

year

Shareholders' equity

of which: net profit for the

year

Balances following Parent Company reconciliation statement 1,549,240 63,603 870,459 48,121

Investee companies' results following separate financial statements:- fully consolidated 44,221 44,221 37,023 37,023 - valued at shareholders' equity 13,485 13,485 13,250 13,250

Amortisation of positive differences - relating to previous year - - - - - relating to previuos years (121,469) - (121,469) -

Defferences compared to carrying values, as to:- fully consolidated companies 75,944 73,434 - companies valued at shareholders' equity 42,709 35,890

Adjustments of dividends collected during the year:- relating to profit for previous year - (34,260) - (29,822) - relating to profit for the year - - - -

Other consolidation adjustments:- netting of intragroup profit and loss (26,324) (1,276) (25,561) 42 - other adjustments (1,151) - (1,167) -

Balances following consolidated financial statements 1,576,655 85,773 881,859 68,614

RECONCILIATION STATEMENT OF SHAREHOLDERS' EQUITY AND NET PROFIT OF THE PARENT COMPANY ANDSHAREHOLDERS' EQUITY AND NET PROFIT OF THE GROUP

31/12/2007 31/12/2006

Regulatory capital and capital ratios The consolidated regulatory capital as at 31 December 2007, a detailed breakdown of which is provided in Part F of the Notes to the Financial Statements, together with other Equity information – amounted to EUR 1,876.9 million, compared to EUR 1,134.9 million in the previous year. The increase is attributable to Tier 1 capital before deductions of EUR 742.7 million, while gross Tier 2 capital increased by EUR 24 million.

10 Consolidated shareholders’ equity includes the financial statement items: 140 “Valuation reserves”; 160 “Equity instruments”; 170 “Reserves”; 180 “Share premium reserve”; 190 “Capital”; 220 “Profit (Loss) for the year”.

43

Deductible elements, represented by share investments in qualified banks, financial companies and insurance companies increased by EUR 24.8 million. The extent of regulatory capital offers adequate support for plans to increase the size of the Group. The tier 1 capital ratio was 10.3%, whereas the total capital ratio reached 13.7%, which more than ensures compliance with the capital requirements of current regulations. At the end of the year, the Group had no outstanding loans falling within the category of “large risks” pursuant to supervisory regulations (loans of more than 10% of the regulatory capital).

44

MANAGEMENT PERFORMANCE IN THE PERIOD - ANALYSIS OF THE MAIN INCOME STATEMENT AGGREGATES RECLASSIFIED CONSOLIDATED INCOME STATEMENT (in thousands of EUR)

ITEMS 2007 2006 % change

Interest margin 445,974 347,375 28.38%

Net fee and commission income 192,660 190,165 1.31%

Dividends and similar income 1,653 1,180 40.08%

Income from investments in associates and companies subject to joint control carried at equity (1) 13,305 13,233 0.54%

Net profit/loss on trading, hedges, disposal or repurchase activities 10,777 25,864 -58.33%

Other operating expenses/income (4) 13,737 15,685 -12.42%

Operating income 678,106 593,502 14.26%

Personnel expenses -236,063 -222,990 5.86%

Other administrative expenses(2) -131,744 -123,342 6.81%

Net adjustments to/recoveries on property, plant and equipment and intangible assets (3) -29,450 -31,042 -5.13%

Operating costs -397,257 -377,374 5.27%

Net income from banking activities 280,850 216,128 29.95%

Net losses/recoveries on impairment of other financial assets -75,127 -58,078 29.36%

Net provisions for risks and charges -6,465 -8,657 -25.32%

Goodwill impairment -1,199 - -

Profit (losses) on disposal of investments in associates and companies subject to joint control 314 632 -50.32%

Income (loss) before tax from continuing operations 198,373 150,024 32.23%

Taxes on income from continuing operations -96,259 -69,940 37.63%

Income after tax from continuing operations 102,114 80,084 27.51%

Income (loss) after tax from discontinued operations 0 1,043 -100.00%

Minority interests -16,341 -12,513 30.59%

Net income for the period 85,773 68,614 25.01% (1) Profits from investments carried at equity include profits/losses on investments carried at equity included in item 240 “Profits(losses) on investments in associates and companies subject to joint control"; the residual amount of this item is included in profits (loss) from disposal of investments in item 270 "Profits(losses) on disposal of investments”; (2) Other administrative expenses include tax and other recoveries recognised to item 220 “Other operating expenses/income” (EUR 38,603 thousand in 2007 and EUR 35,119 thousand in 2006); (3) Net adjustments to/recoveries on property, plant and equipment include items 200 “Net losses/recoveries on property, plant and equipment”, 210 “Net losses/recoveries on intangible assets” and depreciation on costs incurred for leasehold improvements included under item 220 “Other operating expenses/income” (EUR 5,997 thousand in 2007 and EUR 5,806 thousand in 2006); (4) Other expenses and income correspond to item 220 “Other operating expenses/income” net of the above reclassifications.

45

CONSOLIDATED ECONOMIC RESULTS Interest margin The growth in volumes traded brought the interest margin to EUR 446 million, an increase of 28.4% compared to EUR 347.4 million in the previous year. Interest income reached EUR 842 million (+40%), while interest expense stood at EUR 396 million (+55.9%). The percentage ratio between the interest margin and net interest and other banking income stood at 65.7%, against 58.5% in the previous year.

Interest margin

347446

297

50100150

200250300350

400450500

2005 2006 2007

EUR

/mill

ion

s

in thousands of EUR 2003 (*) 2004 (*) 2005 2006 2007 Interest margin 250,740 267,612 297,247 347,375 445,974 Total average assets 9,835,284 10,825,958 12,288,327 13,941,546 16,064,857

Interest margin / Total assets 2.55 % 2.47% 2.42% 2.49% 2.78%

(*) Net profit was not recalculated, in accordance with IAS/IFRS international accounting standards.

Performance of the interest margin / total average assets

+28.4 %

2,20%

2,30%

2,40%

2,50%

2,60%

2,70%

2,80%

2,90%

2003 2004 2005 2006 2007

46

Net fee and commission income Net fee and commission income, EUR 192.7 million compared to the EUR 190.2 million of the previous year, recorded a 1.3% increase and represents a 28.4% contribution to total operating income. The following table illustrates the main types of fee and commission income, which totalled EUR 211.7 million, compared to EUR 208 million in the previous year (+1.8%).

Fee and commission income (in thousands of EUR)

2007 2006 % change

Financial brokerage 67,356 68,053 -1.02% Guarantees given 6,979 6,339 10.10% Collection and payment services 45,349 47,202 -3.93% Current accounts and deposits 46,866 45,175 3.74% Lending 29,156 26,359 10.61% Tax collection services 3,550 867 309.46% Other transactions 12,402 13,986 -11.32% Total fee and commission income 211,658 207,981 1.77%

Net profit (loss) from trading, hedges, disposal or repurchase activities In 2007, net profit (loss) from trading amounted to EUR 10.8 million, compared to EUR 25.9 million in 2006, a decrease of 58.3%. Separating the figure shows that part of the decrease was due to profits, in 2006, from the sale of share investments classified to the “Available for sale” portfolio. With reference to the trading book results, the Group banks significantly reduced the amount of SICAV units held. Their replacement with bonds led to the inclusion of part of the returns on securities under interest. Also of note is the lower result achieved for the trading book with regard to the valuation component. Operating income In 2007, total operating income was EUR 678.1 million, an increase of 14.3% compared to the EUR 593.5 million in 2006.

Operating income

678593

100

200

300

400

500

600

700

800

2006 2007

EUR

/mill

ions

+14.3 %

47

This figure confirms the Group’s ability to continuously increase the profitability of its traditional banking operations. Value adjustments for impairment of loans and other financial assets Net value adjustments to loans and other financial assets – essentially attributable to write downs of the Group loans portfolio – amounted to EUR 75.1 million, compared to EUR 58.1 million in the previous year (+29.3%). The increase is linked to policies implemented during the period to maintain high coverage ratios on problem loans. Operating costs In 2007, operating costs – the sum of personnel expenses, other administrative expenses, net value adjustments on property, plant, equipment and intangible assets, and depreciation of costs incurred for leasehold improvements, adjusted for tax and other recoveries – totalled EUR 397.3 million, increasing by 5.4% over the 2006 figure (EUR 377.4 million). Specifically, personnel expenses increased from EUR 223 million to EUR 236.1 million (+5.9%); other administrative expenses amounted to EUR 131.7 million, an increase of 6.8% on the previous year. Value adjustments to tangible and intangible assets amounted to EUR 29.4 million, a decrease of 5.1% compared to EUR 31 million in 2006. The cost/income ratio – the ratio of operating costs to operating income - therefore stood at 58.6%, compared to 63.6% in the previous year. This confirms the progressive improvement achieved through policy concerning the careful control of operating expenses and the expansion of profit margins. Net income from banking activities Consolidated net income from banking activities, which represents the total of operating income and expenses, reached EUR 280.9 million, an increase of 30% over the EUR 216.1 million of the previous year. Gross income before tax from continuing operations Due to the results indicated above, the consolidated gross operating result from continuing operations amounted to EUR 198.4 million, compared to EUR 150 million in the previous year, an increase of 32.2%. Net income (loss) for the period After income tax of EUR 96.3 million (+38.6%) and minority interests of EUR 16.3 million (+30.6%), the net income for the period was EUR 85.8 million, a 25% increase on the 2006 figure of EUR 68.6 million. Consolidated return on equity ROE (the ratio of net profit for the year and average shareholders' equity, excluding net profit for the period) stands at 7.45%, an increase compared to 9.07% in 2006.

48

STRATEGIC PLAN OBJECTIVES AND RESULTS FOR THE PERIOD During 2007 the Parent Company Board of Directors approved the 2007-2010 Strategic Plan for the Group, which establishes lines of growth in continuity with and consistent with the previous Plan and the system of values – deriving from its nature as a cooperative bank – on which Credito Valtellinese operations are centred. The Plan outlines strategies to further improve market and commercial performance, the efficiency and profit profile, enhance the commercial product mix and reinforce the internal audit system. To achieve these objectives, operating policies and tasks are identified to further enhance human resources excellence, efficiency and flexibility of the organisational models and IT system governance. With regard to growth objectives, two guidelines are identified, to be followed in parallel: internal line development by territorial expansion concentrated mainly in the northern and central areas of Italy, in those already covered and adjacent areas, maintaining the principle of no geographical overlap between the individual retail banks. As already indicated in last year’s report, during the four-year period 2007-2010, 95 new branches are planned, with the objective of expanding the operational network to 500 branches by 2010. Growth by external lines will continue according to the plans previously implemented, with integration of other banks into the Group, and the stipulation of partnership agreements, also related to the purchase of minority shares in banking and/or financial companies. In terms of products, the range of services targeted to businesses will be expanded, with specific emphasis on the “foreign” segment and non-life insurance. With regard to private customers, the main objective is to round out the range of products and services in the consumer credit sector. The Plan also outlines a series of initiatives to improve the branch and Group organisational models, to constantly adapt to the modus operandi of changing customer needs, commencing with the strengths that distinguish Creval operations. A key factor in pursuing all these objectives is the full implementation of the equity reinforcement approved by the Credito Valtellinese shareholders’ meeting on 10 February 2008 – described in detail in the separate report on operations – which aims to: support business development projects, adequately monitor banking-related risks and comply in full with the requirements of supervisory regulations. For 2007-2010 ambitious economic efficiency objectives have been set – with a reduction in the cost/income ratio by over 10 percentage points – and returns on shareholders’ equity – with a gradual improvement in return on equity (ROE), up to around 10% in 2010, possibly through a further significant increase in balance sheet aggregates (increase in the gross banking product – the sum of direct deposits, indirect deposits and loans to customers – to over 54 billion by 2010, with a compound annual growth rate (CAGR) of approximately 12%).

*** In the period in question the Group implemented operating policies to pursue the strategic objectives set by the Plan, particularly with regard to internal line expansion – with the opening of 21 branches that led to increased coverage of Lombardia, Rome and a sizeable growth in the Veneto region market – and external line expansion – the purchase of 35 branches from the Intesa Sanpaolo Group – followed in the first few months of 2008 by the launch of a new retail bank, Credito Piemontese, and the signing of an important agreement with Banca Tercas, a bank with around 100 branches mainly in the Abruzzo and Marche regions, characterised by a market approach and founding principles similar to those of Creval. In terms of products, based on the opportunities identified, a new and specific organisational segment was created – the Foreign Business Unit – with the aim of coordinating and managing the Group’s strategic model for foreign services and the signing of a new bancassurance agreement to expand the product range, particularly non-life insurance, characterised by significant business opportunities and premium increase rates. Specific projects were also launched to improve branch layout and structure, and to increase Group IT system efficiency by upgrading to the latest generation IT technology.

49

The successful conclusion in July 2007 of the Credito Valtellinese share capital increase against payment – for a total in the region of EUR 535 million – was vital in supporting important investments necessary for external development and the opening of new branches. The exercise period for conversion of Credito Valtellinese S.c. 2008 Warrants for around 21 million is due to be launched in the near future and will be another important step in consolidating the equity profile and financial leverage of the Group. To summarise, in 2007 all Group departments and collaborators were strongly involved in achieving strategic projects and the efficiency and profit objectives of the Plan. With the commitment of all personnel it was possible – as illustrated in previous paragraphs – to achieve a consistent improvement in the Creval Group’s financial results, specifically a net consolidated income of EUR 85.8 million, a cost/income ratio of 58.6% and a ROE of 7.45%, in line with forecasts. STRATEGIC OBJECTIVESSTRATEGIC OBJECTIVES ACTION TAKEN ACTION TAKEN

IN 2007IN 2007

INTERNAL LINE DEVELOPMENT

EXTERNAL LINE DEVELOPMENT

PRODUCT RANGE EXPANSION

EQUITY ENHANCEMENT

MANAGEMENT EFFICIENCY

PROFITABILITY

OPENING OF 21 BRANCHES AND 2008/2009 TERRITORIAL DEVELOPMENT PLAN FOR 52 NEW

BRANCHES AUTHORISED

PURCHASE OF INTESA SANPAOLO BRANCHES AND AGREEMENT WITH BANCA TERCAS

FOREIGN DEVELOPMENT PLAN AND NEW PRODUCTS (household and business loans)

CREDITO VALTELLINESE SHARE CAPITAL INCR. 2007 INCREASE OF EUR 535 MILLION

58.6% COST-INCOME RATIO(- 5 percentage points in the period)

CONSOLIDATED NET INCOME EUR 85.8 MILLION 7.45% RETURN ON EQUITY

STRATEGIC OBJECTIVESSTRATEGIC OBJECTIVES ACTION TAKEN ACTION TAKEN IN 2007IN 2007

INTERNAL LINE DEVELOPMENT

EXTERNAL LINE DEVELOPMENT

PRODUCT RANGE EXPANSION

EQUITY ENHANCEMENT

MANAGEMENT EFFICIENCY

PROFITABILITY

OPENING OF 21 BRANCHES AND 2008/2009 TERRITORIAL DEVELOPMENT PLAN FOR 52 NEW

BRANCHES AUTHORISED

PURCHASE OF INTESA SANPAOLO BRANCHES AND AGREEMENT WITH BANCA TERCAS

FOREIGN DEVELOPMENT PLAN AND NEW PRODUCTS (household and business loans)

CREDITO VALTELLINESE SHARE CAPITAL INCR. 2007 INCREASE OF EUR 535 MILLION

58.6% COST-INCOME RATIO(- 5 percentage points in the period)

CONSOLIDATED NET INCOME EUR 85.8 MILLION 7.45% RETURN ON EQUITY

50

ANALYSIS OF RESULTS AND OPERATIONS BY BUSINESS SEGMENT Whereas the previous section of the report referred to the main equity and economic results achieved by the Creval Group in 2007, the following section concentrates on a breakdown of the global results by business segment. It should first of all be mentioned that the international accounting standards (IAS 14) introduced a new “section D” to the Notes to the Financial Statements on “Segment reporting”, containing an analysis of the financial performance in terms of the type of products and services offered by the Group and the geographic areas in which it operates. This information offers those using the financial statements a more detailed analysis of corporate results, allowing a more accurate assessment of risks and profitability and, overall, providing more in-depth information about the company’s various areas of business. In line with its vocation as a cooperative Group mainly targeted to retail customers – households, SMEs, trades, professionals and non-profit making organisations – and based on current regulations on segment reporting, the Creval Group has identified the “segment” as its main approach to analysing financial performance. Consistent with its organisational and corporate structure, and taking into account the set of products and services placed with customers, the overall Group business can be broken down into three significant segments: retail banking, asset management and corporate center.

Business segments

Figures in thousands of EUR

Retail banking Asset management Corporate center Consolidated

2007 2006 % change

2007 2006 % change

2007 2006 % change

2007 2006 % change

INCOME STATEMENT DATA

Net interest and other banking income

573,438 506,320 13.3% 29,876 27,620 8.2% 47,750 30,644 55.8% 651,064 564,584 15.3%

Net income from banking activities

500,363 448,846 11.5% 29,876 27,620 8.2% 45,700 30,040 52.1% 575,939 506,506 13.7%

Income (loss) before tax from continuing operations

181,439 139,377 30.2% 26,020 24,118 7.9% -9,086 -13,471 -32.6% 198,373 150,024 32.2%

BALANCE SHEET DATA

Loans to customers 13,629,004 11,314,896 20.5% 544 574 -5.2% 124,785 130,315 -4.2% 13,754,333 11,445,785 20.2%

Direct collections 13,708,656 12,073,699 13.5% - - - - - - 13,708,656 12,073,699 13.5% - Due to customers 9,858,921 9,096,396 8.4% - - - - - - 9,858,921 9,096,396 8.4% - Securities issued 3,849,735 2,977,303 29.3% - - - - - - 3,849,735 2,977,303 29.3%

Indirect collections 12,137,335 12,370,896 -1.9% - - - - - - 12,137,335 12,370,896 -1.9%

ORGANISATIONAL DATA

Personnel 2,964 2,777 6.7% 22 20 10.0% 493 536 -8.0% 3,479 3,333 4.4%

51

Breakdown of net interest and other banking income by segment as at 31/12/2007 RETAIL BANKING Retail banking – which includes the lending, investment and transfer product and services mix offered to the Group’s retail customers – forms the core business and is a determining factor in achieving the consolidated results. The income statement and balance sheet aggregates for the segment essentially refer to the Group’s retail banks and companies (Credito Valtellinese, Credito Artigiano, Credito Siciliano, Banca dell’Artigianato e dell’Industria, Bancaperta, Mediocreval, Creset, Aperta Fiduciaria), responsible for monitoring the reference markets and pursuing the commercial targets. In 2007, retail banking generated net interest and other banking income of EUR 573.4 million, 13.3% up on the previous year. This segment contributed 88.1% to consolidated net interest and other banking income (89.7% in 2006), a figure confirming the segment’s central role in the overall economy and strategies of the Creval Group. Changes in the interest margin were significant, increasing by 19.5% over the previous period as a result of a marked increase in volumes and a policy of caution in the treatment of income interest and expense. Taking into account operating costs – recorded as EUR 319.2 million, the 3.0% increase mainly due to the effect of the increase in workforce and general costs incurred for expansion of the territorial network – income before tax from continuing operations reached EUR 181.4 million (+30.2%). With regard to the balance sheet figures, it should be mentioned that total deposits increased by 5.7% and totalled EUR 25,846.0 million. Loans to customers also recorded significant progress (+20.5%), increasing from EUR 11,314.9 million to EUR 13,629.0 million. As at the end of the period, the Group operates in the retail banking sector through a commercial network of 389 branches, compared with 368 at the end of 2006. Human resources employed in this sector total 2,964, representing 85.2% of the Group workforce. In achieving the above-mentioned results, equally intense contributions from the retail banks and companies demonstrate that the efforts of their personnel are strongly cohesive and motivated with regard to the Creval Group’s strategic objectives. Following an analysis of the breakdown and key characteristics of the Group’s “customer base”, the next paragraph will discuss the more significant market-related events.

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Business segments

Figures in millions of EUR Retail banking

2007 2006 % change INCOME STATEMENT DATA

Net interest and other banking income 573.4 506.3 13.3%

Income (loss) before tax from continuing operations 181.4 139.4 30.2%

BALANCE SHEET DATA

Loans to customers 13,629.0 11,314.9 20.5%

Total deposits 25,846.0 24,444.6 5.7%

Gross banking product 39,475.0

35,759.5

10.4%

ORGANISATIONAL DATA

Personnel 2,964 2,777 6.7%

Branches 389 368 5.7%

Customer base and commercial performance indicators If the “financial capital” is adequately represented in the balance sheet data, then the “intellectual capital” (according to economic theory developed from the structural capital, relational capital and human capital, i.e. “intangible assets”) is not immediately perceived from a pure, clinical analysis of the accounting results of a given period. Relational capital in particular – the product of relations with stakeholders, customers, suppliers, the local community, institutions and so on – contributes significantly to the consolidation and increase of the intangible value of the Bank The wealth intrinsic to retail operations lies in the “customer base”, i.e. relations with Group customers, based on which is the corporate approach to creating long-term value. As at 31 December 2007 the Group’s customers11 numbered 682,689, a 3.5% increase over the 659,882 for 2006, confirming the Group’s capacity to attract new customer relations in the areas of new or recent branch openings, and to maintain its customer base in its provinces of origin.

659,882

682,689

31.12.2006 31.12.2007

+3.5%

Number of Group customers

11 Customers are intended as all parties with at least one active account with the Creval Group.

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Customer relations are spread throughout the four territorial banks: Credito Valtellinese (30%), Credito Artigiano (30%), Credito Siciliano (38%), Banca dell’Artigianato e dell’Industria (2%).

CREDITO ARTIGIANO

30%

BAI2%

CREDITO SICILIANO

38%

CREDITO VALTELLINESE

30%

Breakdown of Group customers as at 31/12/2007 by bank

The breakdown of customers by geographical area confirms the stronger traditional presence of the Group in northern and central areas of Italy (60.6% of total customers). However, the component representing Southern Italy and the islands, with 38.7%, represents and important share of the overall Creval customer base.

NOTHERN ITALY 53.7%

CENTRAL AREAS 7.0%

SOUTHERN ITALY AND THE ISLANDS

38.7%

ABROAD 0.7%

Breakdown of Group customers as at 31/12/2007 by area of residence In line with the traditional Creval Group approach to the market, retail customers are mainly private (81%) and business (16%), whereas Public Authorities and other categories account for the remaining 3%.

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PUB. AUTHORITIES AND OTHER

3% BUSINESSES16%

PRIVATE81%

Breakdown of Group customers as at 31/12/2007 by segment

As confirmation of the territorial origins that distinguish Creval Group operations, the retention rate – the percentage of active customers at the start of the year still holding accounts with the Group at year-end – has remained high over the year, with a final figure for 2007 of 94.4%, a clear sign of a generally good level of customer satisfaction.

96% 95% 92% 93%

CREDITOVALTELLINESE

CREDITOARTIGIANO

BAI CREDITOSICILIANO

Retention rate of Group banks as at 31/12/2007 The acquisition rate – calculated as the ratio between the number of customers acquired in the year and the number at the start of the year – was 10% as at the end of 2007, in line with development plans for the Group’s commercial operations.

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New

Customers 2007

Acquisition Rate

CREDITO VALTELLINESE 15,077 8% CREDITO ARTIGIANO 21,688 11% BAI 3,562 36% CREDITO SICILIANO 28,137 11% GROUP

68,464 10%

Lastly, from an analysis of the cross-selling figures an increase by 3.18 products on average per customer emerges for the Group, compared with 3.21 at the end of 2007, with a 0.7% variation over the two periods.

3,723,54 3,69

2,53

CREDITOVALTELLINESE

CREDITOARTIGIANO

BAI CREDITOSICILIANO

Cross-selling for Group Banks as at 31/12/2007 Management performance and operations of the retail banks and companies CREDITO VALTELLINESE. During the period, the Parent Company reached important growth targets in volumes traded – with total deposits increasing by 9.3% and loans to customers by 16.5% - as a result of expansion of the branch network and the increased customer base. In this respect the Bank achieved significant profitability levels, with income before tax from continuing operations of EUR 96 million (+40.6%) mainly from developments in the interest margin (whilst the fees and commissions component was affected by the unfavourable financial market performance), and recorded a net income of EUR 64 million (+32.2%).

HIGHLIGHTS FOR CREDITO VALTELLINESE (in thousands of EUR) 2007 2006 %

INCOME (LOSS) BEFORE TAX FROM CONTINUING OPERATIONS 95,890 68,218 40.6% NET INCOME 63,603 48,121 32.2% TOTAL DEPOSITS 10,356,780 9,480,259 9.3% LOANS TO CUSTOMERS 5,459,677 4,685,653 16.5%GROSS BANKING PRODUCT 15,816,457 14,165,912 11.7%EMPLOYEES 822 783 5.0% BRANCHES 112 106 5.7%

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As at 31 December 2007 the Parent Company territorial network comprised 112 branches. In the period in question, the Bank opened the new Dalmine, Clusone, Lovere and Calcinate branches in Bergamo province – increasing its presence in the province considerably, Alzate Brianza branch in Como and the new Verbania offices by Lake Maggiore. The Bank’s workforce numbers 822 (+5.0%). In the latter part of 2007, the Parent Company was affected by important organisational changes – implemented from the beginning of 2008 – in certain company departments specifically involved in internal audit, details of which are provided in the chapter on Group internal audit. CREDITO ARTIGIANO. In 2007, this subsidiary considerably increased its Gross Banking Product – from EUR 13,498 million to EUR 15,232 million, +12.8% - through a balanced growth in total deposits (+10.5%) and loans to customers (+18.0%). By focusing company policy on expanding volumes, thorough control over operating expenses and commercial terms applied to customers, economic margins increased more than proportionally to the increase in total trading. Income before tax from continuing operations increased from EUR 59 million to EUR 75 million (+27.2%), whilst net income recorded a 22.9% increase, closing at EUR 42 million.

HIGHLIGHTS FOR CREDITO ARTIGIANO (in thousands of EUR) 2007 2006 %

INCOME (LOSS) BEFORE TAX FROM CONTINUING OPERATIONS 74,687 58,696 27.2% NET INCOME 41,915 34,116 22.9% TOTAL DEPOSITS 10,220,181 9,251,645 10.5%LOANS TO CUSTOMERS 5,012,320 4,246,612 18.0%GROSS BANKING PRODUCT 15,232,501 13,498,257 12.8%EMPLOYEES 965 874 10.4% BRANCHES 117 105 11.4%

In 2007 the commercial structure of Credito Artigiano expanded by 12 new branches: the Milan 24, Arese and Gorgonzola branches in the Milan area; the offices in Pavia and the Voghera branch for that province; Rome branches 16, 17, 18 and 19 and Grottaferrata in the Lazio region. The Novara and Lucca branches were also opened. At the end of the period, Credito Artigiano had 117 branches, with a growing coverage of the banking market in the cities of Milan and Rome, with a significant presence in Tuscany. The number of Credito Artigiano employees as at 31 December 2007 was 965, increasing from 874 as at the end of 2006. During the year the Bank approved the outlines for the 2007-2010 Industrial Plan which, consistent with the Credito Valtellinese Group 2007-2010 Strategic Plan, include growth strategies for the next four years based on two main development paths:

- internal line growth, through the opening of new branches and the aim of consolidating the Bank’s presence in its original provinces – particularly Rome – and gradual expansion of the distribution network to new operating environments;

- external line growth, through the purchase of 12 branches in Pavia province to be sold by Intesa Sanpaolo, with the aim of rapidly becoming the reference bank for Pavia area households and SMEs.

To achieve these objectives with adequate capitalisation, Credito Artigiano has launched an equity building operation approved by the extraordinary shareholders’ meeting on 20 December 2007. CREDITO SICILIANO. In the period in question, this subsidiary achieved a strong performance, increasing its Gross Banking Product (+10.2% compared to 31 December 2006) and profitability, which reached levels similar to the Creval Group average. In detail, income before tax from continuing operations increased by EUR 18 million to EUR 24 million, up 30.9%. Five years after the launch of the bank, net income – close to zero at the end of 2002, Credito Siciliano’s first year of business – the consistent amount of EUR 9.7 million was recorded (+23.6% compared to 2006).

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HIGHLIGHTS FOR CREDITO SICILIANO (in thousands of EUR) 2007 2006 %

INCOME (LOSS) BEFORE TAX FROM CONTINUING OPERATIONS 23,918 18,276 30.9 % NET INCOME 9,679 7,834 23.6 % TOTAL DEPOSITS 3,971,624 3,763,930 5.5% LOANS TO CUSTOMERS 2,204,198 1,838,954 19.9% GROSS BANKING PRODUCT 6,175,822 5,602,884 10.2% EMPLOYEES 806 846 -4.7% BRANCHES 136 136 -

With the aim of further optimising commercial operations results by rationalisation of the territorial network, in 2007 the Pozzallo (Ragusa) and Canicattì (Agrigento) branches opened, whilst the Resuttano (Caltanissetta) and Gagliano Castelferrato (Enna) branches were closed. The Bank’s operating network as at 31 December 2007 included 136 branches spread throughout the Sicilian provinces. The Bank’s workforce numbers 806 (-4.7%). BANCA DELL’ARTIGIANATO E DELL’INDUSTRIA. BAI closed 2007 with positive results, essentially as forecast in the Veneto Project, approved in 2004 and defining strong development objectives for the Bank in the Veneto market and consolidation of its presence in the Brescia area. In 2007, the Gross Banking Product increased by 45.9%, closing 2007 at EUR 1,394 million. Considerable changes were recorded in total deposits (+53.5%) and loans to customers (+38.5%). Net income before tax from continuing operations totalled EUR 3 million (+95.1%), whilst net income was EUR 0.3 million, increasing by 97.7%.

HIGHLIGHTS FOR BAI (in thousands of EUR) 2007 2006 %

INCOME (LOSS) BEFORE TAX FROM CONTINUING OPERATIONS 2,544 1,304 95.1% NET INCOME 344 174 97.7% TOTAL DEPOSITS 725,334 472,655 53.5%LOANS TO CUSTOMERS 668,657 482,956 38.5%GROSS BANKING PRODUCT 1,393,991 955,611 45.9%EMPLOYEES 132 108 22.2% BRANCHES 24 21 14.3%

During the period, the Bank opened 3 new branches: Padua, Cittadella (Pordenone) and Lonigo (Vicenza) which brought the total number of branches to 24, 11 of which are in Brescia province and 13 in Veneto. Two years after the launch of the above-mentioned Veneto Project, in 2007 the BAI Board of Directors performed extensive verification of the results achieved in comparison with forecasts formulated in the Industrial Plan. The subsidiary’s Board of Directors acknowledged the intense commercial and operations development of the Bank – with the launch of 16 new branches since the Plan was approved – yet keeping risk levels within inherent, controlled limits. Full and essential use was made of production methodologies and systems provided by the Group’s specialised companies. An important factor was the effort behind the cultural and operational integration of the acquired human resources, often from other banks and new to the logistics and operating methods of the Creval Group. On conclusion of the verification, the mission and growth profile of the Bank was reconfirmed in full, geared towards developing the Group’s presence in the Veneto region and maintaining its efficiency in Brescia province.

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Creval Group branches by region, with related branch shares of the market as at 31/12/2007

59

BANK PROVINCE NO. BRANCHES BRANCH SHARE

Credito Valtellinese Sondrio 43 33.6% Como 22 6.2% Lecco 15 6.8% Bergamo 15 2.1% Varese 16 3.4% Verbano Cusio Ossola 1 1.2% Total branches 112

Credito Artigiano Milan 55 Monza and Brianza 25

3.2%

Novara 1 0.5% Pavia 3 0.9% Florence 8 1.2% Prato 2 1.4% Pistoia 1 0.5% Lucca 1 0.4% Rome 21 1.1% Total branches 117

Banca dell'Artigianato e dell'Industria Vicenza 7 1.1% Verona 4 0.6% Padua 2 0.3% Brescia 11 1.2 % Total branches 24

Credito Siciliano Agrigento 3 1.8% Caltanissetta 8 8.2% Catania 53 14.4% Enna 2 3.0% Messina 19 8.1% Palermo 26 6.3% Ragusa 9 7.4% Siracusa 6 4.8% Trapani 10 5.7% Total branches 136 TOTAL GROUP BRANCHES

389

1.2%

Branches and branch shares by bank and province as at 31/12/2007

MEDIOCREVAL. The Company was affected by significant organisational changes related to implementation of the Group’s reorganisation of the credit business to focus Mediocreval’s mission on the allocation and management of medium/long-term loans and to certain proposals for organisational change approved by the Parent Company Board of Directors. In detail, during the period the dispute management departments were transferred to Finanziaria San Giacomo, in line with Supervisory Authority requirements, located within the Group Credit Division of the Parent Company. In addition, the legal duties previously performed by Mediocreval were centralised into Deltas, in which the Group’s Legal Division was therefore established. A similar unification involved the Credit Risk Management Department, merged into the Group’s Risk Management Division. A complete illustration of these organisational changes and underlying implementation logistics is included in the chapter on corporate center operations, to which reference should be made for further details.

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Mediocreval’s current organisation is therefore completely targeted to the allocation and management of medium/long-term credit at central level for the entire Group, to the corporate and specialised finance services segment and to handling servicing operations in the leasing sector for all the retail banks. From a management performance point of view, in 2007 Mediocreval allocated credit of over EUR 217 million12, recording total loans to customers of EUR 322 million as at the end of 2007, a strong increase compared to the EUR 125 million as at 31 December 2006. The business model adopted in the “special” credit sector – involving a high level of cooperation with the other retail banks, which maintain commercial customer relations and involve Mediocreval as the specialised operator for specific financing – led to the generation of an adequate degree of profitability with net income of EUR 1 million (+13.2% compared to the 2006 figure).

HIGHLIGHTS FOR MEDIOCREVAL (in thousands of EUR) 2007 2006 %

INCOME (LOSS) BEFORE TAX FROM CONTINUING OPERATIONS 2,874 2,850 0.8% NET INCOME 1,182 1,044 13.2% LOANS TO CUSTOMERS 321,666 124,777 157.8%EMPLOYEES 74 116 -36.2%

In order to fortify equity to support the Bank’s credit business, 2007 saw the implementation of the second and last tranche of the share capital increase approved by the Bank’s extraordinary shareholders’ meeting in December 2005, for a total of EUR 22,032,000, of which EUR 11,016,000 as share capital and 11,016,000 as premium. At the end of the offer period (7 December 2007) all 3,672,000 of the new shares with a par value of EUR 6 each had been subscribed. Mediocreval’s share capital therefore increased from EUR 44,064,000 to EUR 55,080,000, divided into 18,360,000 shares with a par value of EUR 3 each. BANCAPERTA AND THE GROUP’S “FINANCIAL CENTRE”. With regard to retail banking, a vital role is played by Bancaperta, the “financial centre” responsible for financial and insurance market developments, operations in the property finance sector, management of payment systems, e-money systems and Internet banking. In addition, Bancaperta supervises the management of processes and functional operations with regard to customer investment services, coordinates Group developments in the foreign segment, provides specialist support and consulting to the territorial network, oversees the bancassurance segment and manages insurance coverage of internal risk. In 2007 the company achieved a net income from banking activities of EUR 16 million, an increase of 3.6% compared to 2006. Net income totalled EUR 12 million, up 25.3% on the previous year. Financial assets held for trading – mainly short-term floating rate or fixed rate bonds, centrally managed by Bancaperta – totalled EUR 1,249 million compared with EUR 1,070 million at the end of 2006.

HIGHLIGHTS FOR BANCAPERTA (in thousands of EUR) 2007 2006 %

INCOME (LOSS) BEFORE TAX FROM CONTINUING OPERATIONS 18,612 15,553 19.7% NET INCOME 11,986 9,564 25.3% TOTAL DEPOSITS 1,947,837 2,131,503 -8.6%FINANCIAL ASSETS HELD FOR TRADING 1,249,405 1,069,868 16.8%EMPLOYEES 122 149 -18.1%

With regard to projects and operations covered by Bancaperta, it should be emphasised that in the period in question, payment and e-money systems were characterised by intense efforts in preparation for the 1 January 2008 entry into force of the Single Euro Payments Area (SEPA), launched in 2002 as European banking industry initiative when the European Payments Council (EPC) was founded and defining new standards, rules and procedures for payments in Euro. This initiative – strongly backed by the Eurosystem (European Central Bank and national central banks in the Eurozone) and the European Commission – aims to eliminate differences on smaller amounts in the European payment services markets. As of 1 January 2002 payments could be made in Euro as the single currency in Eurozone countries, but payments by means 12 Mortgages, unsecured loans and pool financing.

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other than cash between EU member states remained complicated and expensive because each country tended to maintain its own standards. The SEPA aims to transform single retail payment systems into a single European system involving 31 countries – the 15 Euro-based member states, the 12 countries that use a currency other than the Euro but which make payments in Euro, together with Iceland, Norway, Switzerland and Liechtenstein – in which all transactions are considered “domestic”, no longer distinguishing between national and cross-border payments. As of 2008 all operators can make and receive payments in Euro either within or beyond the borders of a given country on just one account, a set of harmonised payment tools, under the same basic terms and with the same rights and obligations.

Countries introducing the SEPA In the above-mentioned framework, as of 28 January 2008 Group customers can make use of the new SEPA bank transfer service, a payment instrument allowing payments in Euro to accounts located in the SEPA area. This allows non-urgent payments in Euro, with no limit to the amount, with a pre-established clearance of 3 days. Specifically, European operators are accessed via the Seceti ACH (Automated Clearing House), which holds an authoritative position in the European payments market as discussed in more detail in the chapter on strategic investment management. Given this change of scenario, the national banking coordinates are replaced with European coordinates (the IBAN, International Bank Account Number) which uniquely identifies the account of any customer at any bank. Customers were notified of this new operating method through a specific information campaign and special support operations (Electronic Archive Alignment). Lastly, it should be mentioned that since 2012 the maximum completion time for European bank transfers will be further reduced by 1 day, in line with provisions of the Directive on payment services (2007/64/EC issued by the European Parliament and Council on 13 November 2007).

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With regard to payment cards, a gradual launch of SEPA-compliant products is planned, characterised by the stronger security offered by microchip technology and ease-of-use. More specifically, with a view to ongoing development of payment instruments available to customers and to further SEPA innovations, action has been planned to gradually replace national and international ATM cards held by the customers. It is expected that full migration from the old cards will be completed by 2010.

At system level, savings deriving from introduction of the SEPA are forecast to be around EUR 20 billion in six years. These benefits will be achieved mainly through the banking system, which has reviewed and will continue to review its own operating systems and processes to bring them fully in line with the new measures. In this context, the Creval Group has made significant investments to make production processes more efficient, to improve levels of service and to reduce transfer charges for customers. During the year, Bancaperta also began preliminary activities for implementation of the European Central Bank’s new gross settlement system, TARGET2 (Trans-Automated Real-time Gross Settlement Express Transfer) – guidelines for which were approved in October 2002 by the ECB’s Executive Council – due to be launched in May 2008. The new system meets the banking sector’s needs for advanced, harmonised services, specifically to manage cash flows, European Union and Eurosystem requirements, the search for higher levels of efficiency by means of advanced technology and new situations in terms of business continuity. TARGET2 is characterised by a considerable technical centralisation, achieved through a single platform shared by participating central banks, yet allows individual central banks to maintain relations with their respective national banking communities. With regard to both SEPA and TARGET2, Bancaperta is a direct member, also acting on behalf of the other banks in the Group. With reference to the Foreign Development Plan – one of the key factors of the Creval Group’s 2007-2010 Strategic Plan – to update the range of services to customers operating in international markets, it should be emphasised that during the year a new, dedicated organisational department – the Foreign Business Unit – was established as part of Bancaperta with the aim of coordinating management of the strategic model for Group foreign services, relations with important external departments on matters of foreign trade and support to the territorial networks on this topic. The new department also takes care of personnel training in foreign business and the dissemination of “foreign business thinking” within Creval. Consistent with the above profile, the new organisational setup of the Group’s foreign business was redefined. The Sales Department Manager was designated as reference contact in terms of organisation, acting as foreign contact for the Bank and, as such, coordinates operations in the various territorial areas. With reference to insurance, in implementation of ISVAP Regulation no. 5 of 16 October 2006, in the first few months of the period Bancaperta planned and coordinated adaptation as required for insurance intermediation operations in the light of new regulatory measures, in particular arranging entry of the Group’s retail banks in the new Electronic Register of Insurance and Reinsurance Intermediaries – in operation since 1 February 2007 – and contributing in collaboration with associated company Global Assicurazioni S.p.A. to the redefinition of contract documentation and the structuring of training on the new regulations for all personnel responsible for life and non-life insurance product distribution.

IN DETAIL SEPA – International ATM smart card On 1 February 2008 the Group’s retail banks launched the issue of the first “batch” of international ATM smart cards. Customers included in phase one of the replacement – notified in advance – are the holders of international ATM cards with a magnetic strip who have not yet subscribed to one of the Linea Armonia account packages. The new card features: - a microchip to guarantee a higher degree of security, reducing the risk of

cloning; - new graphics, on the front bearing the: name and surname of the holder,

card ID number and expiry date (5 years); - set limits (without distinction between withdrawals and POS use) of EUR

1,500 or EUR 3,000.

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PROJECT FOR THE INTEGRATION OF BRANCHES ACQUIRED FROM INTESA SANPAOLO – CREDITO PIEMONTESE. With regard to internal growth, the Creval Group's current 2007-2010 Strategic Plan envisages “bringing the number of territorial banks in Italy to five through use of the Creval Banking licence. The new territorial bank will be responsible for developing the Group’s presence in areas that will not be covered by the parent company Credito Valtellinese”. The Strategic Plan therefore programmes the launch of a new bank to supervise and coordinate operational growth of the group in new areas of expansion, particularly Piemonte, a region similar in terms of economy and production to provinces in which the Creval Group currently operates. Given these strategic objectives, the Creval Group participated in the Intesa Sanpaolo (ISP) Group’s sale of 198 branches, organised in accordance with the Antitrust Authority for competition and the market (AGCM) resolution of 20 December 2006 which authorised the merger between Banca Intesa S.p.A. and Sanpaolo IMI S.p.A. subject to the implementation of certain antitrust measures. In order to significantly increase the award options for a quota of the branches for sale by ISP, the Parent Company Board of Directors decided that the Bank should participate in a consortium composed of Banca Carige, Veneto Banca and Banca Popolare di Bari. On conclusion of the procedure, ISP accepted the consortium offer and on 5 October 2007 the preliminary agreement was formalised for transfer of the branches, signed by Credito Valtellinese in reference to the purchase of 35 branches in Piemonte (23) - of which 10 in Torino, 9 in Torino province and 4 in Alessandria for the new Piemonte region retail bank, and 12 in Pavia under the responsibility of Credito Artigiano. The transaction was closed on 21 February and took effect from 25 February 2008. From an analysis of the equity values of the branches acquired by the Group, there is a strong incidence of indirect deposits on the total, the result of ISP’s commercial business focused on the distribution of life insurance and asset management products in more recent years. In terms of indirect funding, the savings managed represent less than half of the total, whereas the incidence of asset management and insurance deposits, as already stated, is highly significant. From an assets point of view, medium/long-term loans – mainly home mortgages – represent over 80% of the total. In this sector there are no doubtful loans, whereas the past due and/or overdue exposures and substandard loans are of limited extent. The acquired branches cover a customer base of over 60,000 in the Family, Affluent and Small Business segments. The total workforce numbers over 200.

HIGHLIGHTS FOR INTESA SANPAOLO BRANCHES as at 30/06/2007 (in millions of EUR)

PAVIA PIEMONTE TOTAL TOTAL DEPOSITS 860 1,430 2,290 CUSTOMER LOANS 221 330 551 INCOME (LOSS) BEFORE TAX 13 19 32 CUSTOMERS 20,000 46,000 66,000 EMPLOYEES 73 151 224 The provisional purchase price of EUR 394.93 million for the company branch, already paid to the counterparty, will be adjusted if necessary after the signing of the final agreement – completed by Credito Artigiano and Credito Piemontese on 21 February 2008 – in accordance with contractual provisions if there should prove to be a considerable difference between the total deposits estimated by ISP at the end of 2007 and actual total deposits as at the date of the agreement. The transfer price coincides with goodwill for the company branches, equal to 16.2% of estimated deposits, essentially in line with the values for comparable transactions – branch transfers – completed recently on the Italian banking market. The transaction concerned complies fully with the logistics of the 2007-2010 Strategic Plan in that its aim is the launch and success of a new bank in the Piemonte banking market, with strong roots and a customer target based mainly on families, SME, trades, authorities and non-profit making organisations, in line with Creval Group profile and guiding principles, and development of a strong competitive position of Credito Artigiano in the Pavia area

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The operation as a whole, particularly the Piemonte development project, rests on the following success factors:

- Profiling of lending business as traditional retail banking according to the “Local Bank” model, based on the development of deposits and loans and with the aim of increasing operating income.

- Focus on and attention to the customer, particularly the corporate segment, by the provision of specialist financial and lending services, by the use of efficient organisational models in the “Loans” sector and the credit risk management techniques developed by the Group.

- Involvement of network personnel in the Group's growth objectives so as to create a maximum level of sharing and motivation in the commercial structure with a view to achieving development as planned.

Success factors for the project for integration of branches acquired from Intesa Sanpaolo For the implementation of the defined project lines and for financial support of developments, Credito Piemontese - the new name of Creval Banking approved by the Extraordinary Shareholders' Meeting of 20 December 2007 and registered in the Torino Companies Register on 16 January 2008 – launched the share capital increase against payment from EUR 15,533,520 to EUR 326,203,920 through allocation of 62,134,080 shares with a par value of EUR 5, with effective date 1 January 2008, offered on option to shareholders at par value in a ratio of 20 new shares for each former share held. The transaction to strengthen capital – approved by the extraordinary shareholders’ meeting of 20 December 2007 – ended on 22 February 2008 with the full subscription of all shares offered. The Parent Company participated in the share capital increase for a total of EUR 310 million. The shareholders’ meeting also approved a number of functional amendments to the articles of association, including the change of name to Credito Piemontese S.p.A. and transfer of the registered office to Torino.

CONCENTRATION ON RETAIL BANKING

FOCUS ON THE CORPORATE SEGMENT

INVOLVEMENT OF ACQUIRED PERSONNEL

LOYAL QUALIFIED PERSONNEL

LOYAL RETAIL CUSTOMERS

SUPPORT FROM SPECIALISED CREVAL GROUP STRUCTURES

CONCENTRATION ON RETAIL BANKING

FOCUS ON THE CORPORATE SEGMENT

INVOLVEMENT OF ACQUIRED PERSONNEL

LOYAL QUALIFIED PERSONNEL

LOYAL RETAIL CUSTOMERS

SUPPORT FROM SPECIALISED CREVAL GROUP STRUCTURES

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During 2008 and in future periods, Credito Piemontese activities will target the development of the Creval Group’s presence in the Piemonte banking market, extending the commercial network to all provinces in the region, focusing on a preferred customer base of small to medium-sized enterprises, trades, households and non-profit making organisations in the catchment area through strategic growth that places the human element – customers and human resources – at the centre of its business, in line with the tradition and values that have always distinguished Creval operations. Over the next two years, subject to authorisation from the relevant Supervisory Authorities, new branches will be opened in the major towns and cities of the Piemonte region, so as to extend the new bank’s presence to the entire region, with the intention of creating a local bank in the short-term that is well-established in the territory and operates according to company philosophy and banking methods that have led to the Group's success on the market. CRESET SERVIZI TERRITORIALI. The period just ended marked the completion of the first year of business of the Company, dedicated mainly to the delicate and complex start-up phases. The Company was appointed the task of Group-level supervision of the local tax market – settlement, assessment and collection of sums for the Local Authorities – and treasury and cash management services for public and private companies. As part of the local tax services, concentrated in the provinces of Como and Lecco, as of the end of 2007 Creset manages ICI collection on behalf of 141 municipal authorities – with amounts routed of approximately EUR 145 million – and collection of TARSU for 165 municipal authorities, for a total collections figure of EUR 73 million. In the treasury and cash management segment, Creset activities in 2007 allowed the Group's retail banks to expand and consolidate their shares of the market in new and recent geographic areas of business. This action involved the reconfirmation of services provided to 47 Authorities – including the assignment of treasury services for the Sondrio Municipal Authority for the period 2008-2012 – and the acquisition of 48 new management agreements, recording a total of 486 Authorities managed at the end of the period (+34).

Credito Valtellinese

189

Credito Artigiano 71

BAI 4

Credito iliano 222

Breakdown of treasury and cash management services by bank as at 31/12/2007

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Breakdown of treasury and cash management services by authority type as at 31/12/2007 Creset closed 2007 with balance sheet assets of EUR 82.4 million (+29%) and net losses of approximately EUR 150,000. APERTA FIDUCIARIA 2007 saw the continued profitable development of Aperta Fiduciaria – authorised to provide static fiduciary services – by the acquisition of new customers and by providing specialist consulting to the Group’s commercial network. The existing fiduciary mandates at the end of the year totalled 132, a net increase of 38 mandates. The total fiduciary deposits managed reached a total of EUR 130.5 million (+12.40% compared to the end of 2006). The 2007 financial statements closed with net income of around EUR 10,000, compared to approximately EUR 61,000 in the previous period. The 2008-2009 territorial development project In observance of the new Bank of Italy instructions which specifically envisage that projects for the opening of new branches are organised with time horizons normally of no more than two years, and after thorough analysis of the market and economic-equity impact by the Group departments and individual retail banks, the Group’s 2008-2009 territorial development project was drafted, defined on the basis of consistency and continuity with commercial expansion programmes recently adopted for Creval internal line growth policies. In greater detail, the project – approved by the Parent Company Board of Directors in July and later authorised by the Supervisory Authority – involves the opening of 52 new branches – 17 Credito Valtellinese, 21 Credito Artigiano, 12 Banca dell’Artigianato e dell’Industria and 2 Credito Piemontese, whilst a further reorganisation and streamlining of the network is planned for Credito Siciliano – and forms part of the strategies outlined in the current 2007-2010 Strategic Plan for the Group, which establishes development of the commercial network primarily in northern and central areas of Italy over the next four years, with around 100 branches to be opened gradually in areas adjacent to those already covered. The founding principle of the Project consists in the proven approach of the Group to rapidly and effectively transfer its organisational models and specific operating methods - focused on the needs of the geographic reference area, on the streamlining of organisational and decision-making processes, and on the capacity to respond quickly to the financial needs of customers - in the new branch locations, often marked by a high level of competition and strong concentration on the credit market, with the aim of reaching break-even point on the investments in no more than 24-36 months. Changes in the reference regulatory framework for commercial operations During the period, the regulatory framework for retail banking was subject to important changes, especially with regard to the financial services sector – with the introduction of MiFID provisions to Italian law, obviously with an impact also on the Asset Management sector, discussed later in this report – and the home mortgages segment, with the issue of further provisions on liberalisation and the reduction of costs to the customer.

Territorial Enrities33%

Retirement Homes, Nurseries5%

Schools46%

Former municipal-owned companies

4%

other Entities12%

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MIFID DIRECTIVE AND FINANCIAL SERVICES The Group’s operations were strongly pervaded throughout 2007 by the special MiFID (Markets in Financial Instruments Directive) Project, coordinated by the relevant departments of Deltas and Bancaperta on behalf of the group, also active in the Committees and working parties promoted by ABI, to analyse, define and develop internal adaptation as necessary. The new Italian financial instrument market regulations issued in enactment of MiFID entered into force on 2 November 2007 and imposed numerous changes upon the bank and investment firm operating methods for the provision of financial services. It should be emphasised that the MiFID transposition process in Italy, also in consideration of its late enactment at both primary level (Legislative Decree 164/2007, published on 8 October) and secondary level, along with the overlap with rules dictated by Legislative Decree 262/2005, has completely reformed the Italian regulatory framework. The new discipline, transposed through enactment regulations – the CONSOB Regulations on intermediaries and markets, joint CONSOB-Bank of Italy Regulation and the Bank of Italy Regulation on minimum capital requirements and cross-border investment firm (SIM) operations, deposit and sub-deposit methods for cash and financial instruments of customers – has radically modified the intermediaries’ provision of services and investment operations by:

- abolishing the option for member states to uphold the requirement to concentrate financial instrument trading on regulated markets;

- introducing the option to operate in different trading venues; - reinforcing the concept of best execution of an order; - envisaging pre- and post-trading transparency mechanisms to allow competition between the

various trading venue options for orders on financial instruments; - based on the Consolidated Law on Finance (Legislative Decree 58/1998) and enactment regulations,

introducing and governing investment consulting services, totally new to Italy, which become reserved operations in addition to the existing placement services, order receipt and transmission, own account trading and the execution of orders on financial instruments.

Overall, the regulations in question have therefore redesigned investor protection, introducing new and more stringent codes of conduct, as well as dictating an analytical discipline of inducements and conflict of interest. As part of the MiFID Project, with reference to operating and commercial options introduced by the new Directive and the numerous organisational requirements envisaged, it was necessary to substantially change the handling of customer orders, both by Bancaperta and with regard to commercial network operations. Specifically, with reference to intermediation services provided by Bancaperta, an important change in the order execution and transmission strategies was assessed and put into practice at the initial implementation stage, requiring that the Group’s banks trade only “branded” bonds on their own account (as direct counterparty), i.e. those issued by the banks themselves or by other members of the Credito Valtellinese Group, and not admitted for trading on regulated markets or multilateral trading facilities. For all other financial instruments for trading, intermediation instead concentrated once again on the receipt and transmission of orders. On the basis of stringent criteria taken from the new Directive, this decision led to the selection of an external trader to which orders on all other financial instruments are transmitted and which, in compliance with the directive, has the task of execution or transmission - using smart order routing (SOR) - to the trading venue periodically identified as that ensuring the best execution for the customer. This stage, launched in the second half of the period, will be completed in 2008. In parallel, organisational solutions for customer rating and assessment of the adequacy and appropriateness of services and products offered to protect the various investor classes (retail, institutional or professional investors) were identified and implemented. In this respect, other than organisational assessment and the technical commitment to IT development by the Group departments concerned, the study and decision-making support, drafting of documentation and contracts performed by the relevant company divisions had a substantial impact. Lastly, it should be mentioned that the commercial impact of the new obligations in terms of inducement – along with the commitment required from the Group’s territorial networks to adapt all customer contracts and profiling – will be particularly significant and will continue throughout the first half of 2008, given the transitional period deadline established by the new regulatory framework (30 June 2008).

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THE BERSANI-BIS DECREE AND MORTGAGE SECTOR OPERATIONS. During the period, the regulatory framework for the home mortgages segment was subject to important innovations. Italian Administrative Order no. 7/2007 – the “Bersani bis” Decree, converted to Law no. 40/2007 in force as of 3 April 2007 – in fact contains provisions of great impact on the mortgages sector, the following aspects in particular:

- prohibition of penalty clauses for early discharge of mortgages on property; - mortgage portability – assumption; - simplification of home mortgage cancellation procedures.

The Decree first of all sanctions the ineffectiveness of any agreement, even after stipulation of the agreement, which envisages mortgagee liability for penalty clauses in the event of early discharge. Mortgages stipulated by companies remain exempt from the field of application of the regulations. With regard to this provision, the relevant departments performed a general review of all existing contractual models to eliminate any compensation envisaged in the event of full or partial early discharge of the mortgage. With regard to existing mortgages as at the date of entry into force of the Decree, on the other hand, further to the agreement signed by ABI and the Consumer Associations, the maximum level of penalties for early discharge were established. Based on the above-mentioned agreement, the new provisions were included in the Group’s operations and, in addition, printed notices to customers were distributed by all branches. The Decree also covers provisions on “mortgage portability”13, intended as an option for a bank to “replace” the bank originally designated as guarantor in guarantee arrangements linked to a mortgage agreement. In this regulatory framework, ABI later defined an interbank procedure contributing to a better implementation of mortgage portability operations, including maximum reduction criteria in relation to timing, obligations to be fulfilled and related costs. Specifically, ABI proposed a procedure that envisages considerable simplification for the customer, by including all contracts, documents and obligations related to the portability transaction into a single document. This indication was positively assessed and adopted by Credito Valtellinese Group banks in reference to transactions in which the bank is either the original or the assuming bank. In order to facilitate this option, the best methods to allow portability transactions through the stipulation of a "single document" were defined, and costs related to management of the entire procedure were eliminated. Lastly, it should be mentioned that the Decree envisages that a mortgage taken out in guarantee of obligations deriving from a separate mortgage agreement is automatically discharged as of the date of discharge of the guaranteed obligation. Alongside this “automation”, the Bank is expected to fulfil certain formal obligations – to which the Group immediately adapted – particularly the issue of a receipt to the debtor confirming discharge of the obligation and online transmission to the custodian of mortgage cancellation notices. Commercial operations profile During the period, commercial operations were characterised by the creation and launch of new products and services to strengthen customer loyalty, constantly based on principles of simplicity and transparency. Special attention was paid to analysis of the demand and recent market changes, identifying customer needs so as to package innovative financial services, characterised by a strong focus on the real needs of customers in the lending, investment and transfer sectors. 13 Specifically, the Decree establishes that: - the doubtful collection of the mortgage or agreement of a term in favour of the debtor shall not preclude exercise by the debtor of the right of assumption pursuant to art. 1202 of the Civil Code; - in the case of assumption requested by the debtor, the substitute lender shall assume the accessory, personal and real guarantees of the assumed loan; - any agreement that inhibits the debtor from exercise of the right of assumption, or which renders such exercise difficult, shall be deemed null and void; - the assumption of the mortgage shall be without prejudice to any tax benefits.

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The capacity for product and process innovation that distinguishes Group operations was also confirmed recently by AIFIN (Italian Association for Financial Innovation), naming Creval as the most innovative intermediary. The Creval Group, in fact, took first place in the "Premio Cerchio d'Oro per l'Innovazione Finanziaria" award - organised by AIFIN with Azienda Banca - dedicated to innovation in the financial sector and with the aim of promoting projects capable of anticipating market trends, contributing significant new elements to banking. 25 financial institutions participated in the 2007-2008 edition, presenting a total of 49 projects. Other than first place overall, Creval was also judged the

winner in the “Marketing” category for its Creval Insieme project, an open community of around 1,000 colleagues of the Group and their families that perform voluntary work for local associations in their respective areas. Creval Insieme was awarded for its capacity to make new and complex contributions available to socially-active collaborators in favour of their associations. In the “Organisation & Operations” Section the IDEA procedure also took first prize, designed and implemented to systematically collect and record suggestions and ideas from all personnel in the Group on matters of management process improvement, product innovation and customer services. In this context, the Creval philosophy is centred on the conviction that customer relations play a central role in defining the company organisation. In line with the Creval Group's tradition and vocation as a "local bank", corporate management is geared towards maintaining positive relations with its customers, aiming particular for a rapid response of retail bank operations to certain key principles, summarised as follows:

- customers are fully informed of the cost of Group services, in line with legal provisions and voluntary initiatives launched by the banking system (PattiChiari) in which Creval has participated for some time;

- the importance of an accurate and rapid response to the customer, particularly in relation to lending services, also when an application for credit has not been accepted;

- special attention and sensitivity to a customer’s economic or personal difficulties; - constant disclosure of the true consistency of available lines of credit, for this purpose promoting the

internet banking channels which allow a complete, 24-hour view of all the customer’s relations with the Bank.

In the framework of the above profiles, the operations of the Inspection Service – responsible for handling customer complaints, initiating the best means of verification and providing a fast response – help to preserve relations with the customer. In handling a complaint and especially in their commercial operations, the Group’s retail banks aim as far as possible to

IN DETAIL – PRODUCT AND SERVICE INNOVATION Loan products launched in 2007 - Mutuo Lavori in Corso specifically targets businesses intending to finance construction, expansion or restructuring projects for industrial properties through a gradual allocation of capital linked to the progress of planned construction works on the property referred to in the loan. - Progetto Casa is a variation that targets building firms and real estate companies for the construction of residential property complexes. A special feature is the company’s option, at the end of the period agreed for the gradual allocation of capital, to request that the loan be broken down into shares to be registered in the name of the buyers of the completed property units. The product therefore allows the end buyer of the home, if purchased on a mortgage, to take advantage of important privileges, including the option of not having to take out a new mortgage. - Mutuo Formula 3 offers extensive redemption flexibility to businesses. Over its 3-year duration, in fact, the customer pays only interest instalments, whilst the capital is repaid on expiry or in freely decided amounts within the same 3-year period.

IN DETAIL – PRODUCT AND SERVICE INNOVATION Expansion of the current and deposit account range for young people - Risparmio Junior is a registered savings deposit account for children from 0 to 11 years of age. Only the parents may open the account, in the name of the child, and execute transactions. This offers an excellent rate of return on capital, without operating costs and with no stamp duty costs payable by the customer. - Risparmio Teen is a registered savings deposit account for teenagers from 12 to 17 years of age. Account transactions can be executed by either the parents or the child, within strict amount limits as indicated in the agreement. On signing the agreement, the parent also confirms acceptance of liability for any transactions. This offers an excellent rate of return on capital, without operating costs and with no stamp duty costs payable by the customer. - Conto Armonia Young is a packaged current account, also available online, offered with particularly advantageous terms to young people between the ages of 18 and 27. The monthly fee of EUR 2 is waived for Credito Valtellinese, Credito Artigiano and Credito Siciliano shareholders, or for customers with at least EUR 75,000 in funds, policies and asset management.

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provide a solid contribution to increasing the financial education of its customers. Careful evaluation of each complaint and the attention paid to examining the reasons underlying the complaint have allowed for the timely identification of the appropriate corrective measures, with the close cooperation of all Group structures, and the decision of how to best direct the initiatives of departments responsible for operations in the retail market. In this context, it would appear to be significant that the total complaints received during the period reduced as compared to the previous year (-24%) and that the total forms an extremely low percentage compared to the Group's total customer base (0.1%).

Bank Total 2007

Total 2006

Credito Valtellinese 56 58 Credito Artigiano 146 199 Credito Siciliano 111 161 Banca dell’Artigianato e dell’Industria 8 3 Bancaperta 2 2 Total

323

423

CV Group complaints 2006 and 2007 With a view to greater focus on customer complaints, in 2007 the role previously attributed to the Ombudsman-Giurì Bancario managed by ABI was transferred to the new figure of "Conciliatore Bancario" (Banking Mediator), of which the Group became a member. This organisation manages various means of settling disputes: through the Ombudsman-Giurì Bancario (general and special divisions), Conciliation and Arbitration.

At this point it is also important to emphasise that, in assessing the organisational setup and internal audit systems, the Group’s Management Bodies make appropriate use of tools to improve the management of customer relations and guarantee increasing levels of customer satisfaction. For this purpose, it is planned to launch new initiatives to guarantee the systematic monitoring of customer satisfaction - in the same manner as that applied to other commercial performance indicators – and a continued decrease in the total number of dissatisfied customers.

In order to reach the profit and commercial targets an efficient, shared process for defining the annual budget proved fundamental, along with related operational plans for the various customer segments. The budget – in effect the definition of a complex incentive system for Group branches to meet economic, equity and business development objectives – steers and supports retail bank sales in logistics terms of profit generation, creation of value and customer satisfaction. Other sales channels: online banking operations, POS and ATM services The Group’s commitment to the development of simple and efficient online banking services was confirmed in the growing number of users and orders arranged online, which remains high even ten years after the introduction of the Banc@aperta line, which involves an increasingly numerous and loyal share of the customer base.

IN DETAIL – PRODUCT AND SERVICE INNOVATION Supplementary pension products As from 27 March 2008 and in relation to Employee Termination Indemnity reform – described in a special section of the report – the Creval Group launched two new supplementary pension products on the market, the Previgen Global and Previgen Valore open-end pension funds. Specifically:

- Previgen Global is a defined contribution pension fund for collective subscription. The fund is targeted to all companies wishing to offer retirement benefits to their employees, maximising tax privileges. Subscribers may be employees covered by contracts, agreements or company regulations permitting collective subscription.

- Previgen Valore is instead an open-end defined contribution pension fund targeted mainly to individual subscribers. This option is for all earners of income, even if not covered by a mandatory pension scheme, and for persons dependent on others for tax purposes.

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As at 31 December 2007 there were 106,717 active users – customers who have completed at least one transaction in the prior six months – equal to 15.6% of the total customer base – compared with a total number of 170,566 registered users. The total value of transactions performed online increased by 28% over 2006 (the number of transactions up by 43%). In this context, the figure for online securities trading is significant, recording a total value of over EUR 1.2 billion. KPMG Advisory’s traditional report on e-retail Finance, now in its fifteenth edition, regarding the first half of 2007 and concerning 64 intermediaries including banks, Groups and investment firms, reported that their sample showed an increase in the e-banking operations index of 33%, in line with figures for the first half of 2006. The market share of the Group in relation to orders completed for retail customers was 2.8% at national level (8th place in the sector), compared to a branch share of 1.2%. In 2007 action continued to develop the interbank corporate banking service (“CrevalCBI”), set up in collaboration with CIM Italia S.p.A., a member of the ICBPI Group. Work to prepare and implement the new services (document management and e-billing), due to be released in the first few months of 2008, was intense. The use of corporate banking applications by the Group’s customers is in constant expansion, with a total number of contracts of over 10,500 (+1.3%) and operations involving more than 5.3 million orders (+59%) at the end of 2007. The POS service available to customers saw a continued increase in the number of installations and operations: 15,030 terminals were active as at the end of the year – an increase of 4.5% - and the number of transactions was over 18 million (+6%) for a total value in excess of EUR 1,381 million (+8%). Lastly, the number of ATMs installed as at the end of 2007 was 463, compared with 439 as at 31 December 2006, recording a significant increase in operations and use of all available services.

DISTRIBUTION CHANNELS 31.12.2007 31.12.2006 % CHANGE Number of ATMs 463 439 5.5% Number of Internet users (active) 106,717 95,247 12.0%

Number of POS 15,030 14,376 4.5% Interbank Corporate Banking contracts 10,559 10,424 1.3%

Alternative products and distribution channels

ASSET MANAGEMENT After analysing the retail banking sector’s contribution to consolidated results, the following paragraphs concentrate on the asset management segment which, in line with the reporting model adopted by the Creval Group, includes the asset management product mix for both retail customers and, through the Group’s banking network, for institutional investors. This sector includes the production activities of Aperta SGR – the group’s asset management product “factory” – and the retail banks’ distribution to customers. During the period, asset management generated net interest and other banking income of EUR 29.9 million (+8.2%), despite the unfavourable economic situation in the global financial market, and achieved income before tax from continuing operations of EUR 26.0 million (+7.9%). At the end of the period, the assets under management (AUM) totalled EUR 4,565.0 million, up 0.8% on the EUR 4,528.2 million of 2006. Net AUM profits – the ratio between income before tax from continuing operations and AUM – therefore remained at a high level (0.6% compared to 0.5% in 2006).

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Business segments Figures in millions of EUR Asset management

2007 2006 % change

INCOME STATEMENT DATA Net interest and other banking income 29.9 27.6 8.2% Income (loss) before tax from continuing operations 26.0 24.1 7.9% BALANCE SHEET DATA Assets under management (AUM) 4,565.0 4,528.2 0.8% - collective asset management 359.7 256.8 40.0% - separate asset management 4,205.3 4,271.3 -1.5% ORGANISATIONAL DATA Personnel 22 20 10.0%

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Aperta SGR activities Aperta SGR was incorporated in 2004 in the wake of developments and consolidation of Credito Valtellinese Group activities in the managed savings sector, particularly asset management, which began in 1984 with the aim of proposing valid alternatives to traditional securities custody and investment consulting services to customers. Over the years, activities were therefore developed and expanded in line with the growing complexity of financial markets and the need for sophisticated products and competent, reliable professional figures to handle investment management. Consistent with customer needs, the management team developed and constantly updated asset management activities, achieving significant results. Starting from

the mid-90’s, alongside the direct management lines in stocks and bonds (GPM), portfolio management for funds (GPF) was created, with the aim of matching the risks assumed to expected returns through increasingly extensive diversification. With specific reference to activities launched in 2007, the Company signed an important agreement with American Express Bank regarding management of a sub-fund of the EPIC FUND sicav, a specialist on the Italian stock market. The sub-fund was distributed from June onwards, through the American Express Funds sicav, on the Italian, European and Asian markets, therefore granting Aperta SGR access to foreign markets. This was the first agreement of its kind signed by American Express Bank with an Italian company. Aperta SGR was also involved in a number of organisational changes which, through the

creation of an “Institutional Customer Services” division, will accelerate the strategic development process of non-captive activities for institutional customers beyond the scope of the Group. 2007 closed with a net income for the period of over EUR 700,000. Asset management product development During 2007 the Credito Valtellinese Group and Duemme Hedge SGR – a speculative asset management company of the Banca Esperia Group, sector leader in Italy – signed a partnership agreement for placement of the CREVAL Hedge, a hedge multi-strategy fund of funds managed by Duemme Hedge SGR and distributed by Creval since February 2007. The main aim of the CREVAL Hedge, a low-volatility hedge fund of funds, is to preserve capital with a medium/long-term performance consistent with that of international bond markets in situations of lower volatility.

IN DETAIL – Asset management products The Group’s asset management range The current range of Asset Management products, managed by Aperta SGR under the name Personal Fund Plus, is composed of 20 different lines of asset management divided into four separate categories: Shares, Bonds, Balanced and Reteaperta. The shares range is composed of 5 lines, differentiated by the type of instrument used – one line of direct instruments and 4 UCITS – and by reference market – Italian, European-American, Global and International. The minimum investment in these lines is EUR 15,000 if in UCITS and EUR 100,000 if in direct instruments. The bonds range comprises 6 lines – 4 invested in direct instruments and two in UCITS. These lines are differentiated by reference market and according to customer objectives. The direct lines are: Euro Bond, Short-term Italian Euro, Foreign Bond and Floating Rate Euro Bond. The UCITS lines are composed of the Euro Bond and Global Bond. The minimum investment in these bond lines is EUR 15,000 if invested in UCITS and EUR 25,000 if invested in direct instruments. The balanced line range is composed of four lines invested in UCITS, differentiated in relation to the share component. The minimum investment for these lines is EUR 15,000. The reteaperta range is represented by 5 balanced lines invested mainly in direct instruments, but leaving the option open to the manager to purchase UCITS. The minimum investment for these lines is EUR 500,000. All lines are invested in shares and bonds, according to a consolidated investment model. The lines invested in UCITS envisage a selection from management companies of high standing. To complete the range of asset management products, the Group has a UCITS placement agreement with leading national and international companies including Arca SGR, Aletti Gestielle SGR, Anima SGR, American Express and Julius Baer, offering customers over 120 mutual funds and SICAV segments and therefore guaranteeing the option of diversifying customer investments by type, market reference and propensity for risk.

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The Group’s asset market volumes and market shares As at the end of December 2007, the assets managed by Aperta SGR totalled approximately EUR 4,565 million, compared with the EUR 4,528 million at the end of 2006 (+0.8%), a positive result in a year that saw a strongly negative closure for the Italian asset management sector. Figures in millions of EUR 2007 2006

Asset management [equity, funds and private] € 4,205 € 4,271Collective management [open-ended Sicav and American Express] € 282 € 184Institutional client management: CV Group Pension Fund € 78 € 73

TOTAL ASSETS UNDER MANAGEMENT € 4,565 € 4,528

Based on the data shown, at the end of 2007 the Creval Group held a 0.47% share of the asset management market14.

14 Source: Assogestioni, “Mappa del Risparmio Gestito”, December 2007.

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CORPORATE CENTER The corporate center sector comprises all the central support divisions for the entire Group and for third parties. Included in the scope of this sector are revenues generated from the owned securities portfolio and income from investments in associates and companies under joint control. The sector also covers operations of the complementary companies (Deltas, Bankadati and Stelline) and part of those of the Group’s specialised financial company (Finanziaria San Giacomo). The availability in common of financial services and services instrumental to traditional banking activities among Group companies, and also third party associates, allows the simultaneous achievement of two important objectives:

- accomplishment of significant scale economies through the wider scale of company business, with reference to IT system, property, administrative and back office unit costs;

- achievement of scope economies, meaning average unit cost savings generated by sharing activities among the different services provided. With expansion of the range of products and services offered and in the composition of the banking Group – by including companies in the scope that are specialised in certain banking processes or in the provision of specific products – a cost saving is achieved that is of benefit to all Group companies.

The economies achieved by centralising key processes that form the service value chain allows a gradual reduction in the cost/income ratio, with a view to pursuing the Strategic Plan objective of persistent reduction of the indicator by over 10 percentage points in the four-year period. In this sense, though there is not always a direct impact on the Group’s commercial operations, the corporate center divisions play an absolute central role in that they collaborate in maintaining service effectiveness levels and convenient management terms in line with the defined plan. Within this sector, an important role is played by the asset allocation strategies of the various operations and investment management segments, which on the one hand allow maximisation of financial performance in relation to capital absorption, and on the other hand help to expand the "Creval Network" - with the aim of sharing production platforms and product factories with third parties - taking into account capital requirement restrictions. As already mentioned in the first part of the report, this exercise saw a succession of numerous events with a destabilising effect on the financial system, first of all triggered by the US subprime, or Alt-A, mortgage crisis, the risks from which were transferred to the market by originators, converged into structured ABS and CDO-type products (the “OTD - Originate To Distribute" model). In the framework of absolute prudence and risk control policies adopted by the corporate centre for financial asset management, it should be noted that the Creval Group has no exposure or commitment. In a situation of market turbulence, therefore, the risk profile control that has always characterised Creval Group operations in the financial sector confirmed its worth. Furthermore, at the start of the financial crisis, stock market exposure was gradually reduced in favour of the bond sector, with investments mainly in government securities. As a result, no losses linked to the drastic decline of the leading world stock markets were recorded. Overall in 2007, Corporate Center activities generated net interest and other banking income of EUR 47.8 million (+55.8%), corresponding to 7.3% of the Group’s net interest and other banking income. Operating expenses of EUR 66.9 million were recorded. The result for the segment was EUR -9.1 million, compared to the -13.5 million of 2006. At the end of the period, amounts due from banks in this sector totalled EUR 760.0 million (-13.6%), whilst amounts due to banks were EUR 848.5 million (-12.3%), giving a net inter-bank position of EUR -88.5 million which confirms a Group liquidity profile unaffected by the financial market crisis and under constant control by Finance and Risk Management Divisions. Investments in securities and in associates and companies under joint control – details of which are given in the first part of this report – totalled EUR 1,556.5 million (+3.5%). The corporate center has a staff of 493, corresponding to 14.2% of the total Group workforce.

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Business segments Figures in millions of EUR Corporate center

2007 2006 % change

% INCOME STATEMENT DATA Net interest and other banking income 47.8 30.6 55.8% Income (loss) before tax from continuing operations -9.1 -13.5 -32.6% BALANCE SHEET DATA Owned securities and investments in associates and companies under joint control

1,556.5 1,503.5 3.5%

Due to banks 848.5 967.8 -12.3% ORGANISATIONAL DATA Personnel 493 536 -8.0%

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Complementary and specialised finance companies providing banking business support GOVERNANCE AND CORPORATE CENTER ACTIVITIES. In 2007 and consistent with its mission as specialised company for coordination and corporate center activities, Deltas provided support to the Parent Company in the definition, governance and control of the Group's business plan and played a guiding and coordinating role in administrative and management production processes. In this context the company provides a series of centralised services, also contributing to enhancing the Group’s overall competitiveness. As already mentioned, the Group’s 2007-2010 Strategic Plan outlines growth strategies for the purpose of creating sustainable medium-term value for all stakeholders. For the period in question the plan envisages that further, stronger efforts be applied to the development process that has gradually led to the Group's position as leader in the national banking sector. The work of Deltas fits neatly into this scenario, which for the next four years plans a significant expansion of the Group’s distribution network through both internal and external lines. Specifically, Deltas provides support to the Parent Company in defining strategic lines and management control geared to achieving the set objectives of the Plan. The second line of business of this company, as already indicated above, regards corporate center tasks. During the period Deltas therefore provided specialist management services in certain phases of the production processes for a number of Group companies. Deltas provides a wide range of high-content services offered, particularly in reference to the following macro areas: legal, accounting, financial statements and reporting, company secretariats, financial instrument administration and accounting, and personnel administration. IT SYSTEM MANAGEMENT In 2007 Bankadati Servizi Informatici played a key role in IT management and development, providing strategic innovation and growth leverage to the Group. With a view to achieving greater scale and scope economies by closer interrelation of systems, data and applications, in the first few months of 2007 the planned merger into Bankadati of Crypto, a company 100% owned by the Group and specialised in application software maintenance and development, was completed. As a result of the merger – information on which was already given in last year's report - there is now a single Creval Group link for ICT management and development. By this integration measure, Bankadati has therefore taken on the role of sole centralised monitor on matters of development, maintenance and management of the IT systems, along with related operations support services and consistent with the technology development needs of the Group and other banks to which, as part of strategic and industrial partnerships, Creval allows access to its own operating systems and models. The Company has also extended its services to production companies not included in the scope of consolidation of the Group, further enhancing the high level of know-how and competence of its collaborators and the considerable investments made in prior periods. In execution of the 2007-2010 Strategic Plan, specifically the organisational and characteristics review of the Group’s IT-area governance, Bankadati launched the study and analysis phase for development of the branch application sub-system, strategic to optimisation of the commercial network’s process for multi-channel customer relations and for implementation of the planned partnerships with other banking groups. REAL ESTATE ASSET MANAGEMENT. The mission attributed to Stelline Servizi Immobiliare S.p.A. is to manage the Group’s real estate assets. The company conducts studies and research in the real estate and urban planning sector, develops architectural projects, technical installations and interior decoration and fits out branches for the banks, also providing turnkey solutions, while continuously searching for innovative solutions in technical, functional and image terms. Stelline is also in charge of security, maintenance, management and administration of the real estate holdings, and ensures the continuous, adequate functionality of the Group real estate with a view to containing management costs. In addition, Stelline also provides increasingly important technical support to lending activities, financial leasing in the real estate sector and the protection of claims. As part of the 2007-2010 Strategic Plan, Stelline’s operations was further focused on implementing several strategic projects to improve the management efficiency of the Group, by defining new branch models featuring lower operating expenses per “workstation” and rationalising office space in the central divisions. Stelline also supports development of the group by internal lines, through the planned opening of 95 new branches in the next four years.

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MANAGEMENT OF IMPAIRED LOANS. The acquisition, management and disinvestment of impaired loans is the responsibility of Finanziaria San Giacomo, a financial intermediary registered since 14 April 2006 in the general register of financial sector intermediaries pursuant to art. 106 of the Consolidated Law on Banking. In the period in question, the Company addressed the operational implementation of certain tasks to complete the rationalisation project for the Group's credit business - launched in September 2005 - including, amongst other things, the establishment of Finanziaria as the specialised centre for the administration, management and collection of impaired loans, through the direct management of non-performing loans acquired without recourse originating from Group banks and management “on assignment” of loans still owned by those banks. The project envisaged the operational launch of Finanziaria, providing the Company with an organisational structure - in accounting system, data processing, internal audit and personnel terms – suited to duties and tasks performed in strict observance of supervisory authority regulations. In this respect, in 2007 the proposal to adopt an independent organisational structure was approved, characterised by a strong specific business profile and streamlining of management and decision-making processes, and became operative on 1 September 2007 with the transfer in of former Mediocreval personnel. With reference to the company’s business development, it should be noted that in November the transfer pursuant to art. 58 of the Consolidated Law on Banking of Credito Valtellinese, Credito Artigiano and Credito Siciliano impaired loans to Finanziaria San Giacomo was completed. Loans classed as non-performing as at 31 December 2006 – around 3,000 positions - were transferred for a total of approximately EUR 37 million. Strategic management of investments The strategic management of investments aims to expand the “Creval Network” so as to increase the critical mass of the Group, also by sharing operating platforms and banking and financial service production phases with third parties. This activity will allow a long-term increase in profitability for the Group through dividends and profits generated by the investee companies, gradually reducing the cost of products offered to customers as adequate economies of scale are achieved. Istituto Centrale delle Banche Popolari Italiane The Parent Company has a 22.5% interest in ICBPI share capital, with a strong Credito Valtellinese imprint offered by the fact that Giovanni De Censi is ICBPI’s Chairman. This equity investment is strictly functional to the use of services – in a scale economy logic with reduced costs of services for customers – particularly in the finance, payment systems and IT areas through the parent company Istituto Centrale Banche Popolari Italiane – specialised in payment, administrative and financial services – and its subsidiaries:

- Seceti S.p.A., among the interbank company leaders for payment system outsourcing services; - Key Client Cards & Solutions S.p.A., operating in the international payment card sector; - CIM Italia S.p.A., reference specialist in e-money, POS management, web banking and e-commerce; - Oasi S.p.A., leader in the distribution of welfare, tax and social security management applications.

Specifically, it should be emphasised that in 2007 the payment and e-money systems sector was characterised by the implementation of projects ready for the 1 January 2008 entry into force of the Single Euro Payment Area (SEPA). In this framework, the Institute recently signed an important strategic agreement with the German-Dutch company Equens for the joint development of payment system activities, also in view of the launch of the SEPA. The ICBPI Group and Equens Group will jointly manage EUR 8.7 billion in payments and EUR 3 billion in POS and ATM transactions, with a 12% share of the European market. The alliance with ICBPI is a fundamental element of the “Creval Network”, allowing the constant expansion of the commercial product range and rendering the network more competitive in price and quality terms. During 2007, the Institute also approved a wide-ranging detailed project to reorganise the ICBPI Group, focusing on the following principles:

- organisation of the operating model according to logical business areas and competence centres, particularly for the core business of e-money and payments;

- elimination of company overlaps and duplications, and the improvement of operating process monitoring;

- setup of each line of business as single market interfaces; - strengthening of the management and coordination role of the Parent Company ICBPI; - centralisation of certain complementary and non-strategic activities into ad hoc SPVs.

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Implementation of the new operating and corporate model - expected by the end of 2008 - represents a key requisite to achieving the strategic and economic objectives of the ICBPI Group Industrial Plan and to its configuration as a Group open to strategic alliances at European level. Banca di Cividale The industrial cooperation project with the Banca Popolare di Cividale Group, launched in 2004 with the acquisition of 22.22% of share capital of Banca di Cividale S.p.A. – the operations centre for the Friuli-based group with a network of over 50 branches – and enhanced in 2005 by an increase in the investment to 25%, was further consolidated in the period by the Cividale Group’s adoption of Creval Group IT system and technology structures on 1 October, also in reference to specific agreements to provide back-office financial services, back-office transfers and human resources management These activities required significant involvement of Bankadati divisions and resources in relation to the application component and from a technological point of view. The precision demonstrated in keeping to schedule meant that the start-up deadline was met, allowing launch of the service of 1 October 2007. The start-up phase was followed by fine-tuning, analysis and enhancement to gradually improve the levels of service provided. In line with the commitments taken on within the Veneto Project, the Parent Company Banca Popolare di Cividale supported the growth project for Banca dell’Artigianato e dell’Industria – in which it holds 9.86% - in northwest Veneto. A significant event for our Group, as it heralds potential opportunities which are currently being assessed, is the consolidation of investments of the Friuli-based associate in banks in the East European markets. Banca della Ciociaria In implementation of agreements signed on 31 October 2006 and after due authorisation was obtained from the competent authorities, March 2007 saw completion of the purchase by Credito Valtellinese of 1,677,427 Banca della Ciociaria S.p.A. shares, corresponding to approximately 27.9% of share capital, for the total price of EUR 20.6 million. The Creval investment in Banca della Ciociaria share capital therefore increased to around 37.9%. The transaction forms part of a strategic cooperation project between the two banking groups which aims to increase the Creval Group’s presence in central Italy and strengthen the market role of Banca della Ciociaria in the geographical areas it serves by the development of commercial and operational synergies. From a governance point of view, the company’s ordinary shareholders’ meeting of 15 October 2007 renewed its control bodies, after which the Board of Directors appointed Prof. Marcello Condemi as its Chairman. During 2007 an agreement was signed between Bankadati and Banca della Ciociaria for the provision of a Group IT system as from 2008. This agreement, which constitutes a further reinforcement of the partnership, will allow the Bank to adopt Group operational and organisational models with the aim of full implementation of the Industrial Plan. Banca Tercas On 19 November 2007, Credito Valtellinese acquired 3.656% of Banca Tercas share capital, for a total investment of EUR 24,403,800. In addition, an option was signed involving 1.334% of share capital of the Abruzzo-based bank, for exercise in the period April-May 2008 so as to reach a shareholding of 4.99%. These transactions are included in the framework of a strategic partnership project between Credito Valtellinese and Banca Tercas. In fact, on 12 November 2007, the Parent Company, Fondazione Cassa di Risparmio della provincia di Teramo and Banca Tercas - with a network of around 100 branches in the Abruzzo, Emilia Romagna, Lazio, Marche and Molise regions and a total workforce of 830 – and Cassa di Risparmio della provincia di Teramo S.p.A. signed Shareholders’ Agreements and a Framework Agreement covering operational, management and governance aspects with the intention of launching a wide-ranging strategic cooperation project. The Shareholders’ Agreements and Framework Agreement – which followed the letters of intent signed on 17 April 2007 – outline a series of steps toward common growth, based on sharing means of production and the development of a joint market and product policies. Specifically, these envisage:

- mutual consulting in favour of pursuing synergies in all areas of common interest and to facilitate the convergence of key decisions to aid business coordination development;

- inclusion of specific members of Credito Valtellinese in the control bodies of Banca Tercas.

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The validity of the Shareholders’ Agreements and Framework Agreement is subject to Creval’s entry into the ownership structure of Banca Tercas with 20% of the share capital. The maximum payment envisaged for the entire block of shares corresponding to 20% of share capital is EUR 133.5 million. Global Insurance and Global Assistance In November 2007 Credito Valtellinese and Ri-Fin S.r.L. signed an agreement to strengthen Creval’s presence in the insurance market through the development of existing partnerships, centred on the joint interest in Global Assicurazioni – a multifirm insurance agency, which since 1999 has operated in insurance intermediation using an innovative business model, appointed to supervise the Creval Group’s bancassurance sector, including the management of insurance group partner relations (e.g. Generali, Axa, Allianz and Aviva) – and in Global Assistance – an insurance company specialised in non-life business. The main objectives of this agreement are to:

- significantly expand the life and non-life insurance product range for the Creval Group’s retail and corporate customers;

- provide further input to Global Assicurazioni and Global Assistance activities through entry into new market segments and the joint commitment to consistently increase volumes traded, revenues and profitability of the two companies;

- maximise Creval results – in premiums collected and profitability terms – in the bancassurance segment by exploiting the potential offered by the “Creval Network” (Group banks and associated companies) and know-how acquired from Global Assicurazioni and Global Assistance.

The terms of the signed agreement – execution of which is suspensively conditioned to obtaining authorisation from the relevant Supervisory Authorities – envisages the purchase by Bancaperta of 24,000 Global Assicurazioni shares – representing 20% of the share capital – from Ri-Fin at the price of EUR 22,000,000. On conclusion of the transaction, the Creval Group will hold 60% and Ri-Fin 40% of Global Assicurazioni share capital. The agreements also envisage that Ri-Fin has the right to sell its remaining investment to the Creval Group – equal to 40% of Global Assicurazioni share capital – at fair value (based on the market price). This option may be exercised by Ri-Fin as of the data of approval of the 2010 financial statements. In 2007, Global Assicurazioni achieved net income of EUR 4.9 million (-5.4% compared to 2006), whereas the value of production was EUR 20.9 million (-1.2%). The portfolio managed by the company totalled EUR 1.3 billion, in line with the 2006 figure. Global Assistance achieved a net income of EUR 0.7 million, a 16% increase over 2006, with total premiums issued for EUR 4.7 million (+1.9%).

Activities of associated company Aperta Gestioni The Swiss associated company Aperta Gestioni Patrimoniali SA – fiduciary, asset management and private banking company – ended 2007 with an increase in total deposits from EUR 328 to 338 million. The year ended with significant growth of the period result, closing at EUR 1.43 million, up 16.4%. In response to the growing and varied requirements of customers in the Lugano and Chiasso markets, managers and consultants of Aperta Gestioni Patrimoniali S.A. have succeeded in providing an increasingly wide range of services. Bancaperta holds 48% of the company’s share capital, with Hoderas Holding S.A. and Sarasin Colombo Gestioni Patrimoniali S.A. as holders of the remainder.

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Assets managed in millions of EUR

APERTA GESTIONI 31/12/2007 31/12/2006 31/12/2005 Total assets 6,050 5,548 4,679 Total revenues 4,386 3,787 2,297 Profit (Loss) 1,427 1,226 910 Shareholder’s Equity 4,265 3,985 3,544

Figures in thousands of EUR

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Financial sector activities Operations in the financial sector, covered by Bancaperta, on the one hand relate to the banking book – involving liquidity and interest rate risk management in cash pooling under assignment from all the Group’s banks – and on the other hand to the trading book. During the period, transfer of the trading book to Bancaperta was completed, formerly handled by individual Group banks. Bancaperta therefore took over full centralised responsibility for Creval financial assets. In 2007, with regard to financial market performance, restructuring of the trading book began. The assets invested in UCITS units were decreased considerably in favour of direct exposures, divided by asset type, in order to minimise market risk. The Group portfolio is now mainly composed of government securities, bank bonds, shares and, to a more limited extent, hedge fund units. Banking book activities, regarding the Group’s liquidity and interest rate risk management, are based on ALM application analysis which during the year allowed specific periodic reports to be submitted to the Group’s corporate governance bodies on the static ALM, repricing risk, liquidity risk and sensitivity measurements. In parallel, specific reports were prepared to illustrate monthly movements in balance sheet aggregates and represent imbalances forecast for the coming quarters. This reporting system, conceived with a view to dynamic ALM, was structured to take into account planning forecasts and funding policies formulated at budgeting stage. Equity policy The Creval Group’s equity policy is a fundamental tier in corporate center activities in that it allows support for development plans under balanced economic and financial conditions, in full observance of regulatory restrictions, the principles of sound and prudent management and objectives to create economic value for shareholders. Specifically, the capital allocation strategies and policies both aim to:

- finance the expansion of risk-weighted assets and real estate investments complementary to the opening of around a hundred new branches as envisaged in the Strategic Plan;

- hold an adequate level of free capital to ensure financial flexibility and equity resources necessary to finance the development of existing partnerships with other banks and to acquire additional controlling and non-controlling quotas in banks or intermediaries operating in areas or market segments not currently covered by the Group;

- maintain an adequate degree of capitalisation of assumed risks, also from a regulatory point of view, with a total capital ratio of over 10%. This also with a view to the full introduction of the New Basel II Accord on Capital on 1 January 2008;

- maintain a constant balance in the financial structure so as to ensure an increasing level of return to shareholders.

In fact, the capitalisation policy is strictly linked to the internal audit system and levels of risk assumed, to be discussed in the next paragraph. As already mentioned, the Group’s equity allows the level of assumed risk to be observed in traditional banking activities, taking into account the principles of the New Accord on Capital transposed to Italian law and current Supervisory Authority provisions at the end of 2007. As we know, the new prudential regulatory structure is based on three “pillars”. The first introduces capital requirements to cover risks typical of banking and financial activities (credit, counterparty, market and operational risks). For this purpose, alternative calculation methodologies are envisaged for capital requirements, characterised by various levels of complexity in the measurement of risk and in organisational and control requirements. The second requires that banks adopt a capital adequacy strategy and control process, both current and prospective, leaving the Supervisory Authority with the task of verifying reliability and consistency of the related results and, where necessary, adopting appropriate corrective measures. The third introduces public disclosure obligations regarding capital adequacy, risk exposure and general characteristics of the related management and control systems. Given the framework outlined above and with a view to the strategic control and risk management involved, as part of its strategic planning process the Parent Company defines the adequate total capital – in current and prospective terms – necessary to face all risks deriving from banking activities and growth projects. In assessing and defining the adequate total capital, all risks to which the Group is currently or could be exposed are taken into considered and analysed in full, also in the light of expansion strategies.

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Included in this context are the project tasks launched towards the end of 2007, for the purpose of the Group's complete adaptation to "second pillar" provisions (ICAAP - Internal Capital Adequacy Assessment Process) - in force from 2008 - with particular regard to capital adequacy definition process. As part of this project – which also includes the preparation of documents for submission to the relevant control bodies during 2008 and to the Supervisory Authority pursuant to current regulations - internal capital adequacy will be more precisely defined and formalised, using stricter and more analytical measurement tools where necessary, the breakdown of tasks being as follows:

- identification of risks subject to assessment; - measurement/assessment of individual risks and the related internal capital; - measurement of total internal capital; - calculation of total capital and reconciliation with regulatory capital.

It is therefore envisaged that the project launched will allow for greater effectiveness in Group equity management, with optimal allocation of capital among the business areas and an improvement in net profitability levels compared with economic equity. Included among the strategic lines described above is the strategic task of equity reinforcement approved by the extraordinary shareholders' meeting of the Parent Company on 10 February 2007, in stages as illustrated in the separate report on operations. In this report it is important to emphasise how the total subscription of ordinary shares optioned to Parent Company shareholders has allowed a considerable reinforcement of the consolidated equity profile – shareholders’ equity increasing by approximately EUR 535 million, of financing the growth projects mentioned in the first part of the report and of covering all risk factors relevant to the bank's operations. A close link is therefore required between the growth rates of risk-weighted assets and those of consolidated equity, which in the period 1997-2007 increased by an average 18.7%, with a significant leap this year.

Evolution of consolidated shareholders’ equity 1997-2007

The Group’s Internal Audit system Internal Audit plays a central role in the management of the Group and constant attention is dedicated to this in order to adapt to regulatory changes, to the changing market context and to the introduction of new areas of business. The simultaneous pursuit of Group competitiveness, its medium/long-term stability and the principles of sound and prudent management call for the implementation of a concrete, effective Internal Audit System. In this respect, the Internal Audit System - in accordance with the Supervisory provisions applicable to banks and banking groups - comprises a set of rules, procedures and organisational structures that aim to ensure respect of corporate strategies and achievement of the following goals:

- effectiveness and efficiency of corporate processes; - safeguarding of the asset value and protection from losses; - reliability and integrity of accounting and management information; - compliance of transactions with the law, with supervisory regulations and with internal policies,

plans, regulations and procedures.

343

389

418

429

441

453

532 75

6

882

1.57

7

283

0

200

400

600

800

1000

1200

1400

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

CAGR CONSOLIDATED SHAREHOLDERS' EQUITY

1997-2007: 18.7%18.7%

in m

illio

ns o

f EU

R

Financial statements according toIAS/IFRS standards

343

389

418

429

441

453

532 75

6

882

1.57

7

283

0

200

400

600

800

1000

1200

1400

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

CAGR CONSOLIDATED SHAREHOLDERS' EQUITY

1997-2007: 18.7%18.7%

in m

illio

ns o

f EU

R

Financial statements according toIAS/IFRS standards

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The Parent Company, as part of the central management activities it provides for the banking group, constantly performs:

- monitoring of the strategic development of the various business areas, with particular focus on the risks assumed by the various subsidiaries;

- management control, aimed at ensuring maintenance of a balance between the technical/operational profiles of profitability, capitalisation and liquidity of the individual companies and of the Group as a whole;

- operational control aimed at evaluation of the various risk profiles of individual subsidiaries, manly with regard to the area of risk management.

Components of the Group’s Internal Audit system

Considering the control duties weighing upon the Parent Company, extensive powers have been assigned to Credito Valtellinese General Management regarding the preparation of measures necessary to ensure the establishment and maintenance of an efficient and effective Internal Audit System for the Bank and for the Group. Lastly, with regard to organisational tasks arranged during the period, the following are of particular note:

- the unification with effect from 1 January 2008 of the Group’s risk management departments into the Deltas Risk Management Division, responsible for monitoring credit risk, market risk and operational risk;

- the establishment of a compliance division in Deltas and appointment of the related manager, in order to create a single centralised unit for compliance risk monitoring;

- localisation of the Group Credit Division with the Parent Company, with the role of defining more standardised, consistent credit policies at Group level and of monitoring the quality level of consolidated assets.

MONITORING OF BANKING RISK The clear identification of risks to which the Bank is potentially exposed constitutes the essential prerequisite for a knowledgeable assumption of said risks and their effective management, making use of the appropriate mitigation and transfer tools and techniques. Careful risk management, based on criteria of prudence and implemented within a specific organisational framework, aims to limit the volatility of expected results. In line with its focus on retail banking, the Group is mainly exposed to credit risk. In 2006, the 2006/48/EC Directive was given final approval. This directive introduced the new, definitive prudent requirements of the Basel Committee (“Basel 2”). Article 152 of this directive allowed banks and banking groups to continue applying the previous prudent requirements, at the latest until the end of 2007. The Parent Company and other Banks in the Group resolved to exercise this right. Therefore, for 2007, they are exempt from regulations regarding the internal assessment of total capital adequacy requirements (“second pillar”) and disclosures to the public (the “third pillar”) and regulations regarding operational risk. From 2008, the Group will determine capital requirements to meet credit and market risk by means of the standard method and operational risk by the basic method. The procedural and organisational tasks necessary to generate supervisory signals according to these approaches have therefore been implemented.

STRATEGIC DEVELOPMENT MONITORING

MANAGEMENT CONTROL

OPERATIONAL CONTROL

GROUP INTERNAL AUDIT

STRATEGIC DEVELOPMENT MONITORING

MANAGEMENT CONTROL

OPERATIONAL CONTROL

GROUP INTERNAL AUDIT

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Projects with the aim of introducing more sophisticated risk management methodologies as envisaged by the regulations have shown considerable progress, as indicated below. In parallel, as established under the “second pillar” and requiring definition of the ICAAP (Internal Capital Adequacy Assessment Process), the tasks necessary to define the processes and tools to calculate internal capital adequate to cover all operational risks to which the company is exposed have, as mentioned previously, been launched. The Group will prepare the first simplified ICAAP statement as at 30 June 2008 by 31 October 2008. From an organisational point of view, it should be mentioned that during 2007 and the Group’s risk management units were converged into the Deltas Risk Management Division, responsible for monitoring credit, financial, market and operational risk, becoming operative as from 1 January 2008. Credit risk Organisation of the credit process requires loan proposals to be formulated by bodies within the territorial network, where the related decision-making procedure can be completed. Applications for larger credit lines are automatically forwarded to central structures (Loans Department, Credit Committee, Executive Committee and Board of Directors), which decide on the relative cases. The Board of Directors of the Bank, the only body authorised to grant powers in terms of credit disbursement, is regularly informed during its meetings on the exercise of delegated powers and performance of the most significant loans. The administrative body of the Parent Company also extends its analysis to significant loans of the entire Group. In relation to changes regarding Mediocreval's mission, the Group Credit Department - previously located within the subsidiary - was transferred to the Credito Valtellinese internal organisation with effect from 1 January 2008. This department is responsible for reinforcing the Group’s credit policies and monitoring the quality of consolidated assets, defining the policies and criteria necessary for credit risk assessment and management. The Group Credit Committee – established as part of the Parent Company – expresses its mandatory and non-binding opinion on credit line practices decided by the Boards of Directors of the Group banks. For the credit segment, this Committee supervises all assets of individual banks, exercising control and providing guidelines to optimise the assumption of credit risk. The “Credit Performance Management Service” was established as part of the Credit Department of individual Banks with the task of monitoring the segment in overall terms and in reference to single positions, particularly those flagged as anomalous. At the same time, inspection tasks – formerly attributed to the Credit Division’s “Risk Control Department” – was assigned to the Inspection Service. The Credit Performance Management Service, with these line duties removed, can now more effectively support the commercial network in managing irregular positions, whilst the Inspection Service – no longer involved in credit management tasks – now combines operational risk and credit risk inspections, therefore optimising internal audit activities. The two services, in close and constant liaison, monitor action taken on guidelines issued by the Group’s Auditing Department and Credit Department, whose collaboration helps coordinate the various operations units and balance the development and function of the Group’s Internal Audit System. Without prejudice to the terms indicated with regard to decisions adopted at Group level on the calculation of capital requirements, during the period the new company rating model became operative. Corporate customers, defined as counterparties of any legal nature that produce and/or market goods and services, are divided into two segments:

- corporate, including companies with a turnover of over EUR 5 million or credit lines of over EUR 250,000. This segment is composed of a limited number of counterparties which nevertheless count for a significant share of loans;

- small business, including companies with a turnover of up to EUR 5 million and credit lines of up to EUR 250,000. This segment is composed of a high number of counterparties with credit lines of a limited amount.

The rating model derives from systems centred on the automatic component and includes objective quality elements, excluding justified overrides attributed by the analysts. The model is structured according to a modular or partial approach format and includes five modules: quantitative analysis of balance sheet indicators; company-Banking Group relations performance, the position of the company on the banking system; macro-economic assessments for the company business segment and company qualitative analysis. Each module works independently from the others and produces a partial assessment score. Based on the

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score obtained in the various corporate assessment areas, a rating class is assigned. 9 rating classes are envisaged for performing counterparties and one class for counterparties in default. Assignment of the rating is linked to the credit allocation process and is activated at the time of allocation and review of credit lines. The ratings are reviewed automatically on a monthly basis. Given that backtesting activities performed on the model have shown a good correspondence between the credit rating classes and the historic default frequency, the model is considered suitable for use in managing the various credit process stages. As mentioned above, the Risk Management Department is responsible for:

- the development and management of the internal rating model for the Group’s credit customers; - for reporting to the retail banks (Credito Valtellinese, Credito Artigiano, Credito Siciliano, Credito

Piemontese, Banca dell’Artigianato e dell’Industria) and Mediocreval on individual credit risk positions;

- for reporting to the Parent Company on the consolidated credit risk position.

The Creval Group internal rating model The appropriate monitoring of credit risk using the above methodologies and tools has led to a gradual reduction of impaired assets in relation to total loans. In particular, as at the end of 2007, the ratio between non-performing and total loans to customers was 1.4%, decreasing further over the 1.6% of the previous year and decidedly lower than the banking system average. Similarly, the ratio between total impaired loans – the sum of non-performing, watch-list, restructured, past due and/or overdue exposures – and loans to customers was 2.9%, compared to the 3.4% for the end of 2006.

InternalPerformance

GlobalAnalysis

ExternalPerformance

Fin. StatementsAnalysis

Qualitative Analysis

Company Data

Default Probability

RATING

InternalPerformance

GlobalAnalysis

ExternalPerformance

Fin. StatementsAnalysis

Qualitative Analysis

Company Data

Default Probability

RATING

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Market risk As mentioned in the introduction to this chapter, the Group’s investment policy is based on the criteria of containing market risk, with reference to all of its components: interest rate risk, price risk, and exchange rate risk. No positions involving commodities risk are normally adopted. Risk-hedging tools and techniques are used in the management of the portfolio. The investment and trading activity is carried out in compliance with the guidelines established by the relative governance levels of the Group, and is implemented as part of an extensive system of assigned management powers and according to detailed internal regulations on, among other things, modification of the set stocks, type of negotiable assets, the investment market, type of issuer, maturity of the securities and rating of the securities. For the daily trading activities, there are maximum daily loss limits and overall open position limits. The financial assets held for trading portfolio is composed mainly of:

- bonds; - shares; - harmonised UCITS units; - trading derivatives.

The bond component of the portfolio consists mainly of floating rate securities. The fixed-rate portion (BOT with varying expiries) has a limited duration. The bonds held are mainly issued by the Republic of Italy or by banks with ratings higher than investment grade. The UCITS units held by the Banks are also prevalently bond-based. The direct equity investments, residual in size, mainly involve shares listed in the Italian stock exchange and with high degree of liquidity. The financial instruments present in the portfolio are almost exclusively in euro. Measurement of the market risks in a portfolio is based on the daily estimate of parametric Value at Risk (VAR), determined with a confidence interval of 99% and a period of 10 days. The VaR measures the maximum risk that the portfolio may undergo based on volatility and historic correlations of the individual risk factors (interest rate, share prices and exchange rates). Monthly VaR reports are submitted to the Boards of Directors of the Group Banks for evaluation of the consistency of the risk profile with the particular management objectives. The control of limits assigned in terms of value at risk is now a consolidated part of Group operations: the procedure that monitors the financial sector automatically reports cases where said limits are exceeded, allowing for the appropriate corrective action to be taken. During the period, the average consolidated VaR was EUR 1.3 million, equal to 0.1% of the financial assets value. This data confirms the low risk level of the securities portfolio.

Group VaR 2007

600000

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2-Jan 31-Jan 1-Mar 30-Mar 3-May 1-Jun 29-Jun 30-Jul 29-Aug 27-Sep 26-Oct 27-Nov 28-Dec

VaR

Consolidated VaR performance 2007

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Interest rate risk The financial statements of financial intermediaries are typically composed mainly of financial assets and liabilities, the value of which are also interest rate sensitive. Consistent with the Group’s retail mission, with a prevalent assumption of credit risk given its specific customer segments, the interest rate risk assumed deriving from typical banking activities (funding and lending) remains within certain limits. Risk management aims to minimise the impact of unfavourable variations in the rates curve on the value of the banks, as well as on the cash flows generated by balance sheet items. Limiting exposure to interest rate risk is pursued primarily by indexing asset and liability items to money market parameters (usually Euribor) and the tendential equalisation of asset and liability durations to very low levels. Interest rate risk measurement of the banking book is based on the economic value approach, defined as the difference between the current asset value and current liability value. The measurement is based on pre-established changes in the rates structure applied to balance sheet items at the reference date (static ALM). The reaction to changes in interest rates is measured by sensitivity indicators (modified duration). Based on the modified duration of items assessed, the impact of instant parallel translation to the rate structure is calculated. The changes are then normalised in proportion to regulatory capital.

During the second half of 2007, activities continued to improve and integrate the ALM system, which provides repricing risk, maturity risk and sensitivity risk measurements calculated on the monthly financial position as at the date of analysis. These measurements – reported monthly to the ALCO (Asset and Liability Committee), General Management, Board of Directors and Boards of Statutory Auditors of the Group's Banks - allow monitoring of the repricing risk between indexed asset and liability items and their impact on the economic equity value.

Liquidity risk The liquidity risk management profile envisages integration between the cash flow matching approach (which attempts to align expected incoming and outgoing cash flows for each time interval) and the liquid assets approach (which maintains balance of a given quota of instruments readily transferable into cash). The Bank’s objective consists in financing the assets under the best possible conditions in ordinary operating circumstances and in being able to meet its commitments under conditions of cash flow crisis. This objective is achieved by:

- Centralising liquidity risk management with Bancaperta so as to reduce recourse to financing by parties external to the Group and to render market access more efficient;

- Appropriate diversification of funding sources, in terms of both technical and collection formats and with regard to the counterparties.

From an operational point of view, liquidity risk management consists in two processes: - Short-term liquidity risk management which aims to ensure that the Bank is always able to meet its

commitments on time. This objective is pursued by an appropriate balance between incoming and outgoing cash flows. In addition, the maintaining of assets readily transferable into cash responds to the need to meet unexpected commitments;

- Structural liquidity risk relates more to asset financing which, in the final analysis, implies assessment of the overall business strategy (growth objectives and their time horizon; policy on loans and deposits by destination, source, duration, technical format and cost).

Liquidity risk reports are submitted on a monthly basis to the ALCO committee, General Management, the Boards of Directors and Boards of Statutory Auditors of the Group's Banks.

With regard to both interest risk and liquidity risk, in-depth analysis was performed to obtain an optimum measurement of “on demand item” risk, with the aim of identifying the best methodologies to estimate their actual financial duration and the stickiness of their related rates. Likewise, activity continued on implementation of the dynamic ALM model for a more accurate and systematic incorporation of strategic and planning objectives in the measurement of interest rate and liquidity risk. Operational risk Operational risk, a particularly wide-ranging class, is not typical of banking or corporate activities. The origin of such risk may be internal or external and their area of manifestation may also extend beyond the scope of the company. The definition adopted by the Group, in line with supervisory authority guidelines, identifies operational risk as the risk of suffering losses due to the inadequacy or malfunction of procedures, human resources and

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internal systems, or from external events. Amongst others, losses classified as such derive from fraud, human error, operations stoppages, system crashes, contractual default and natural disasters. Operational risk includes legal risk, but not strategic risk or reputational risk. The containment of risk also aims to protect the Group’s reputation and brand. Operational risk management activities aim to meet the following guidelines:

- To increase overall operational efficiency; - To prevent the occurrence or reduce the probability of events that could potentially generate

operating losses by means of appropriate regulatory, organisational, procedural or training measures; - To mitigate the expected impact of such events; - To transfer any risk not expected to be retained by means of contractual insurance instruments.

As already mentioned, in terms of prudent supervision, the Group has resolved to use the Basic Indicator Approach (BIA), starting from 2008, to determine the minimum capital requirement with respect to operational risk. Under the operational profile, in addition, a project aimed at the development of advanced methods for the measurement and management of operational risk has been implemented. For further information on these methods, reference should be made to Part E (Information on risks and hedging policies) of the notes to the financial statements. Non-compliance risk and establishment of the Compliance Department In accordance with Bank of Italy instructions issued in 2007, the Credito Valtellinese Group has centralised its compliance department with Deltas, with the aim of creating a single compliance monitoring and control department and to enhance the distinctive competence required for such matters. In this context, and as specified in Supervisory Instructions, the risk of non-compliance with regulations is the risk of incurring legal or administrative penalties, significant financial loss or damage to reputation as a consequence of violation of imperative legislation (laws or regulations) or self-regulation (e.g. articles of association, codes of conduct, codes of self-discipline). In this respect, the Credito Valtellinese Board of Directors resolved on 13 November 2007 to appoint a Compliance Officer as head of the Compliance Department, based in the Compliance and General Affairs Division. This appointment became fully operative from 2 January 2008, the date of entry into force of a series of departmental changes in the organisation. The organisational decision adopted to ensure the correct performance of compliance activities envisages that as part of his duties, the head of Deltas Compliance and General Affairs makes use of line support staff, collaborators located in other organisational units and external consultants under contract. The result is therefore a “network” model that allows the Compliance Officer same-time access to hierarchical, departmental and contractual leverage in accordance with the defined guidelines. From an action perimeter point of view, the most important legal provisions that the Compliance Department is expected to observe regard intermediation, the management of conflict of interest, transparency to customers and consumer protection measures. The organisation described above has been communicated to all members of the Group, each of which has by special board of directors’ resolution has appointed a Compliance Department liaison officer, normally a member of General Management, to provide interface and support to the Compliance Officer. This solution was further implemented by the Parent Company Board of Directors at their meeting of 15 January 2008 with approval of the “Credito Valtellinese Banking Group Compliance Model” – which focuses on essential elements of Creval Group policy on compliance – later adopted by the boards of directors of all other banks and companies in the group. ANTI-MONEY LAUNDERING During 2007 action continued on the implementation of procedures with the aim of constant, accurate observance of obligations imposed by anti-money laundering law, also in line with indications and recommendations provided by the Ufficio Italiano Cambi after its inspection of the Parent Company during the year, details of which are provided in the separate report on operations. The training programme on this topic continued during the period, aimed at sensitising all employees to the importance of a sound working knowledge of the law on prevention and combating of money laundering and terrorism financing phenomena. In addition to classroom training for Branch Managers, all employees were given access to a self-learning course for compulsory completion by the end of December 2007.

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It should also be mentioned at this point that on 29 December 2007 Italian Legislative Decree 231/2007 entered into force, in enactment of Directive 2005/60/EC on prevention of the use of the financial system for the money-laundering of proceeds of crime and for terrorism financing, and Directive 2006/70/EC containing the implementation measures. The decree envisages a number of new operations, specifically:

- a new configuration of the relevant authorities, with suppression of the Ufficio Italiano Cambi and transfer or related competence to the UIF (Financial Information Unit) of the Bank of Italy;

- stricter limits on the use of cash and securities payable to the bearer, and on the circulation of bank drafts without the "not transferable" clause;

- intensification of adequate customer identification obligations and the introduction of an approach based strongly on the assessment and management of money-laundering and terrorism financing risk;

- new thresholds for entries to the Single Electronic Archive; - requirement for special procedural precautions in the event of relations with "politically exposed"

parties (heads of state and government, parliamentarians, members of the court, ambassadors and related parties) from EU and non-EU countries.

These new aspects, duly communicated to the Group’s commercial network, will be subject to transposition of the new version of the internal “Consolidated Anti-money Laundering Manual” due for issue in the first half of 2008. In addition, all tasks required for the full adaptation of company procedures to the new legal provisions were launched. MARKET ABUSE AND PRIVILEGED INFORMATION It should be specified that the law on market abuse places obligations on financial intermediaries to report to Consob on any transactions involving financial instruments listed on regulated markets which could reasonably be considered a violation of market abuse regulations (insider trading and market manipulation). In this respect, 2007 saw the issue of the “Credito Valtellinese Banking Group internal regulations on market abuse pursuant to Legislative Decree 58/98 (Consolidated Law on Finance)”, approved by the Boards of Directors of the Group’s banks concerned. This document structurally defines the rules and operating methods adopted by the Group to ensure the internal observance of regulations on the reporting of suspect transactions. As part of the new regulations, the establishment of a “Market Abuse Committee” was also defined with the role of analysing transactions considered suspect in terms of market abuse, and of expressing non-binding opinion on the subsistence of justified suspicion requiring the issue of a report to Consob. It should also be mentioned that article 4 of the Self-Regulatory Code for Listed Companies recommends the adoption of internal management procedures and external disclosure of documents and information regarding such Companies, with particular reference to Privileged Information, defined by the Consolidated Law on Finance and in CONSOB's Issuers’ Regulations. In observance of such legislation, at Group level the “Credito Valtellinese Banking Group internal procedure on: Privileged Information; register of persons with access to Privileged Information; communications on Internal Dealing” was prepared to:

- guarantee maximum confidentiality of the information in question; - reduce the risk of abuse of privileged information offences pursuant to art. 184, and market

manipulation offences pursuant to art. 185, of the Consolidated Law on Finance; - guarantee application of legal and regulatory provisions on the treatment and disclosure to the

market of privileged information and keeping of the register of persons with access to such information.

ITALIAN LAW 262 ON THE PROTECTION OF SAVINGS Among the objectives of the Law on Savings (Italian Law 262/2005 and Legislative Decree 303/2006) is the improvement of quality and transparency of corporate reporting, which requires financial market operators to increase the efficiency of their internal audit systems. These regulatory measures redesign the financial reporting process so as to highlight supervisory mechanisms and administrative system traceability, reinforce controls and the transparency of records, and to improve both corporate transparency and the reliability and credibility of information disclosed to the market.

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The new measures proposed by the Law on Savings centres on the preparation of adequate administrative and accounting procedures for financial statements purposes. The expression “administrative and accounting procedures” refers to:

- the processes for collecting, processing and disclosing information of an economic and financial nature;

- IT systems for the gathering and processing of accounting data; - the assessment of assets and liabilities; - in general, all activities capable of positively or negatively influencing the accuracy of data and

therefore the preparation of financial statements and other financial documents and reports. The same law introduced art. 154-bis of the Consolidated Law on Finance which states that:

o the articles of association of issuers must include the professional requirements and method of appointment of an Executive responsible for the preparation of corporate accounting documents, subject to approval by the controlling body;

o corporate documents and reports disclosed to the market and related accounting information, including interim statements of the company are accompanied by a written declaration of the executive responsible for the preparation of corporate accounting documents to confirm their correspondence with accounting documents, books and records;

o the executive responsible for preparing corporate accounting documents must implement adequate administrative and accounting procedures for preparation of the annual financial statements and, where applicable, the consolidated financial statements and all other disclosures of a financial nature;

o the Board of Directors ensures that said executive has adequate powers and means to exercise his duties and supervises the actual observance of administrative and accounting procedures;

o the delegated administrative bodies and the executive responsible for the preparation of corporate accounting documents provide a special report for the annual, abbreviated half-year and, where applicable, the consolidated financial statements to confirm: o the adequacy and effective application of procedures indicated pursuant to subsection 3 in

the period of reference of the documents o that the documents were prepared in compliance with applicable international accounting

standards approved by the European Community; o the correspondence of results with accounting books and records; o the suitability of the documents to provide a truthful and accurate view of the equity,

economic and financial position of the issuer and the group of companies included in the scope of consolidation;

o that the report on operations, separate financial statements and, where applicable, the consolidated financial statements include a reliable analysis of the performance and result of operations, and the position of the issuer and companies included in the scope of consolidation, together with a description of the main risks and uncertainties to which they are exposed;

o that the interim report on operations for the abbreviated half-year financial statements contains a reliable analysis of information pursuant to art. 154-ter, subsection 4 of the Consolidated Law on Finance.

The declaration provided is based on the model established by CONSOB regulation. In accordance with the newly-introduced aspects, listed companies are therefore required to establish an Executive responsible for preparation of corporate accounting documents and to identify processes for the collection and generation of equity, economic and financial disclosures, formalising adequate administrative and accounting procedures so as to provide the executives concerned with the tools necessary to assess and periodically confirm the adequacy and effectiveness of operations. On 21 April 2007, the Credito Valtellinese Extraordinary Shareholders’ Meeting approved amendments to the articles of association in adaptation to the Law on Savings, and on 12 June 2007 the Credito Valtellinese Board of Directors appointed Vice General Manager Enzo Rocca as the Executive responsible for preparation of corporate accounting documents. In May 2007 a specific project was launched at Group level to further improve the quality and transparency of corporate disclosures and to increase efficiency of the internal audit system. The project, launched by the Accounting Documents Executive, involved various departments responsible for activities and controls necessary in the preparation of financial reports (Internal Audit, Organisation, Risk Management, Administration, etc.).

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The reference model identified by the Credito Valtellinese Group to verify the adequacy and effective application of administrative and accounting procedures is based on guidelines established in the "Internal Control - Integrated Framework". The “Internal Control – Integrated Framework” (forming an integral part of the “COSO framework”), issued by the Committee of Sponsoring Organizations of the Treadway Commission, is a standard reference methodology for analysis of the internal control system on Financial Reporting widely adopted at international level. The Framework defines the internal control system as a process, performed by top management, management and all company resources, designed to provide a reasonable guarantee of reaching objectives in the following categories:

financial reporting reliability, compliance with current laws and regulations, efficacy and efficiency of operating mechanisms.

It outlines the Internal Control System as a set of five main components:

control environment: the nucleus of every business is its human resources (their individual qualities, including integrity, ethics and skills) and the environment in which they work;

risk assessment: the company must be aware of the risks it faces. It must set objectives that are integrated with sales, production, funding and other activities in order that the organisation may operate consistently, establishing risk identification, analysis and management mechanisms;

control tasks: the control policies and procedures must be established and implemented in order to contribute to guaranteeing that action identified as necessary by management (to ensure that control objects mitigate risk) is actually performed;

information and reporting: information and reporting systems allow resources to obtain and exchange information necessary to address, manage and control the operating mechanisms;

monitoring: the entire process must be monitored, and amended as soon as the need arises; in this manner, the control system is able to react dynamically, changing as soon as circumstances require.

With regard to general rules governing technology and application developments, the control tasks performed by the EDP Auditing Department, part of the Group’s internal audit system, were considered valid. In addition, the "Design, development and maintenance of application software and corporate IT systems” was certified as meeting the UNI EN ISO 9001:2000 standard. Upgrading to the COBIT (Control Objective for IT and Related Technologies) standard is in progress. COBIT defines four domains or macro-processes typical of IT-oriented organisations, for each process describing the potential risks, control objectives to be achieved and the related control and safety factors and measures to be considered:

Organisation and Planning: includes strategies and identifies the means by which Information Technology can contribute to achieving corporate objectives.

System Acquisition, Development and Maintenance: to achieve strategic objectives, the technical solutions must be identified, developed, implemented, maintained and integrated into corporate processes.

Distribution and Support of IT Services: the required coverage of IT services must be verified in terms of provision of service, security management and business continuity, user support, data management and operating system management.

Monitoring and Auditing: the IT processes must be monitored and subject to periodic review in terms of quality and capacity to reach control objectives.

To conclude, the model defined and adopted at analysis stage by the Credito Valtellinese Group allows for a reasonable level of certainty in the reliability of accounting and financial reports. As the COSO Framework points out, no internal control system, even if well-designed and functional, can 100% exclude the existence of malfunction or breach of security that could have an impact on financial reports.

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PRIVACY LAW 2007 saw further development of the project to define an overall Group policy on privacy, with particular regard to aspects concerning instructions to data treatment managers, information provided to recruitment candidates, employees and collaborators of Group companies, video surveillance and the use of biometric data. In addition, in the light of an ad hoc measure issued by the Antitrust Authority on the treatment of customer data, the text provided to customers was reviewed, also in reference to information provided to bank customers on the national introduction of the use of IBAN codes and in relation to the transfer of funds via SWIFT. During the period, standard action was also concluded to fully update the Group’s system security policy (DPS). ADMINISTRATIVE LIABILITY OF LEGAL PERSONS During the period, the consolidated text of the "Organisation, Management and Control Model pursuant to Legislative Decree 231/01" for Creval Group companies was issued, combining the operating regulations and code of ethics adopted by Group companies, based on the specific activities performed, to prevent offences pursuant to Italian Legislative Decree 231/2001. OTHER RISKS The risk types outlined in previous paragraphs are the main risks to which the Group’s operations are exposed. Furthermore, the “second pillar” of prudential regulations introduced by the new Basel Accord envisages that in assessing capital adequacy banks should consider all the risks to which they are exposed. In this respect, the Group commenced tasks necessary to recognise further risks which, on first analysis, are attributable to strategic risk and reputational risk. This initiative will allow further refinement of the level of efficiency in risk management activities of the internal control system, and will be instrumental to preparation of the ICAAP statement, required under the “second pillar”, to be submitted to the Supervisory Authority on an annual basis.

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HUMAN RESOURCES MANAGEMENT AND NEW LEGISLATION Foreword In the current scenario, the Group’s ability to attract excellent human resources is a determining factor in maintaining competitiveness. During the year, and continuing from previous years, the Group pursued a human resources policy centred on professional career paths. In full compliance with the principles of the current Strategic Plan, the priorities for human resources management are as follows:

- improvement in the quality of new recruits; - ability to integrate resources coming from other banks; - keeping the turnover rate below the sector average; - clearer definition of career paths and professional development; - adjustment of branch operations to new trends in the banking business; - adopting structures to ensure increased flexibility of personnel within the country.

In order to achieve these objectives, in 2007 specific initiatives were launched to fine-tune the personnel management and development systems. Organisational model for human resources management As a means of maintaining close contact with its catchment areas, the Group’s Organisational Model envisages that human resources management is distributed between the Deltas and Human Resources Departments established as part of the banking network. The task of defining work methods, specialist consulting and common support on human resources matters are centralised with Deltas. Direct human resources management and development, on the other hand, is performed by the individual companies. The central departments guarantee constant implementation and updating of work methods, including the integrated human resources IT system, available for use by all central and peripheral business units of the Group, the database storing and updating personal, organisational, pay-related and training-related data. This database also stores and allows online consultation of information on performance appraisals, potential and professional skills. The human resources bonus and incentive system As part of the human resources management policy a detailed incentive plan was defined and implemented for the sales network – focused on quantitative equity and economic data, integrated into the less specific bonus system comprising the series of fixed and variable payments to reward global professionalism and performance achieved by the collaborator in terms of quality and quantity. The bonus system is a process which, according to an organisational workflow arranged in a series of steps, is launched by an economic proposal from the line manager and subsequently involves other players in the process up to the (joint or individual) decision-making body. Deltas operations provide support at the assessment stage of the bonus system by producing reports on the historic pay policies of the Group, compared with appropriate system benchmarks. Recruitment policy The recruitment policy begins with the definition of annual workforce needs formulated by each Company, the definition of which – in terms of number and professional skills required – forms part of the Group's budgeting for human resources and related costs. The new recruitment options, prepared with the help of departments responsible for the planning and control of operating expenses, are numerically defined in the annual budget. Once the number and skills of human resources to be recruited has been established, recruitment procedures are defined and implemented on a "geographic" basis. In line with the Credito Valtellinese Group's strong localization principles, the selection and recruitment of professional figures for inclusion in a company's workforce begins first of all in the local area in which the company operates, for this purpose making use of a special job application function on the Group’s Internet web site and with the help of external companies. In 2007, 308 new human resources were recruited, compared with 237 in 2006 (+30%).

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2005 2006 2007 Number of candidates 11,500 12,369 15,385 Number of interviews 1,329 1,300 1,850 Number of recruits 250 237 308

Number of candidates, interviews and recruitments in the period 2005-2007 Group workforce As at the end of December the company workforce included in the Group's scope of consolidation comprised 3,49215 collaborators, compared with 3,344 at the end of 2006. This increase was based on 308 recruitments and 160 dismissals and resignations. In terms of work categories, the Group's workforce is divided into:

- 57 top managers; - 1,113 middle managers; - 2,322 other professional capacities.

Top Managers2%

Middle Managers32%

Other professional capacities

66%

Workforce by contract category as at 31/12/2007

Group workforce trend 15 Including 13 collaborators outsourced to companies/authorities not members of the Group.

2.951 3.0003.121

3.307 3.3443.492

2.818

2001 2002 2003 2004 2005 2006 2007

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3,204 workers were employed on permanent contracts (equal to 91.8% of the total), and 245 on temporary contracts (8.2%). Part-time contracts, regarding 203 employees, involve 5.8% of the total workforce of the Group.

Permanent workforce

92%

Temporary workforce

8%

Permanent and temporary workforce as at 31/12/2007

Part-time6%

Full-time94%

Full and part-time workforce as at 31/12/2007 Training With regard to professional training, during the year, the lines identified in the 2006-2008 Training Plan were implemented which – consistent with the Strategic Plan, identified training needs through interviews with personnel in the central and peripheral structures and defined the guidelines for development of training paths in line with the strategic objective of maintaining levels of human resource excellence. In 2007, 17,375 days’ training were provided (+63% on the previous year) – of which 11,367 in the classroom, 6,008 as distance learning (virtual classrooms and self-learning courses) – corresponding to an average 5 days per employee. 88% of staff participated in training programmes in 2007, compared to 85% in 2006.

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Renewal of the national pay agreement On 8 December 2007 the national pay agreement that expired on 31 December 2005 was renewed for middle managers and professional employees in the banking, financial and complementary sectors. The renewal did not modify any particular areas of the previous 2005 agreement, but for the trade unions clarified certain applicative and interpretational models of the current provisions, opening up new negotiation and comparison options and placing companies in constant dialogue with social representatives. The new pay agreement entered into force on 1 January 2008, unless otherwise dictated by individual regulations, and both the economic and regulatory sections will expire on 31 December 2010. The salient points relate to trade union relations, active employment policies and pay. On the first of these topics, the agreement envisages stronger trade union relations at decentralised level, at the same time increasing group negotiation options. Significant changes were also made towards the transfer of trade union relations to banking group level, in observance of principles denying overlapping and duplication in offices of the group. It was also confirmed that contractual assignment is mainly targeted towards achieving the following objectives:

- to avoid a division of the human and professional wealth of employees; - to encourage steady occupation; - to encourage the need for flexibility.

In this respect, the companies assess the maximum options available for in-service establishment of employees recruited on non-permanent contractual terms. With regard to pay aspects, the two-year period 2006-2007 envisages the payment of a lump sum of 4.9% of salary, which also takes into account a 1.7% inflation rate for 2008, 1.5% for 2009 and 1.5% for 2010. It should be specified that, with regard to the Group position, amounts provisioned in prior periods have allowed adequate cover of the increased costs deriving from the 2006-2007 agreement. An agreement was also reached for top managers in the banking, financial and complementary sectors, which reconfirmed the previous agreement. In particular, the agreement remarked upon the strategic value of professionalism in the category, in consideration of market globalisation, business restructuring and combination processes, unceasing developments in technology and the innovation of banking products and services. Both the economic and legislative sections of the agreement expire on 31 December 2010. For 2006 and 2007 an inflation recovery and past productivity bonus is to be paid in the form of a lump sum of around 4.90%. The overall pay increase (as at 1 December 2010), including the aforementioned 4.90% lump sum, related tabling of inflation rates expected for 2008/2009/2010 and the incidence of Long Term Care will be approximately 11%. Amounts provisioned by the Group for top management in prior years also proved to be adequate.

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New legislation on Employee Termination Indemnities As of 1 January 2007 all employees, except for domestic and public administration staff, may opt for their matured employee termination indemnities – i.e. matured as from 1 January 2007 – to be allocated to complementary pension plans or, for companies with less than 50 employees, to the “Fund for the distribution of employee termination indemnities to private sector employees" (the "Treasury Fund") managed by INPS. Employee termination indemnities already provisioned by the company remain untouched by the new measures and continue to be managed by the employer under the current regulations. Opting-in to the transfer of employee termination indemnities to a complementary pension plan is irrevocable, whereas opting-out of the transfer to a complementary pension plan can be revoked. In this respect it should be specified that the complementary pension plans are benefit plans aimed at the distribution of a pension in addition to the State pension. These plans are authorised and subject to supervision of a public authority, the Italian pension funds supervisory commission (COVIP). Complementary pension plans include: Contractual pension funds, open-ended pension funds, individual pension plans and pension funds established prior to November 1992. With regard to subscription figures for Group employees, out of 1,056 employees – 32% of the total - called upon to express their preference for allocation of employee termination indemnities, 758 opted for 100% or partial allocation of maturing employment termination indemnities to the Group Pension Fund (i.e. over 70% of those queried).

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QUALITY AND SOCIAL RESPONSIBILITY Quality policy and certification In 1995, Credito Valtellinese, in the conviction that quality represents a critical success factor in the banking sector, obtained its first quality certification, based on the provisions of the ISO 9001 international standard, for its loan application, granting and management process. The Parent Company was the first financial intermediary in Italy to obtain the certification for an operational process. There are three main reasons behind the Group’s adoption of a Quality strategy:

- the pursuit of satisfaction of customers and all stakeholders; - the need to adopt sure, official regulations that cannot be modified at company discretion; - the option to access quality and social responsibility certification along the same path as that

followed by numerous business customers. In line with Group strategies, the other banks and companies later obtained their own certification, fully adopting the business model based on quality of service to the customer, in accordance with long-term objective and systematic application of processes. For the first time in 2007, Aperta SGR obtained certification based on the ISO 9001 standard, confirming compliance with its own specific operational procedures. During the year, all certification was renewed for the services provided by the 10 banks and companies of the Group already certified to ISO standard, and Bancaperta obtained certification for its e-commerce QWEB Mark services. On central offices and a sample of 46 branches located throughout the territory, CISQCERT assessors confirmed that the conditions for obtaining certification continued to be met. The certification authority also issued, for the first time, “Corporate UNI EN ISO 9001:2000 Certification of the Credito Valtellinese Group” to clarify and enhance the integration and coherence of the quality system and certification processes among the various Group companies. At the end of 2007, the certification position was as follows:

- Credito Valtellinese, Credito Artigiano, Credito Siciliano and Banca dell’Artigianato e dell’Industria: planning and provision of services in the credit, transfers, investments, treasury and cash management services for public and private companies;

- Bancaperta: provision of web-based banking services to its own customers and to customers of the Group’s banks. Cash flow management and the provision of investment services and activities to its own customers and to customers of the Group's banks. Management of the entire Group’s private banking, bancassurance and foreign services;

- Aperta SGR: asset management services; - Bankadati Servizi Informatici: planning, development and maintenance of software applications and

management of corporate IT systems; - Stelline Servizi Immobiliari: planning and coordination of the real estate construction and

management; - Deltas CFP (Professional Training Centre): planning and provision of ongoing training courses in the

banking field; - Creset Servizi Territoriali: local tax management services; - Fondazione Gruppo Credito Valtellinese: social responsibility system.

PattiChiari A consortium of 167 Italian banks covering a total of over 26,000 branches in Italy (83% of the entire Italian banking system) – launched by the Italian Banking Association in September 2003 – the aim of PattiChiari is to spread the awareness of banking products and services by creating realistic tools for the savings, credit and services areas with a view to increasing the quality of bank-customer relations in a clear, transparent, comparable manner centred on a corporate social responsibility approach. The Group became a convinced, determined member of the consortium, sharing its ideals and as of 2004 obtaining certification for all PattiChiari protocols except for "comparative financial investments" (an initiative suspended by the PattiChiari Consortium following the entry into force of the MiFID Directive). As the remaining services do not form part of its core business, Bancaperta requested and obtained certification for its "basic banking”, “cheque availability”, “average response times”, “general assessment criteria” and “account switching” services. Lastly, with regard to the entire PattiChiari project it should be mentioned that on 19 December the ABI Executive Committee resolved to completely restructure the initiative as part of a strategic plan of action in

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the banking sector to improve relations with retail customers, with significant changes to be implemented in 2008. This action aims to:

- redefine governance of the banking sector plan of action through the PattiChiari vehicle, called upon to guarantee an explicit consulting and sharing role with stakeholders and which approves a credible verification role through independent, neutral bodies;

- define a quality code to provide an overall collection of information tools, procedural tools and quality standards for customer relations.

Fondazione Gruppo Credito Valtellinese and the Social Report The strong need felt to compete in the promotion of the geographic areas served, in line with corporate social responsibility principles, is expressed significantly in the Fondazione Gruppo Credito Valtellinese, non-profit making centre of competence of the Group. The Foundation is committed to completing a large number of qualified initiatives in the social and charity field, professional career guidance and training, cultural, artistic and educational activities, research and conferences. The Foundation’s annual financial statements receive funding from a part of profits of the Group’s Banks. The annual ordinary shareholders' meeting decides on the amount to be allocated to social and charity activities headed by the Foundation.

Established in March 1998 as a Foundation operating in the Valtellinese area, since 2002 the Fondazione Gruppo Credito Valtellinese has become an organisation active throughout Italy. The Foundation's activities aim to promote and sustain cultural, moral, scientific, social and economic progress, mainly in the geographic areas and communities covered by the Credito Valtellinese Group banks, through three specific sectors: social solidarity, career guidance and training, art and culture. For this purpose the Articles of Association state that contributions to operations

provided by Group Companies are used mainly to support initiatives in the areas in which the Companies operate, taking into account their traditions and tendencies. A full statement of the Foundation's activities is provided in the Social Report, drafted by Creval since 1995 - the first bank in Italy to do so - and presenting its thirteenth edition in 2007, to which reference should be made for a complete account of topics linked to relations with stakeholders and corporate social responsibility.

IN DETAIL SODALITAS SOCIAL AWARD: SPECIAL MENTION FOR THE FOUNDATION The Sodalitas Social Award, 2007 seeing its fifth edition, confirms the importance of corporate social responsibility in the Italian production sector: 225 companies applied for the award, submitting a total of 271 projects (28% more than in the previous edition). Fondazione Gruppo Credito Valtellinese, awarded in June 2007, received a special mention and a citation in the “Community partnership programme” category (76 participants). With regard to initiatives contributing to the improvement of quality of life in the community, and encouraging social cohesion through partnerships with civil organisations and/or public administrations, the Fondazione received a special mention for the Cometa and Argo educational programme, justified as: “having developed a school education path to guide secondary school students towards study and employment options that are more consistent with the inclination, potential and interests of the young, taking into account local employment market limits”.

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RATINGS OF THE CREVAL GROUP COMPANIES For the first time in 2002, Credito Valtellinese received a Moody's rating. The Baa1 rating confirmed the Group's competitive capacity and a level of capitalisation appropriate for the nature of risks associated with its business activities. During 2007, the agency uprated its outlook from “stable” to “positive” on the following long-term and short-term ratings assigned to Credito Valtellinese and Bancaperta:

- Long-term deposits: Baa1; - Senior Unsecured debt: Baa1; - Subordinate debt: Baa2; - Junior Subordinate: Baa2; - Short-term deposits: Prime-2.

The "C-" rating for financial solidity was confirmed with a “stable" outlook. In their justification (available in the original version in the "Investor Relations" of the Group's web site) Moody's remarks on the improvement in the overall financial profile of the Parent Company – with particular reference to profitability and efficiency parameters – and the solid, prudent strategy adopted. Credito Valtellinese was considered adequately capitalised given the share capital increase in 2007, also with regard to planned acquisitions and corporate growth. In May the Parent Company received the following Fitch ratings:

- Issuer Default (long term) A-, with stable outlook; - Short term F2; - Individual C; - Support 3.

The positive rating is based on the Group’s local ties, which show solid interest margins in support of profitability. Credit concentration appears to be well spread both at individual business level and industrial sector level, and remains within acceptable risk limits. In August, to confirm the Parent Company’s ratings, the agency assigned the following ratings for the first time to Bancaperta:

- Issuer Default (long term) A-, with stable outlook; - Short term F2; - Support 1.

Fitch emphasises Bancaperta’s role in the treasury, funding and trading services for the entire Group and its close integration with Credito Valtellinese in terms of strategy and risk management.

102

STOCK MARKET PERFORMANCE OF LISTED SECURITIES AND FINANCIAL INDICATORS

STOCK MARKET PERFORMANCE Credito Valtellinese shares. In 2007, Credito Valtellinese shares constantly outperformed the Comit Bancari benchmark index. The cash flow crisis in international financial markets which peaked at year-end also penalised the share, with respect to the reference benchmark, in the latter part of the year. However, a strong increase in traded volumes of Credito Valtellinese was recorded in reference to both 2007 overall and the daily average, compared to 2006 figures. Over the year, the share recorded a minimum of EUR 8.63 on 22 November, whereas the peak price of EUR 12.216 was reached on 18 May. The average price was EUR 10.42. The average daily volume traded on the market was over 340 thousand shares. The share closed the year with a backward slide of 15.2%, compared to the 14.7% reduction recorded by the Comit Bancari index.

Credito Valtellinese share performance

-

500.000

1.000.000

1.500.000

2.000.000

2.500.000

3.000.000

3.500.000

4.000.000

4.500.000

gen-00 feb-07 mar-07 apr-07 mag-07 giu-07 lug-07 ago-07 set-07 ott-07 nov-07 dic-078

8,5

9

9,5

10

10,5

11

11,5

12

12,5

Volumes Prices

Credito Artigiano shares. Over 2007, Credito Artigiano shares recorded an increase in market trading volumes compared with the previous year. In the first half of 2007 the average listed price for the Credito Artigiano share was EUR 3.915, with a minimum of EUR 3.568 recorded on 5 March and a maximum of EUR 4.276 on 21 May. For 2007 as a whole, the share recorded a minimum of EUR 3.51 on 19 December, whereas the maximum of EUR 4.701 was reached on 19 July. The average price over the twelve months was EUR 3.93, with average daily trading volumes of just under 105 thousand shares.

103

Credito Artigiano share performance

-

100.000

200.000

300.000

400.000

500.000

600.000

700.000

gen-00 feb-07 mar-07 apr-07 mag-07 giu-07 lug-07 ago-07 set-07 ott-07 nov-07 dic-073

3,2

3,4

3,6

3,8

4

4,2

4,4

4,6

4,8

Volumes Prices

Credito Valtellinese and Credito Artigiano share performance compared with Mibtel and Comit Bancari

80

90

100

110

120

130

gen-07 feb-07 mar-07 apr-07 mag-07 giu-07 lug-07 ago-07 set-07 ott-07 nov-07 dic-07

Credito Valtellinese Credito Artigiano Mibtel Comit Bancari

104

FINANCIAL INDICATORS – LISTED BANKS OF THE GROUP16 Price to book value The price/book value – expressed as a shareholders' equity multiplier - indicates the market value of the entire share capital of a listed company and indirectly, therefore, the total assets of that company. Even taking into account external factors that could influence listed price performance, the index to a certain extent represents the appreciation of some investors in the future profit potential and equity solidity of the company. The table below illustrates development over the last five years of the price/book value – calculated on annual average prices – of the Parent Company and Credito Artigiano.

CREDITO VALTELLINESE 2003 (*) 2004 (*) 2005 2006 2007 average price 7.01 8.04 10.89 12.23 10.42 book value per share 9.22 9.03 9.70 9.57 9.63 price/book value per share 0.76 0.89 1.12 1.28 1.08

CREDITO ARTIGIANO 2003 (*) 2004 (*) 2005 2006 2007

average price 3.21 3.11 3.32 3.55 3.93 book value per share 2.58 2.61 3.02 3.13 3.26 price/book value per share 1.24 1.19 1.10 1.13 1.21

(*) Shareholders’ equity was not recalculated, in accordance with IAS/IFRS international accounting standards The payout ratio The pay out ratio measures the percentage ratio the amount distributed as dividends and the profit produced. During the year, this ratio for the Parent Company and the subsidiary Credito Artigiano reached high values, demonstrating the dividend policy focused on maximising the level of wealth produced and distributed to partners and shareholders. (in thousands of EUR)

CREDITO VALTELLINESE 2003 (*) 2004 (*) 2005 (*) 2006 2007 net profit 32,066 36,483 41,830 48,121 63,603 amount of dividends 21,831 26,404 31,387 36,389 54,600 pay out ratio 68% 72% 75% 76% 86%

CREDITO ARTIGIANO 2003 (*) 2004 (*) 2005 (*) 2006 2007

net profit 15,154 15,457 18,274 28,478 34,886 amount of dividends 13,155 13,413 14,921 23,282 30,330 pay out ratio 87% 87% 82% 82% 87%

(*) Net profit was not recalculated, in accordance with IAS/IFRS international accounting standards. Dividend yield The progress of the dividend yield – an indicator of returns in terms of the dividend on shares valued at the annual average price as a ratio of the dividend in relation to the corresponding financial period – for Credito Valtellinese and its subsidiary Credito Artigiano recorded an appreciable return on investment.

CREDITO VALTELLINESE 2003 2004 2005 2006 2007 Unit dividend 0.40 0.40 0.40 0.40 0.34 average price 7.01 8.04 10.89 12.23 10.42 dividend yield 5.7% 5.0% 3.7% 3.3% 3.26%

CREDITO ARTIGIANO 2003 2004 2005 2006 2007

Unit dividend 0.1093 0.1126 0.124 0.1635 0.2130 average price 3.21 3.11 3.32 3.55 3.93 dividend yield 3.40% 3.62% 3.73% 4.61% 5.42%

16 Alternative performance indicators.

105

Consolidated earnings per share The table below reports the performance of the consolidated earnings per share (EPS), calculated as the ratio between consolidated net profit – subtracting quotas destined for the welfare and benefits funds of the Parent Company and the other Group Banks, calculated on the related percentage control – and the average weighted number of shares of Credito Valtellinese outstanding during the year. In 2007 the consolidated earnings per share was EUR 0.63 compared to EUR 0.76 in 2006.

CREDITO VALTELLINESE 2005 2006 2007 Attributable consolidated profit 53,973 66,078 82,463 Weighted average of Parent Company shares 74,723,668 87,226,387

130,347,319

Basic consolidated earnings per share 0.72 0.76 0.63

106

HIGHLIGHTS FOR THE SUBSIDIARIES AND MAIN ASSOCIATED COMPANIES Credito Artigiano S.p.A.

BALANCE SHEET DATA 31/12/2007 31/12/2006 % change

(in thousands of EUR) Loans to customers 5,012,320 4,246,612 18.03% Direct deposits from customers 5,565,648 4,651,808 19.64% Indirect deposits from customers 4,654,533 4,599,837 1.19% Shareholders’ equity 463,811 446,083 3.97%

INCOME STATEMENT DATA 2007 2006 % change

(in thousands of EUR) Operating income 227,170 203,616 11.57% Operating costs -120,404 -113,833 5.77% Net income from banking activities 106,765 89,783 18.91% Net income for the period 41,915 34,116 22.86% Credito Siciliano S.p.A.

BALANCE SHEET DATA 31/12/2007 31/12/2006 % change

(in thousands of EUR) Loans to customers 2,204,198 1,838,954 19.86% Direct deposits from customers 2,460,394 2,231,929 10.24% Indirect deposits from customers 1,511,229 1,532,001 -1.36% Shareholders’ equity 198,699 194,217 2.31%

INCOME STATEMENT DATA 2007 2006 % change

(in thousands of EUR) Operating income 156,414 136,321 14.74% Operating costs -110,776 -105,296 5.20% Net income from banking activities 45,638 31,024 47.11% Net income for the period 9,679 7,834 23.55% Banca dell'Artigianato e dell'Industria S.p.A.

BALANCE SHEET DATA 31/12/2007 31/12/2006 % change

(in thousands of EUR) Loans to customers 668,657 482,956 38.45% Direct deposits from customers 589,002 364,925 61.40% Indirect deposits from customers 136,332 107,730 26.55% Shareholders’ equity 78,420 78,078 0.44%

INCOME STATEMENT DATA 2007 2006 % change

(in thousands of EUR) Operating income 24,025 19,005 26.41% Operating costs -17,216 -13,563 26.93% Net income from banking activities 6,810 5,441 25.16% Net income for the period 344 174 97.70%

107

Credito Piemontese S.p.A.

KEY DATA 2007 2006 % change

(in thousands of EUR) Shareholders’ equity 18,469 18,411 0.32% Operating income 276 734 -62.40% Operating costs -207 -713 -70.97% Net income from banking activities 69 21 228.57% Net income for the period 9 3 200.00% Mediocreval S.p.A.

BALANCE SHEET DATA 31/12/2007 31/12/2006 % change

(in thousands of EUR) Loans to customers 321,666 124,777 157.79% Direct deposits from customers 194,772 145,129 34.21% Shareholders’ equity 96,732 73,523 31.57%

INCOME STATEMENT DATA 2007 2006 % change

(in thousands of EUR) Operating income 16,158 17,315 -6.68% Operating costs -11,700 -12,770 -8.38% Net income from banking activities 4,458 4,544 -1.89% Net income for the period 1,182 1,044 13.22% Finanziaria San Giacomo S.p.A.

KEY DATA 31/12/2007 31/12/2006 % change

(in thousands of EUR) Loans 124,404 102,837 20.97% Shareholders’ equity 3,203 3,009 6.45% Net income from banking activities 455 13 3400.00% Net income for the period 195 9 2066.67% Bancaperta S.p.A.

BALANCE SHEET DATA 31/12/2007 31/12/2006 % change

(in thousands of EUR) Loans to customers 8,890 14,015 -36.57% Direct deposits from customers 946,660 601,177 57.47% Indirect deposits from customers 1,001,177 1,530,326 -34.58% Shareholders’ equity 124,750 121,809 2.41%

INCOME STATEMENT DATA 2007 2006 % change

(in thousands of EUR) Operating income 41,178 44,425 -7.31% Operating costs -24,925 -28,741 -13.28% Net income from banking activities 16,253 15,684 3.63% Net income for the period 11,986 9,564 25.32%

108

Aperta SGR S.p.A.

KEY DATA 31/12/2007 31/12/2006 % change

(in thousands of EUR) Loans 5,826 5,439 7.12% Shareholders’ equity 5,747 5,021 14.46% Net fee and commission income 4,394 4,615 -4.79% Net income from banking activities 1,483 1,667 -11.04% Net income for the period 726 923 -21.34% Aperta Fiduciaria S.p.A.

KEY DATA 31/12/2007 31/12/2006 % change

(in thousands of EUR) Non–current assets 3 3 -12.26% Current assets 215 229 -5.89% Current liabilities 76 101 -24.51% Shareholders’ equity 142 131 8.34% Net income for the period 11 61 -82.18% Creset S.p.A.

KEY DATA 31/12/2007 31/12/2006 % change

(in thousands of EUR) Loans to customers 65,988 57,513 14.74% Due to customers 77,501 58,954 31.46% Shareholders’ equity 2,578 2,733 -5.67% Net income for the period -155 33 -573.39% Deltas S.p.A.

KEY DATA 31/12/2007 31/12/2006 % change

(in thousands of EUR) Non–current assets 840 549 52.94% Current assets 7,380 6,236 18.35% Non–current liabilities 363 340 6.84% Current liabilities 6,444 5,283 21.98% Shareholders’ equity 1,412 1,162 21.56% Net income for the period 250 165 51.51% Bankadati SI S.p.A.

KEY DATA 31/12/2007 31/12/2006 % change

(in thousands of EUR) Non–current assets 10,596 11,174 -5.17% Current assets 5,970 4,085 46.14% Non–current liabilities 3,209 2,826 13.56% Current liabilities 8,108 7,820 3.68% Shareholders’ equity 5,250 4,613 13.80% Net income for the period 287 197 45.72%

109

Stelline S.p.A.

KEY DATA 31/12/2007 31/12/2006 % change

(in thousands of EUR) Non–current assets 4,326 5,037 -14.10% Current assets 21,505 22,057 -2.50% Non–current liabilities 3,970 4,549 -12.73% Current liabilities 8,360 9,093 -8.07% Shareholders’ equity 13,502 13,451 0.37% Net income for the period 50 44 14.69%

110

AUDIT The consolidated financial statements were audited by the independent auditing firm Reconta Ernst & Young S.p.A.

SIGNIFICANT EVENTS OCCURRING AFTER THE CLOSE OF THE FINANCIAL YEAR On 21 February 2008 the agreement was finalised for the acquisition of 35 Intesa Sanpaolo branches for a sum provisionally calculated as EUR 395 million, based on estimated direct and indirect deposits as at 31 December 2007. The final price will be calculated on the actual total deposits as at the date of transfer of the branches. With regard to the exercise of option rights, the Credito Artigiano share capital increase against payment resolved by the extraordinary shareholders' meeting of 20 December 2007, was completed on 7 March 2008. To date, Credito Valtellinese has already subscribed its own respective quota of the share capital increase, by payment of approximately EUR 196 million. With regard to the commitment to full subscription of the share capital increase also in relation to any shares unoptioned on closure of the stock market offering, pursuant to art. 2441, subsection 3 of the Italian Civil Code, on 20 March 2008, the final payment made by Credito Valtellinese could reach a total of around EUR 228 million.

BUSINESS FORECAST In an economic context there are signs of increasing uncertainty regarding the economic situation and financial market performance. Despite this, the Board of Directors has reason to believe that Group results for the period will show further progress in terms of both balance sheet aggregates and performance of the main profit indicators, in line with 2007-2010 Strategic Plan objectives.

111

CLOSING REMARKS Dear Shareholders, we conclude this report by emphasising that the positive results it describes were possible as a result of the fundamental contribution of all Collaborators who, in their respective roles and levels of responsibility, have demonstrated a strong and dedicated commitment to the Group's commercial and support activities. The Board of Directors therefore particularly applauds the Collaborators and the entire management in expressing its appreciation for their profitable and vital collaboration, the true force behind our companies. Our heartfelt thanks go first and foremost t you, our Shareholders, for the constant faith demonstrated also at the time of the Parent Company share capital increase. Your support in reaching key objectives which, in the year in question, led to the growth of the Group is a fundamental stimulating factor for continued development and for facing new challenges and, of course, important gratification for the work undertaken to date. A special thank you goes to our Customers, whose growing number confirms the effectiveness of the action taken. It is to our Customers that our research departments dedicate the proposal of products and services that increasingly respond to a wide variety of real needs. We also thank the Chairman, Directors, Statutory Auditors and members of General Management that each day and with top level professionalism and constant dedication strive towards the ideal management of the Group’s Banks and Companies, often in complex circumstances. We again express our gratitude to the Bank’s Board of Statutory Auditors and the Independent Auditing Firm Reconta Ernst & Young S.p.A. for their scrupulous and assiduous control of the regular keeping of corporate administrative, management and accounting operations, and for the skill demonstrated in performing their respective duties. We would like to remind shareholders of the work of the Credito Valtellinese Group Foundation which in this last year has more than ever proved its worth in contributing to the cultural and social spheres in the Bank’s reference territory. We also wish to express our gratitude and admiration for the Supervisory Authority and market organisations: the Bank of Italy for the attention they have continued to demonstrate to us throughout the year, to CONSOB, to the Antitrust Authority for competition and the market and to Borsa Italiana for their vital collaboration, always marked by the transparency and fairness that distinguish their market operations. Lastly, we would like to acknowledge the skilful support and amiable approachability always demonstrated to us by the Italian Banking Association (ABI) and the Italian National Association of Cooperative Banks.

The Board of Directors Sondrio, 18 March 2008

112

Guide to consultation

The purpose of the consolidated financial statements is to illustrate the equity and financial position, economic result, changes in shareholders’ equity and cash flows of the Credito Valtellinese Group as at 31 December 2007.

Their content is governed by Bank of Italy Circular no. 262 of 22 December 2005, issued pursuant to art. 5, Italian Legislative Decree no. 87 of 27 January 1992 and taking into account the amendments introduced by art. 9 of Legislative Decree no. 38 of 28 February 2005 “Exercise of options pursuant to art. 5, EC Regulation no. 1606/2002 on international accounting standards".

Also included is information required under the international accounting standards, even where not specified in the aforementioned provisions.

113

CONSOLIDATED FINANCIAL STATEMENTS

114

CONSOLIDATED BALANCE SHEET

ASSETS 31/12/2007 31/12/2006 10. Cash and cash equivalents 158,387 133,880

20. Financial assets held for trading 1,284,560 1,287,473

40. Financial assets available for sale 70,288 49,213

50. Financial assets held to maturity 1 1

60. Due from banks 760,025 879,784

70. Loans to customers 13,754,333 11,445,785

100. Investments in associates and companies subject to joint control 201,690 166,830

120. Property, plant and equipment 393,290 387,286

130. Intangible assets 106,929 108,815

of which: - goodwill 101,897 103,086 140. Tax assets 113,783 115,619

a) current 59,667 70,110 b) pre-paid 54,116 45,509 160. Other assets 384,976 326,767

Total assets 17,228,262 14,901,453

LIABILITIES AND SHAREHOLDERS' EQUITY 31/12/2007 31/12/200610. Due to banks 848,452 967,762

20. Due to customers 9,858,921 9,096,396

30. Securities issued 3,849,735 2,977,303

40. Financial liabilities held for trading 8,150 6,789

80. Tax liabilities: 122,298 88,421

a) current 115,288 84,159 b) deferred 7,010 4,262 100. Other liabilities 626,256 559,477

110. Employee termination indemnities 53,169 55,218

120. Provisions for risks and charges: 67,692 64,697

a) post employment benefits 32,738 33,600 b) other provisions 34,954 31,097 140. Valuation reserves 73,444 123,929

160. Equity instruments - 708

170. Reserves 118,084 93,432

180. Share premium reserve 738,631 323,023

190. Share capital 562,061 272,914

200. Treasury shares (-) -1,338 -761

210. Minority interests (+/-) 216,934 203,531

220. Net income (loss) for the period (+/-) 85,773 68,614

Total liabilities and shareholders’ equity 17,228,262 14,901,453

115

CONSOLIDATED INCOME STATEMENT ITEMS 2007 2006 10. Interest income and similar income 842,020 601,445

20. Interest expense and similar expense (396,046) (254,070)

30. Interest margin 445,974 347,375

40. Fee and commission income 211,658 207,981

50. Fee and commission expense (18,998) (17,816)

60. Net fee and commission income 192,660 190,165

70. Dividend and similar income 1,653 1,180

80. Profits (losses) on trading activities 10,213 22,420

90. Fair value adjustments in hedge accounting - 14

100. Profit/loss from disposal or repurchase of: 564 3,430

a) loans - (93) b) financial assets available for sale 8 3,288 d) financial liabilities 556 235 120. Net interest and other banking income 651,064 564,584

130. Net losses/recoveries on impairment of: (75,125) (58,078)

a) loans (75,038) (58,107) d) other financial activities (87) 29 140. Net income from banking activities 575,939 506,506

180. Administrative expenses: (406,409) (381,451)

a) personnel expenses (236,063) (222,990) b) other administrative expenses (170,346) (158,461) 190. Net provisions for risks and charges (6,465) (8,657)

200. Net adjustments to/recoveries on property, plant and equipment (19,363) (20,715)

210. Net adjustments to/recoveries on intangible assets (4,090) (4,521)

220. Other operating expenses/income 46,342 44,997

230. Operating expenses (389,985) (370,347)

240. Profit (loss on investments in associates and companies subject to joint control 13,329 13,250

260. Goodwill impairment (1,199) -

270. Profit (loss) on disposal of investments 289 615

280. Income (loss) before tax from continuing operations 198,373 150,024

290. Taxes on income from continuing operations (96,259) (69,940)

300. Income (loss) after tax from continuing operations 102,114 80,084

310. Income (loss) after tax from discontinued operations - 1,043

320. Net income (loss) for the period 102,114 81,127

330. Minority interests (16,341) (12,513)

340. Net income (loss) for the period pertaining to the parent company 85,773 68,614

2007 2006

Earnings per share(euro) 0.63 0.76Diluted earnings per share (euro) 0.56 0.66

116

STATEMENT OF CHANGES IN CONSOLIDATED SHAREHOLDERS' EQUITY

Share capital:a) ordinary shares 272,914 82,331 272,914 82,331 53,530 - 984 235,617 562,061 81,347 b) other sharesShare premium reserve 323,023 50,390 323,023 50,390 328 - 4,468 415,281 738,631 45,922 Reserves:a) profits 92,995 32,918 92,995 32,918 17,653 971 6,131 14,303 116,779 48,192 b) other 437 - 48 437 - 48 765 112 103 15 1,305 80 Valuation reserves:a) available for sale 8,617 - 34 8,617 - 34 3,045 6 11,662 - 28 b) cash flow hedgingc) other (*) 115,312 25,461 115,312 25,461 - 53,530 - 381 61,782 25,080 Equity instruments 708 708 - 708 Treasury shares - 761 - 761 7,990 - 8,567 - 1,338 Net income (loss) for the period 68,614 12,513 68,614 12,513 - 18,418 - 1,083 - 61,626 85,773 16,341 85,773 16,341 Shareholder’s Equity 881,859 203,531 881,859 203,531 - - - 61,626 9,607 8,491 658,888 - - 8,567 - 708 - - 85,773 16,341 1,576,655 216,934

(*) The amount refers to valuation reserves for property, plant and equipment.

Share capital:a) ordinary shares 235,405 82,601 235,405 82,601 - 4,200 37,509 3,930 272,914 82,331 b) other shares -

Share premium reserve 273,358 49,213 273,358 49,213 - 2,087 49,665 3,264 323,023 50,390 Reserves:a) profits 74,763 28,324 74,763 28,324 13,062 10,546 5,170 - 5,952 92,995 32,918 b) other 437 - 48 437 - 48 Valuation reserves:a) available for sale 1,403 - 57 1,403 - 57 7,214 23 8,617 - 34 b) cash flow hedging - - c) other (*) 114,385 27,045 114,385 27,045 927 - 1,584 115,312 25,461

Equity instruments 1,230 1,230 - 522 708 Treasury shares 4,459 - 5,220 - 761 Net income (loss) for the period 55,530 10,546 55,530 10,546 - 13,989 - 10,546 - 41,541 68,614 12,513 68,614 12,513 Shareholder’s Equity 756,074 197,672 756,074 197,672 - 41,541 12,821 - 13,848 91,633 7,194 - 5,220 - 522 68,614 12,513 881,859 203,531

(*) The amount refers to valuation reserves for property, plant and equipment.

Shareholders' equity as at 31/12/2006 - minority interests

Derivatives on treasury

shares

Stock options

Allocation of extraordinary

dividends

Change in equity

instruments

Derivatives on treasury

shares

Shareholders' equity as at 31/12/2006 - group

Net income (loss) as at 31/12/2006 -groupGroup Equity

Closing balance as at

31/12/2005 - minority interests

Opening balance as at 01/01/2006 -

minority interests

Change in reserves - minority interests

Change in reserves -

group

Reserves - minority interests

Dividends and other allocations

Transactions on shareholders' equityChange to opening balances

Opening balance as at 01/01/2006 -

group

Allocation of prior year incomeChanges for the period

Group reserves

Issue of new shares

Issue of new

minority interest shares

Purchase of treasury shares

Stock options

Net income (loss) as at 31/12/2006 - minority interests

Closing balance as at

31/12/2005 - group

Shareholders' equity as at 31/12/2007 - group

Shareholders' equity as at 31/12/2007 - minority interests

Net income (loss) as at 31/12/2007

- minority interests

Change in reserves -

group

Change in reserves - minority interests

Net income (loss) as at 31/12/2007 -

group

Dividends and other allocations

Issue of new shares

Change in equity

instruments

Opening balance as at 01/01/2007 - group

Opening balance as at 01/01/2007 - minority interests

Allocation of prior year incomeChanges for the period

Group reserves

Reserves - minority interests

Issue of new

minority interest shares

Purchase of treasury shares

Allocation of extraordinary

dividends

Transactions on shareholders' equity

Group Equity

Closing balance as at

31/12/2006 - group

Closing balance as at

31/12/2006 - minority interests

Change to opening balances

117

CONSOLIDATED CASH FLOW STATEMENT – Direct method

2007 2006 A. OPERATING ACTIVITIES 1. Management 252,785 148,893

- interest income received (+) 863,087 601,611

- interest expense paid (-) -403,689 -240,553

- dividend and similar income (+) 1,611 1,180

- net commissions (+/-) 192,552 190,164

- personnel expenses (-) -237,412 -217,994

- other costs (-) -131,048 -119,996

- other revenues (+) 68,147 70,790

- taxes (-) -100,463 -137,352

- costs/revenues after tax from discontinued operations (+/-) - 1,043

2. Cash flow generated/utilised by financial assets -2,371,685 -1,890,361

- financial assets held for trading -7,026 -200,994

- financial assets available for sale -25,070 -11,135

- loans to customers -2,376,466 -1,516,715

- due from banks: repayable on demand -40,145 18,074

- due from banks: other 141,795 -216,713

- other assets -64,773 37,122

3. Cash flow generated/utilised by financial liabilities 1,596,738 1,779,434

- due to banks: repayable on demand 74,528 -24,278

- due to banks: other -177,777 128,439

- due to customers 757,417 1,179,078

- securities issued 859,836 393,440

- financial liabilities held for trading 8,835 -6,776

- other liabilities 73,899 109,531

Cash flow generated/utilised by operating activities -522,162 37,966

B. INVESTMENT ACTIVITIES

1. Cash flow generated by 734 14,394

- sale of investments in associates and companies subject to joint control - 1,553

- dividends from investments in associates and companies subject to joint control 42 -

- sale of property, plant and equipment 692 12,841

2. Cash flow utilised by -42,759 -86,454

- purchase of investments in associates and companies subject to joint control -20,504 -12,771

- purchase of property, plant and equipment -18,246 -67,622

- purchase of intangible assets -4,009 -6,061

Cash flow generated/utilised by investment activities -42,025 -72,060

C. FUNDING ACTIVITIES

- issue/purchase of treasury shares 650,320 86,413

- issue/purchase of equity instruments - -522

- dividend distribution and other -61,626 -41,541

Cash flow generated/utilised by funding activities 588,694 44,350

NET CASH FLOW GENERATED/UTILISED DURING THE PERIOD 24,507 10,256

118

RECONCILIATION

Balance sheet items 2007 2006 Cash and cash equivalents at the beginning of the period 133,880 123,624

Net cash flows generated/absorbed during the period 24,507 10,256

Cash and cash equivalents at the end of the period 158,387 133,880

Key: (+) generated (-) utilised

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Guide to consultation

The purpose of the notes to the financial statements is to highlight all complementary information required for a better understanding and greater reliability of the financial statements. They form an integral part of the statements, and are to be read as a whole along with the balance sheet, income statement, the statement of changes in shareholders’ equity and the cash flow statement. The content of the notes to the financial statements is governed by Bank of Italy Circular no. 262 of 22 December 2005, issued pursuant to art. 5, Italian Legislative Decree no. 87 of 27 January 1992 and taking into account the amendments introduced by art. 9 of Legislative Decree no. 38 of 28 February 2005 “Exercise of options pursuant to art. 5, EC Regulation no. 1606/2002 on international accounting standards". Also included is information required by CONSOB and under international accounting standards, even where not specified in the aforementioned provisions.

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CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

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PART A – ACCOUNTING POLICIES

A.1 - GENERAL INFORMATION

SECTION 1 - STATEMENT OF COMPLIANCE WITH INTERNATIONAL ACCOUNTING STANDARDS

Pursuant to art. 4 of Legislative Decree no. 38 of 28 February 2005, the consolidated financial statements of the Credito Valtellinese Group have been drawn up according to IAS/lFRS accounting standards issued by the International Accounting Standards Board (IASB) and approved by the European Union, which the bank was required to comply with by 31 December 2007, including the related interpretations of the lnternational Financial Reporting Interpretations Committee (lFRIC), as set forth by EC Regulation no. 1606 of 19 July 2002. The individual financial statements as at 31 December 2007 have been prepared in compliance with the instructions issued by the Bank of Italy within the scope of its regulatory function over the technical structure of financial statements of banks and financial institutions as provided by Legislative Decree 38/05: "Instructions for the preparation of the separate and consolidated financial statements of banks and financial companies which are parent companies of banking groups" (Provision of 22 December 2005 - circular no. 262).

SECTION 2 - BASIS OF PREPARATION

The financial statements consist of the Balance Sheet, the Income Statement, the Statement of Changes in Shareholders' equity, the Cash Flow Statement and these Notes to the financial statements and are accompanied by the Directors’ Report on Operations. The amounts reported in the Financial Statements, the Notes to the financial statements and the Directors' Report, are in thousands of euro, unless indicated otherwise. The financial statements and the notes to the financial statements show, in addition to the amounts for the reporting period, also the comparatives as at 31 December 2006. In the Balance Sheet and Income Statement, drafted according to the regulations of the Bank of Italy, any items equal to zero for the year under review and for the previous year have not been included. In the Income Statement and in Part C of the Notes to the financial statements dealing with the Income statement, costs are reported in round brackets, while revenues are not. The Statement of Changes in Shareholders’ Equity presents the breakdown and changes occurred in the shareholders’ equity during the year under review and the previous one. The Cash Flow Statement has been prepared according to the direct method, in which the main cash collection and disbursement items are displayed. The cash flows for the year are divided into operating, investment and funding activities. The Notes to the financial statements do not include the sections pertaining to items equal to zero in the year under review and in the previous one. Moreover, the tables presented in Part B “Information on the Balance Sheet” and in Part C “Information on the Income Statement” refer exclusively to the banking group, as companies included in the categories “insurance companies" or “other companies included in the scope of consolidation” are excluded from the scope of consolidation. On 25 February 2008 the Bank of Italy sent the Banks a clarification regarding the accounting methods applicable to Build Leases (so-called “leasing in costruendo”). More specifically, as regards build leases, two types of contracts have been identified which differ in the transfer of risks associated with site management and the execution of the asset to be leased. As far as the preparation of the financial statements is concerned, in the first case (Build-Operate-Transfer or BOT where risks are transferred) the lessors report the transactions concerning assets under construction and those to be leased which are found under receivables. In the second case (Build-Own-Operate or BOO where risks are not transferred), the lessors show the assets under construction and those to be leased under “Assets used in the business”. Thus, “build leases” have been included in the financial statements according to this interpretation. As a result, comparatives (financial statements as at 31 December 2006) were restated in accordance with paragraph 38 of IAS 1 without affecting net profit and shareholders’ equity.

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SECTION 3 – CONSOLIDATION AREA AND METHODS

Section 3 – Consolidation area and methods

The consolidated accounts include Credito Valtellinese and the companies directly or indirectly controlled by it. Investments in companies subject to exclusive control are those in respect of which the Bank has the power of governing the financial and operating policies of the entities with a view of gaining economic benefits from their activities. Investments in companies subject to joint control are those in respect of which the Bank, together with other parties subject to the terms of an agreement, has the power of governing the financial and operating policies of the entities with a view to gaining economic benefits from their activities. Such control exists only when the decisions require unanimous consent of the parties that hold the joint control. The book value of the investments in subsidiaries, whose accounts are consolidated on a line-by-line basis, is offset against the corresponding share in the shareholders’ equity. The differences arising from this transaction, after recording the subsidiary’s assets and liabilities, are stated under “Intangible assets” – Goodwill; if negative, they are directly recognised in the income statement. Minority interests are assigned the corresponding shares of equity and net profit. Dividends booked to the parent company’s financial statements and concerning investments in companies included in the area of consolidation or valued at equity have been cancelled. Taxes associated with consolidation adjustments have been accounted for, when applicable. The investments in companies subject to joint control were valuated at equity. Changes to the shareholders’ equity due to profits or losses of subsidiaries are booked on the basis of the “equity ratios” under item “Profit from investments in associates and companies subject to joint control”. Other changes are booked to reserves. Business combinations carried out in the financial year are accounted for according to IFRS 3. In particular, the difference between the cost of the business combination and the share of the fair value of excess assets over liabilities:

- if positive (cost of the investment higher than the corresponding share of the fair value of the net balance of purchased assets and liabilities) is recognised in the consolidated balance sheet under “Intangible assets – Goodwill”;

- if negative (cost of the investment lower than the corresponding share of the fair value of the net balance of purchased assets and liabilities) is recognised directly in the income statement.

In the event of acquisitions of jointly-controlled companies: - the excess book value over the share of equity pertaining to the Group, arisen upon acquisition, is

recorded as a consolidated balance sheet asset under the item “Investments in associates and companies subject to joint control”;

- the lower book value than the share of equity pertaining to the Group is booked directly in the income statement.

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1. Investments in companies subject to exclusive and joint control (consolidated on a proportional basis)

Company name Registered office

Type of relationship

(1) Share capital Type of

investment % voting

rights (2)

(amounts (in thousands of EUR)

Participating company % held

A. Companies A.1 Consolidated on a line-by-line basis

1. Credito Valtellinese Soc. Coop. Sondrio 1 562,061

2. Credito Artigiano S.p.A. Milan 1 142,396 A.1.1 65.71

3. Credito Siciliano S.p.A. Palermo 1 95,826 A.1.1 40.26

A.1.2 35.79

4. Bancaperta S.p.A. Sondrio 1 84,240 A.1.1 63.44

A.1.2 24.45

A.1.3 12.11

5. Mediocreval S.p.A. Sondrio 1 55,078 A.1.1 37.45

A.1.2 31.29

A.1.3 31.23

6. Banca dell'Artigianato e dell'Industria S.p.A. Brescia 1 69,542 A.1.1 39.31

A.1.2 20.81

7. Bankadati Servizi Informatici S.p.A. Sondrio 1 2,500 A.1.1 80.00

A.1.2 20.00

8. Stelline Servizi Immobiliari S.p.A. Sondrio 1 12,500 A.1.1 80.00

A.1.2 20.00

9. Deltas S.p.A. Sondrio 1 120 A.1.1 50.00

A.1.2 50.00

10. Creset S.p.A. Lecco 1 2,600 A.1.1 100.00

11. Aperta Fiduciaria S.r.l. Milan 1 50 A.1.4 100.00

12. Aperta SGR S.p.A. Milan 1 4,966 A.1.4 100.00

13. Credito Piemontese S.p.A. Turin 1 15,534 A.1.1 99.78

14. Finanziaria San Giacomo S.p.A. Sondrio 1 3,000 A.1.5 100.00

Key (1) = majority of voting rights in the ordinary shareholders' meeting; 2 = dominant influence in the ordinary shareholders' meeting; 3 = agreements with other shareholders; 4 = other forms of control; 5 = sole direction pursuant to art.26, paragraph 1, of "Legislative Decree 87/92"; 6 = sole direction pursuant to art.26, paragraph 2, of "Legislative Decree 87/92"; 7 = joint control (2) Voting rights held in the ordinary shareholders' meeting, only if different from the ownership percentage, divided into actual and potential: 1 = actual 2 = potential

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2. Other information

Associated companies are those under significant influence, i.e. the Parent Company has the power of participating in the determination of financial and operating policies, but has no control or joint control over those policies. Said investments were valued at equity. In applying the equity method to the investment in Istituto Centrale delle Banche Popolari Italiane, the consolidated results of the latter were taken into account. The investment in Serv.Int.Sicilia S.r.l. (30%) held through Credito Siciliano S.p.A., and the investments in Sondrio Città Centro S.r.l. (30%) and Progetti Industriali Valtellina S.r.l. (49%) held through Stelline Servizi Immobiliari S.p.A. were recorded at cost as they were not considered to be material.

SECTION 4 - EVENTS AFTER THE BALANCE SHEET DATE

On 21 February 2008 a contract was completed for the acquisition of 35 branches from Intesa Sanpaolo, for a temporary consideration of EUR 395 million on the basis of the total estimated (direct and indirect) deposits at 31 December 2007. The final consideration will be determined on the basis of the actual amount of total deposits at the date the branches were disposed. As regards the exercise of the option rights, the share capital increase, against payment, of Credito Artigiano resolved upon by the Extraordinary Shareholders’ Meeting of 20 December 2007 was completed in March 2008. To date Credito Valtellinese has already subscribed its quota of the share capital by paying in approximately EUR 196 million. As regards the commitment undertaken to fully subscribe the share capital increase relating to the share options that had not been exercised by the end of the Stock Exchange Offer pursuant to Art. 2441, third paragraph of the Civil Code, which will be completed on 20 March, the maximum final payment by Credito Valtellinese may amount to approximately EUR 228 million.

SECTION 5 - OTHER ASPECTS

These financial statements are subject to audit by the independent auditing firm Reconta Ernst & Young. Group companies decided to opt for "national tax consolidation". The decision to opt for the national tax consolidation, regulated by articles 117 and subsequent of the Income Tax Consolidation Act, allows the Parent Bank to consolidate the income of group companies, resulting in a single tax liability for the Parent Bank.

A.2 – MAIN AGGREGATES This section provides information on the accounting principles adopted for drawing up the Annual Report. Recognition, classification, measurement and derecognition criteria are illustrated for each individual item, including, if relevant, the recognition criteria for the income items.

1. Financial assets held for trading The item includes:

- debt and equity instruments purchased primarily in order to obtain profit in the short term; - derivative contracts other than those designated as effective hedging instruments, when their fair

value is positive.

Debt and equity instruments are recognised in the financial statements at their settlement date, whilst derivative financial instruments at the trading date. Upon initial recognition they are recorded at fair value, usually represented by the transaction price, without considering the transaction costs directly attributable to the instrument; subsequently they are booked at fair value. Any gains and losses associated to the above, including those arising from trading, any cashed interest and dividends and changes in fair value due to market rate fluctuations, changes in share prices and other market variables, are recognised in the income statement. Financial assets or parts thereof are derecognised when the contractual rights to the cash flows expire or are transferred without retaining the risks and rewards associated with them.

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2. Financial assets available for sale This item comprises non-derivative financial assets with fixed or determinable payments and fixed maturity, that an entity has the positive intention and ability to hold to maturity. They are initially recognized at settlement date, and measured at fair value inclusive of transaction costs directly attributable to the acquisition. After initial recognition, any change in fair value is booked to the shareholders’ equity until such assets are derecognised, when they are booked to the income statement. If the fair value of equity instruments cannot be determined reliably, they are carried at cost. At every balance sheet date, these financial assets are assessed for evidence of impairment. Evidence of impairment originates from one or more events occurring after the initial recognition of the asset, which have an impact on the estimated future cash flows of the financial asset (or group of financial assets) that can be reliably estimated. In case a financial assets available for sale is impaired, the whole loss, including the portion previously booked to shareholders’ equity, is recycled to the income statement. Any recoveries, which are allowed only if the circumstances giving rise to the impairment no longer exist, are booked to the income statement, in case of loans or debt instruments, and to shareholders’ equity, in case of equity instruments. The amount of the recovery cannot , in any case, exceed the amortised cost that the financial instrument would have had if no adjustments had been made in the past. Interest is entered in the Income Statement and calculated according to the effective interest rate method. Dividends on equity instruments are booked in the Income Statement when payment is due. Financial assets or parts thereof are derecognised when the contractual rights to the cash flows expire or are transferred without retaining the risks and rewards associated with them. 3. Financial assets held to maturity This item comprises non-derivative financial assets with fixed or determinable payments and with a fixed expiry date and which the Bank intends and is able to hold to maturity. They are initially recognized at settlement date, and measured at fair value including transaction costs directly attributable to the acquisition. Subsequent to initial recognition, they are measured at amortised cost using the effective interest method. If the fair value of equity instruments cannot be determined reliably, they are carried at cost. At every balance sheet date, these financial assets are assessed for objective evidence of impairment. Evidence of impairment originates from one or more events occurring after initial recognition of the asset, which have an impact on the estimated future cash flows of the financial assets (or group of financial assets) that can be reliably estimated. The loss is measured as the difference between the book value and the present value of the future estimated cash flows discounted using the effective interest originally applied to the loan. Any recoveries are allowed only if the circumstances that had caused the impairment no longer exist. The recovery is booked to the income statement and, in any case, cannot exceed the amortised cost that the instrument would have had if no previous adjustments had been booked. Financial assets or parts thereof are derecognised when the contractual rights to the cash flows expire or are transferred without retaining the risks and rewards associated with them. 4. Loans These are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans are initially recognized at the disbursement date, and debt securities are recognized at their settlement date. Upon initial recognition, they are recorded at the consideration paid or the subscription price, normally equal to their fair value including any directly attributable transaction costs. Subsequently they are measured at amortised cost using the effective interest method. The effective interest rate is the rate that equates the present value of cash flows expected throughout the life of the instrument (up to the maturity or “expected” maturity or shorter period if appropriate) to the net carrying amount of the asset. The rate used for the calculation of the interest allows the latter to be systematically allocated over the life of the instrument. The expected flows have been calculated considering all contract terms of the instrument and including all fees and basis points paid or received by and between the contracting parties, transaction costs and any other premium or discount that is measurable and considered an integral part of the effective interest rate of the transaction. If it is not possible to obtain a reliable estimate of the expected cash flows or of the expected life of the instrument, the contract cash flows determined according to the terms set for the

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instrument have been used instead. The amortised cost has not been calculated for short-term transactions the effect of which is considered immaterial. At every balance sheet date, these financial assets are tested for impairment. Evidence of impairment originates from one or more events occurring after the initial recognition of the asset, which have an impact on the estimated future cash flows of the financial asset (or group of financial assets) that can be reliably estimated. Instruments which, based on the regulations of the Bank of Italy, were designated as doubtful, substandard, restructured or past due/over-limit for over 180 days have been assessed on an individual basis, whilst performing loans on a portfolio basis. Loans are classified, in accordance with the criteria set by the Bank of Italy, as follows:

a) doubtful loans: loans in a state of insolvency due to the impossibility by the client to fulfil his debt obligations, to non-compliance with a previously agreed repayment plan, to bankruptcy proceedings or to the presence of prejudicial encumbrances;

b) substandard loans: these are loans to subjects that experience temporary financial hardships which are expected to be overcome within a reasonable period of time;

c) restructured loans: this category comprises loans whose contractual terms have changed giving rise to a loss for the bank, due to the deterioration of the original economic-financial conditions of the debtor.

d) loans past due: exposures past due and/or overdue by more than for 180 days, other than those classified as doubtful, substandard or restructured.

In the assessment carried out on an individual basis, the loss is measured as the difference between the carrying value and the present value of the future estimated cash flows discounted using the effective original interest rate of the loan. The estimated cash flows take account of the guarantees associated with the loans and the probability that they may be settled. In the event that the guarantees are not likely to be enforced, account will be taken of either their current value or their realisable value net of expenses to be incurred to recover the amount due. The individual adjustment relates to expected losses on single non-performing loans. Where the causes that gave rise to previous loss adjustments no longer exist, then such adjustments are reversed and credited to the income statement. Assets that have been individually assessed and for which no impairment losses have been recorded are evaluated on a portfolio basis. The adjustment made on a portfolio basis refers to losses expected on homogeneous groups of performing loans (e.g. loans exposed to same sector, country or inherent risk) and is calculated according to internal statistical models. In order to assess the losses on a portfolio basis, financial assets are grouped based on similar credit risk characteristics which are representative of the ability of the debtor to pay all the amounts due according to the contractual terms. The risk categories identified represent the basis for the calculation of the historical loss experience due to loan impairment. Financial assets or parts thereof are derecognised when the contractual rights to the cash flows expire or are transferred without retaining the risks and rewards associated with them. Loan repurchase agreements These are spot purchases of securities negotiated together with the obligation of forward sale. As all the risks connected with the possession of the securities are borne by the seller, only a loan to the seller is recognized. The spreads between spot and forward prices, including the accrued interest and the share of any issue premium, are recognised on an accrual basis in the income statement items dealing with interest and similar income. Financial leasing Loans to customers for leased assets are initially recognized at the effective date of the corresponding agreements, i.e. upon formal delivery of the asset. Loans to customers for leased assets are stated in the financial statements at amortised cost, that is the initial value of the investment including direct costs initially incurred and any directly attributable commissions, less any capital repayments and adjusted by the amortisation calculated using the effective interest method, i.e. by discounting the future estimated payments at the effective interest rate for the estimated term of the loan. Similar criteria to the above ones are followed for adjustments and adjustment reversals.

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5. Financial assets designated at fair value This item comprises financial assets designated at fair value through profit and loss on the basis of an option set forth by IAS 39 (“fair value option”) for specific cases. The Group did not avail itself of this option. 6. Hedging transactions The Group has no such transactions in place.

7. Investments in associates and companies subject to joint control This item comprises the values of the investments held in associates and companies subject to joint control valued at equity. Investments in companies subject to joint control are those for which the Bank, together with other parties subject to the terms of an agreement, holds the power to control financial and operating policies with a view to gaining economic benefits from their activities; conversely, investments in associated companies are those for which the Bank exercises significant influence, that is has the power to take part in the financial and operating policies but does not control them. Significant influence is presumed when the Bank holds more than 20% of the investee’s share capital. Investments in associates and companies subject to joint control are derecognised when the contractual rights to the corresponding cash flows expire or when they are sold transferring substantially all the risks and rewards connected to the assets. 8. Property, plant and equipment Property, plant and equipment purchased on the market are recognised as assets when the main risks and rewards connected with the assets are transferred. These assets are initially recorded at cost, including all directly attributable expenses. Land is recognised separately, even when purchased together with the building, using a component approach. Land and the buildings are separately assessed on the basis of independent appraisals and only in the case of self-contained buildings. Property, plant and equipment are subsequently valued at cost as adjusted by any accumulated depreciation and losses/recoveries of value. The depreciable value of property, plant and equipment, identified as the difference between the purchase cost and the residual value, is systematically charged over the estimated useful use of the assets according to an allocation criteria that reflects the technical-economic duration and the residual use of each asset item. According to that criterion, the life of the different categories of property, plant and equipment is as follows:

- for buildings, from 30 to 50 years; - for furniture, furnishings and sundry equipment, from 5 to 8 years; - for office machines, electronic security systems, from 3 to 5 years; - for Motor vehicles, from 4 to 5 years.

Land and artistic assets are not subject to depreciation, as the former has an indefinite useful life and the latter normally increase in value over time. At every balance sheet date, the Group verifies if there are indications that property, plant and equipment may have suffered an impairment loss. In the event that there is evidence of impairment, the book value and the recovery value (defined as the greater of fair value and value in use) are compared. Property, plant and equipment are derecognised when they are sold or no future economic benefits are expected from their use or disposal. 9. Intangible assets Assets recognised under intangible assets are non-monetary assets, without physical substance, identifiable and able to generate future economic benefits that can be controlled by the company. Intangible assets purchased externally are recognised as assets at purchase price when the main risks and benefits connected with the asset are transferred. Intangible assets generated internally are entered on the basis of the costs sustained and directly attributable. All intangible assets recorded in the financial statements other than goodwill have a finite useful life and are consequently amortised in consideration of said life. The maximum estimated useful life is 3 years whilst the residual value of the various assets is assumed to be zero. Intangible assets are derecognised when sold or no further economic benefits are expected from them. Goodwill

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Goodwill generated from business combinations represents the differential between the purchase cost, including ancillary charges incurred, and the fair value at the acquisition date of the assets and liabilities of the acquired company. If positive, it is booked at cost as an asset (goodwill) as it represents the amount paid by the acquirer for the future benefits arising from assets which can not be either identified as single components or booked separately. If negative, it is directly recognised in the income statement (excess over cost). Goodwill recorded as an asset must be allocated to the cash-generating units to which it refers. The cash-generating unit to which goodwill was allocated is tested annually for impairment or every time there is an indication that the unit may have suffered an impairment. Any difference between the book value and the recovery value, that is the greater of the fair value; less any costs to sell, and its value in use, is recognised in the income statement. The fair value has been established based on the best information available so as to reflect the amount that the Bank could obtain, at the balance sheet date, if the asset were sold by and between knowledgeable, willing parties in an arm’s length transaction. This value was determined taking account of the result of recent transactions for similar assets carried out within the same industry sector. In calculating the value in use, the future cash flows that are expected to be generated by the asset have been estimated and discounted using the cost of equity (determined considering an average market return, at a risk-free current market rate and the Bank’s beta). Software Software is recognised at cost, net of the corresponding accumulated amortisation and of any impairment loss. The costs connected to the acquisition and development of the software are capitalised when control over it is acquired and when future benefits, exceeding the cost, are likely to arise over more years. 10. Non current assets held for sale and discontinued operations Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale rather than through continuous use. In order for this to occur, the asset must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets and its sale must be highly probable. Once classified as held for sale, the asset is valued at the lower of its carrying amount and fair value less costs to sell. At 31 December 2007 there were no “Non current assets held for sale". 11. Current and deferred taxation Current taxes entirely or partially unpaid at the balance sheet date are included in the financial statements under liabilities. If the amount already paid in respect of current and prior periods exceeds the amount due for those periods, the excess shall be included in the financial statements as an asset. Deferred taxation is accounted for using the liability method, whereby deferred taxes are recognised by comparing the various carrying amount and tax base of assets and liabilities in the balance sheet. These differences in value, if recoverable in future years, are defined as “timing differences” and will generate taxable or deductible amounts in the relevant tax year; therefore, they originate, respectively, deferred tax liabilities and deferred tax assets. Deductible timing differences are those that will generate a future reduction in the total taxable amount, for which it is necessary to deferred tax assets. Deferred tax assets must be recorded for all deductible timing differences which are likely to be used against a future taxable amount hence generate a benefit for the company. Taxable timing differences are also those differences that create deferred tax liabilities, as they generate taxable amounts in the years subsequent to the one in which there were recorded in the income statement. All taxable timing differences have been recorded as deferred tax liabilities. 12. Provisions for risks and charges Provisions for risks and charges are recorded when the company has a current obligation (legal or implicit) resulting from a past event, for which it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, whose amount can be reliably estimated. The amount recorded represents the present value of the reasonable amount that a company would pay in order to extinguish the obligation as at the balance sheet date. If the impact is not significant the amount is not discounted.

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Such provisions are reassessed at every balance sheet date and adjusted in order to reflect the best current estimate. If it is no longer likely that the resources producing economic benefits will be used to meet the obligation, the provision is adjusted and any excess is recorded in the income statement. 13. Outstanding amounts and securities issued Financial instruments issued are classified as liabilities when, according to the substance of the agreement, the Bank has a contractual obligation to deliver cash or another financial asset to another entity. Outstanding amounts due to banks and customers and securities issued represent the funding collected on the inter-bank market and from customers also through the placement of bonds and certificates of deposit. Transactions with banks are booked at the time they are executed, except those relating to remittance of bills and to the placement of securities, which are booked upon settlement. Initially, financial liabilities are designated at fair value, generally equal to the amount collected or the issue price, as increased by any directly attributable transaction costs. Subsequently, they are valued at amortised cost using the effective interest method. The amortised cost has not been calculated for short-term transactions, for which the effect of the calculations is considered immaterial. Financial liabilities or parts thereof are derecognised when extinguished, i.e. when the obligation has been met, cancelled or has expired. They are derecognised also following their repurchase on the market. The derecognition is made on the basis of the fair value of the issued item and of the repurchased item at the purchase date. Profit or loss resulting from the transaction, depending on whether the book value of the repurchased item is higher or lower than the purchase price, is recorded in the income statement. The subsequent replacement of the securities is to be considered as a new issue, recognised at the new placement price. Deposit repurchase agreements These are spot sales of securities negotiated together with the obligation of forward purchase. As the risks associated with the securities underlying the transactions are not transferred, the assets are recorded in the financial statements along with the related liability. The spreads between spot and forward prices, including the accrued interest and the share of any issue premium, are recognised in the income statement on an accrual basis under interest and similar income. 14. Financial liabilities held for trading Trading liabilities are represented by trading derivative financial instruments with a negative fair value. 15. Financial liabilities designated at fair value This item comprises financial assets designated at fair value through profit and loss on the basis of an option set forth by IAS 39 (“fair value option”) for specific cases. The Group did not avail itself of this option. 16. Foreign currency transactions Transactions denominate in foreign currency are converted, at initial recognition, into the reporting currency by applying the exchange rate in force at the transaction date. At each subsequent balance sheet date:

- any monetary items are converted at the exchange rate in force at the balance sheet date; - any non-monetary items measured at historical cost are converted at the exchange rate in force at

the transaction date; - any non-monetary items measured at fair value are converted at the exchange rate in force at the

date when the fair value was determined.

A monetary element represents the right to receive, or the obligation to pay, a fixed or determinable amount of money. Conversely, the key characteristic of non-monetary items is the absence of the right to receive, or the obligation to pay, a set amount of money or an amount that can be determined The exchange rate differences relating to monetary items are recorded in the Income Statement as and when they arise; those related to non-monetary items are recorded in shareholders’ equity or in the Income Statement following the accounting treatment of the profits or losses that include that item. Revenues and expenses in foreign currency are shown at the exchange rate prevailing at the time they are recorded or, if accruing, at the year-end exchange rate. 17. Insurance assets and liabilities The consolidated financial statements do not include any insurance assets and liabilities.

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18. Other information Employee termination indemnities and pensions Employee termination indemnities fall within post-employment benefits which IAS 19 distinguishes in:

- defined contribution plans; - defined benefit plans;

Defined contribution plans envisage the payment by the company of fixed contributions into a fund. The company has no legal or constructive obligation to make further payments if the fund does not have sufficient assets to pay all of the employees' entitlements for the service rendered in the current year and in previous years. The company records the employee’s payments into the fund as a liability after deducting any contributions already paid. If at the balance sheet date the contributions paid are higher than those actually due, the excess must be accounted for as an asset to the extent that the advance payment will reduce future payments or give rise to a refund. A defined benefit plan is a post-employment benefit plan according to which the company has the obligation to pay to its employees the benefit agreed. Following the introduction of the 2007 Finance Act, which anticipated to 1 January 2007 the reform of supplementary retirement plans pursuant to Legislative Decree no. 252/05, any employee termination indemnities that have accrued since 1 January 2007 must, at the employee’s option according to explicit or tacit acceptance, be allocated to supplementary retirement plans or held within the company, which will ensure that such accrued indemnities are paid into the Treasury Fund managed by INPS. The reform of supplementary retirement plans entailed an adjustment of the accounting treatment of employee termination indemnities, as explained below:

i. Any employee termination indemnities accrued up to 31 December 2006 continue to be considered as a “defined benefit plan” to be assessed by actuaries according to the “Projected Unit Credit Method”, as provided by IAS 19. The liability associated with the accrued employee termination indemnities is assessed by actuaries without applying the pro-rata of the service rendered, as the service to be assessed has already fully accrued. any actuarial gains and losses arising from the recalculation of the employee termination indemnities at 31 December 2007 are recognised in the income statement;

ii. any employee termination indemnities accrued since 1 January 2007 are deemed to be a “defined contribution plan”, whether the employee opts for supplementary retirement plans or decides to pay such indemnities into the Treasury Fund managed by INPS. The amount of the indemnities is determined based on the contributions due by the employee without using actuarial calculations.

Treasury shares Shares issued and repurchased are recorded as a direct reduction of shareholders’ equity. No profit or loss resulting from the purchase, sale, issue or cancellation of said instruments is recorded in the income statement Any amount paid or received for said instruments is recorded directly under shareholders' equity. A specific reserve is booked, pursuant to art. 2357 ter of the Italian Civil Code. Determination of the fair value of financial instruments The fair value of financial instruments has been determined based on price quotations on active markets. In this case, the value is represented by the market price (bid, ask or average price depending on the different financial instruments) at period end or, if this price is not available, by the price of the most recent transactions. The fair value of financial instruments not listed on active markets has been determined by reference to the price of recent market transactions, or to the fair value of a financial instrument with similar characteristics or, failing both of these, using mostly discounted cash flow valuation methods. In the latter instance, the cash flows have been discounted using the rates on the market curve to which a spread was applied to take account of the counterparty credit risk. Guarantees and commitments Guarantees given are initially recognized at their fair value, represented by the commission received, and subsequently at the higher of the estimated obligation determined according to IAS 37 and the initially

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booked amount gradually reduced by the portion related to the year. The overall nominal value of guarantees given, net of amounts used, is highlighted in the notes to the financial statements. Commitments are entered in the financial statements on the basis of the best estimate of the obligation determined according to IAS 37. The overall amount of the commitment undertaken by the Bank is highlighted in the notes to the financial statements. Accounting of revenues Revenues resulting from the third-party use of company assets generating interest, commissions and dividends must be recorded when it is probable that the economic benefits associated with the transaction will flow to the company and the amount of the revenue can be measured reliably. Interest and commissions are recorded in the income statement according to the classification of the financial instrument to which they refer. Dividends are recorded when the shareholders become entitled to receive the related payment. Other commissions are recorded on an accrual basis. Use of estimates and assumptions in drawing up the financial statements In drawing up the financial statements, estimates and assumptions were used which may affect the values recorded in the balance sheet, income statement and the notes. More specifically, subjective evaluations by company management were made in the following cases:

• to quantify the impairment of financial assets, especially loans; • to determine the fair value of financial instruments to be used for financial statement information

and the use of valuation models to determine fair value of financial instruments that are not quoted in active markets;

• to assess the reasonableness of the amount of goodwill; • to quantify employees' provisions and provisions for risks and charges; • the actuarial and financial assumptions used to determine liabilities associated with defined benefit

plans for employees; • the estimates and assumptions made with regard to the recoverability of deferred tax assets.

In order to formulate reasonable estimates and assumptions for the recording of business transactions, subjective assessments are made based on all information and historical experience available.

132

PART B – INFORMATION ON THE CONSOLIDATED BALANCE SHEET

ASSETS

SECTION 1 – CASH AND CASH EQUIVALENTS – ITEM 10

1.1 - Cash and cash equivalents: breakdown

31/12/2007 31/12/200

6

a) Cash 155,886 131,156

b) Unrestricted deposits with Central Banks 2,501 2,724

Total 158,387 133,880

SECTION 2 – FINANCIAL ASSETS HELD FOR TRADING – ITEM 20

2.1 - Financial assets held for trading: breakdown by type

31/12/2007 31/12/20

06

Items/Amounts Listed Unlisted Listed Unlisted A. Cash assets 1. Debt securities 126,872 98,915 211,043 17,537

1.1 Structured securities - - - -

1.2 Other debt securities 126,872 98,915 211,043 17,537

2. Equity securities 2,494 - 3,464 47

3. Quotas of UCI 7,285 31,682 - 189,279

4. Loans - - - -

4.1 Repurchase agreements - - - -

4.2 Other - - - -

5. Impaired assets - - - 60

6. Assets sold and not cancelled 934,075 75,580 857,202 -

Total A 1,070,726 206,177 1,071,709 206,923

B. Derivatives 1. Financial derivatives: 295 7,362 10 8,831

1.1 trading 295 7,362 10 8,831

1.2 connected with fair value option - - - -

1.3 other - - - -

2. Credit derivatives: - - - -

2.1 trading - - - -

2.2 connected with fair value option - - - -

2.3 other - - - -

Total B 295 7,362 10 8,831

Total (A+B) 1,071,021 213,539 1,071,719 215,754

133

2.2 - Financial assets held for trading: breakdown by debtor/issuer

31/12/2007 31/12/2006

A. Cash assets 1. Debt securities 225,787 228,580 a) Governments and Central Banks 104,225 207,560 b) Other public entities 5,949 7,563 c) Banks 115,527 12,998 d) Other issuers 86 459 2. Equity securities 2,494 3,511 a) Banks 20 29 b) Other issuers: 2,474 3,482 - insurance companies - - - financial businesses - - - non-financial businesses 2,474 3,482 - other - - 3. Quotas of UCI 38,967 189,279 4. Loans - - a) Governments and Central Banks - - b) Other public entities - - c) Banks - - d) Other - - 5. Impaired assets - 60 a) Governments and Central Banks - 51 b) Other public entities - - c) Banks - - d) Other - 9

6. Assets sold and not derecognised 1,009,655 857,202

a) Governments and Central Banks 922,467 857,202 b) Other public entities - - c) Banks 87,188 - d) Other issuers - - Total A 1,276,903 1,278,632

B. Derivatives a) Banks 3,670 7,626 b) Customers 3,987 1,215 Total B 7,657 8,841

Total (A+B) 1,284,560 1,287,473

Quotas of UCI held in portfolio are mainly represented by Hedge Fund units.

134

2.3 - Financial assets held for trading: trading derivatives

Type of derivative/underlying asset Interest Currencies and Equity Loans Other 31/12/2007 31/12/2006

rate and gold securities A) Listed Derivatives 1) Financial derivatives: - with exchange of capital 286 - 9 - - 295 10

- options purchased - - - - - - -

- other derivatives 286 - 9 - - 295 10

- without exchange of capital - - - - - - -

- options purchased - - - - - - -

- other derivatives - - - - - - -

2) Credit derivatives: - with exchange of capital - - - - - - -

- without exchange of capital - - - - - - -

Total A 286 - 9 - - 295 10

B) Unlisted Derivatives 1) Financial derivatives: - with exchange of capital 44 5,625 1 - - 5,670 2,032

- options purchased - - - - - - -

- other derivatives 44 5,625 1 - - 5,670 2,032

- without exchange of capital 1,082 - 610 - - 1,692 6,799

- options purchased - - 610 - - 610 2,057

- other derivatives 1,082 - - - - 1,082 4,742

2) Credit derivatives: - with exchange of capital - - - - - - -

- without exchange of capital - - - - - - -

Total B 1,126 5,625 611 - - 7,362 8,831

Total (A+B) 1,412 5,625 620 - - 7,657 8,841

135

2.4 - Cash financial assets held for trading (other than “sold and not cancelled” and “impaired”): annual changes

2007

Change/Underlying asset Debt securities

Equity securities Quotas of UCI Loans Total

A. Opening balance 228,626 3,510 189,279 - 421,415

B. Increases 8,589,473 60,078 208,239 - 8,857,790

B.1 Purchases 8,575,719 58,762 205,810 - 8,840,291

B.2 Positive changes in fair value 241 - 935 - 1,176

B.3 Other changes 13,513 1,316 1,494 - 16,323

C. Decreases -8,592,312 -61,094 -358,551 - -9,011,957

C.1 Sales -8,074,351 -59,648 -358,472 - -8,492,471

C.2 Redemptions -510,610 - - - -510,610

C.3 Negative changes in fair value -5,874 -865 -65 - -6,804

C.4 Other changes -1,477 -581 -14 - -2,072

D. Closing balance 225,787 2,494 38,967 - 267,248

SECTION 4 – FINANCIAL ASSETS AVAILABLE FOR SALE – ITEM 40

4.1 - Financial assets available for sale: breakdown by type

31/12/2007 31/12/2

006 Items/Amounts Listed Unlisted Listed Unlisted

1. Debt securities - - - -

1.1 structured securities - - - -

1.2 Other debt securities - - - -

2. Equity securities 27,043 42,943 24,181 24,968

2.1 designated at fair value 27,043 - 24,181 -

2.2 measured at cost - 42,943 - 24,968

3. Quotas of UCI - 302 - 63

4. Loans - - - -

5. Impaired assets - - - 1

6. Assets sold and not cancelled - - - -

Total 27,043 43,245 24,181 25,032

136

4.2 - Financial assets available for sale: breakdown by debtor/issuer

Items/Amounts 31/12/2007 31/12/20061. Debt securities - -

a) Governments and Central Banks - -

b) Other public entities - -

c) Banks - -

d) Other issuers - -

2. Equity securities 69,986 49,149

a) Banks 25,356 8,511

b) Other issuers: 44,630 40,638

- insurance companies 3,175 3,971

- financial businesses 5,255 5,034

- non-financial businesses 36,172 31,633

- other 28 -

3. Quotas of UCI 302 63

4. Loans - -

a) Governments and Central Banks - -

b) Other public entities - -

c) Banks - -

d) Other - -

5. Impaired assets - 1

a) Governments and Central Banks - -

b) Other Public Entities - -

c) Banks - -

d) Other parties - 1

6. Assets sold and not cancelled - -

a) Governments and Central Banks - -

b) Other Public Entities - -

c) Banks - -

d) Other parties - -

Total 70,288 49,213

137

4.5 - Financial assets available for sale (other than “sold and not cancelled” and “impaired”): annual changes

2007

Debt securities

Equity securities Quotas of UCI Loans Total

A. Opening balance - 49,150 63 - 49,213

B. Increases - 30,027 239 - 30,266

B.1 Purchases - 27,155 239 - 27,394

B.2 Positive changes in fair value - 2,862 - - 2,862

B.3 Recoveries - - - - -

- recorded in the income statement - X - - -

- recorded in shareholders’ equity - - - - -

B.4 Transfers from other portfolios - - - - -

B.5 Other changes - 10 - - 10

C. Decreases - -9,191 - - -9,191

C.1 Sales - -2,137 - - -2,137

C.2 Redemptions - - - - -

C.3 Negative changes in fair value - - - - -

C.4 Write-downs for impairment - - - - -

- recorded in the income statement - - - - -

- recorded in shareholders’ equity - - - - -

C.5 Transfers to other portfolios - - - - -

C.6 Other changes - -7,054 - - -7,054

D. Closing balance - 69,986 302 - 70,288

Purchases are mainly attributable to the shareholding in Tercas - Cassa di Risparmio della Provincia di Teramo S.p.A..

SECTION 5 – FINANCIAL ASSETS HELD TO MATURITY – ITEM 50

5.1 - Financial assets held to maturity: breakdown by type

31/12/2007 31/12/2006

Type of transaction/Amounts Book value Fair value Book value Fair value

1. Debt securities 1 1 1 1

1.1 structured securities - - - -

1.2 Other debt securities 1 1 1 1

2. Loans - - - -

3. Impaired assets - - - -

4. Assets sold and not cancelled - - - -

Total 1 1 1 1

138

5.2 - Financial assets held to maturity: breakdown by debtor/issuer

Type of transaction/Amounts 31/12/2007 31/12/2006

1. Debt securities 1 1

a) Governments and Central Banks 1 1

b) Other public entities - -

c) Banks - -

d) Other issuers - -

2. Loans - -

a) Governments and Central Banks - -

b) Other public entities - -

c) Banks - -

d) Other parties - -

3. Impaired assets - -

a) Governments and Central Banks - -

b) Other public entities - -

c) Banks - -

d) Other parties - -

4. Assets sold and not cancelled - -

a) Governments and Central Banks - -

b) Other public entities - -

c) Banks - -

d) Other - -

Total 1 1

5.4 - Financial assets held to maturity (other than “sold and not cancelled” and “impaired”): annual changes

2007

Debt securities Loans Total

A. Opening balance 1 - 1

B. Increases - - -

B.1 Purchases - - -

of which business combination transactions - - -

B.2 Recoveries - - -

B.3 Transfers from other portfolios - - -

B.4 Other changes - - -

C. Decreases - - -

C.1 Sales - - -

of which business combination transactions - - -

C.2 Redemptions - - -

C.3 Value adjustments - - -

C.4 Transfers to other portfolios - - -

C.5 Other changes - - -

D. Closing balance 1 - 1

139

SECTION 6 – DUE FROM BANKS – ITEM 60

6.1 - Due from banks: breakdown by type

31/12/2007 31/12/2006

Type of transaction/Amounts A. Deposits with Central Banks 157,882 107,807

1 Restricted deposits - -

2.Compulsory reserve 157,882 107,807

3 Repurchase agreements - -

4 Other - -

B. - Due from banks 602,143 771,977

1 Current accounts and unrestricted deposits 84,303 44,436

2 Restricted deposits 10,007 324,772

3. Other loans 122,120 397,713

3.1 repurchase agreements 26,976 394,984

3.2 finance leases - -

3.3 other 95,144 2,729

4. Debt securities 113,917 5,056

4.1 structured securities - -

4.2 Other debt securities 113,917 5,056

5. Impaired assets - -

6. Assets sold and not cancelled 271,796 -

Total (book value) 760,025 879,784

Total (fair value) 759,339 879,496

SECTION 7 – LOANS TO CUSTOMERS – ITEM 70

7.1 - Loans to customers: breakdown by type

31/12/2007 31/12/2006 Type of transaction/Amounts 1.Current accounts 5,642,380 4,632,556

2 Repurchase agreements - 1,019

3.Mortgages 4,103,631 3,318,795

4. Credit cards, pers. loans and salary-backed loans 267,885 235,608

5 – Finance leases 871,604 777,226

6. Factoring - -

7. Other transactions 2,468,058 2,096,331

8. Debt securities 1,811 1,808

8.1 structured securities - -

8.2 Other debt securities 1,811 1,808

9. Impaired assets 398,964 382,442

10. Assets sold and not cancelled - -

Total (book value) 13,754,333 11,445,785

Total (fair value) 13,910,895 11,567,935

140

(*) Item 7 “Other transactions” refers mainly to syndicated loans (EUR 376,628 thousand), forward cash (EUR 552,987 thousand), loans for advances on bills (EUR 514,648 thousand) and foreign currency loans and advances (EUR 158,419 thousand).

7.2 - Loans to customers: breakdown by debtor/issuer

Items/Amounts 31/12/2007 31/12/2006 1. Debt securities 1,811 1,808

a) Governments - -

b) Other public entities - -

c) Other issuers 1,811 1,808

- non-financial businesses 1,811 1,808

- financial businesses - -

- insurance companies - -

- other - -

2. Loans to: 13,353,558 11,061,535

a) Governments 22,037 20,455

b) Other public entities 96,362 93,442

d) Other 13,235,159 10,947,638

- non-financial businesses 10,691,585 8,822,952

- financial businesses 380,137 395,075

- insurance companies 5 777

- other 2,163,432 1,728,834

3. Impaired assets 398,964 382,442

a) Governments - -

b) Other Public Entities - -

c) Other 398,964 382,442

- non-financial businesses 287,656 268,333

- financial businesses 848 1,599

- insurance companies 3 3

- other 110,457 112,507

4. Assets sold and not cancelled - -

a) Governments - -

b) Other Public Entities - -

c) Other - -

- non-financial businesses - -

- financial businesses - -

- insurance companies - -

- other - -

Total 13,754,333 11,445,785

141

7.4 - Finance leases

31/12/2007Financial leases to customers: reconciliation gross investment at the balance sheet date 878,657

Time value accrued 396

Present value of minimum lease payments due at the balance sheet date 878,261

Loan write-down reserve referred to minimum payments 6,657

Unexpired term of gross investment Up to 1 year 150,786

Between 1 year and 5 years 390,463

Beyond 5 years 337,408

Unexpired term of the present value of minimum payments due Up to 1 year 150,644

Between 1 year and 5 years 390,327

Beyond 5 years 337,291

SECTION 10 – INVESTMENTS IN ASSOCIATES AND COMPANIES SUBJECT TO JOINT CONTROL - ITEM 100

10.1 – Investments in companies subject to joint control (valued at equity) and in companies subject to significant influence: further information

- - Shareholding relationship

Name Registered office Type of Participating Quota % voting rights

relationship company % .

(1) % B. Companies 1. Rajna Immobiliare S.r.l. Sondrio 1 Credito Valtellinese 50.00 2. Global Assicurazioni S.p.A. Milan 1 Bancaperta 40.00 3. Banca della Ciociaria S.p.A. Frosinone 1 Credito Valtellinese 37.96 4. Global Assistance S.p.A. Milan 2 Credito Valtellinese 40.00 5. Istituto Centrale delle Banche Popolari Italiane S.p.A. Milan 2 Credito Valtellinese 22.50 6. Aperta Gestioni Patrimoniali S.A. Lugano (Switzerland) 2 Bancaperta 48.00 7. Banca di Cividale S.p.A. Cividale del Friuli 2 Credito Valtellinese 25.00 8. Serv.Int.Sicilia S.r.l. Palermo 2 Credito Siciliano 30.00 9. Sondrio Città Centro S.r.l. Sondrio 2 Stelline S.I. 30.00 10. Progetti Industriali Valtellina S.r.l. Sondrio 2 Stelline S.I. 49.00 11.Soc. Coop. del Polo dell'Innovazione della Valtellina p.A. Sondrio 2 Credito Valtellinese 20.52

Key (1) Type of relationship: 1 = joint control 2 = significant influence

The % of voting rights is not indicated as it does not correspond to the shareholding percentage.

10.2 – Investments in companies subject to joint control and in companies subject to significant influence:accounting information

142

Consolidated

Name Total Total Net profit Shareholders’ financial Fair

assets revenues (loss) equity statements value

A. Companies valued at equity A.1 subject to joint control: 1. Rajna Immobiliare S.r.l. 2,197 152 36 543 290 -

2. Global Assicurazioni S.p.A. 11,293 21,200 4,930 5,087 1,769 -

3. Banca della Ciociaria S.p.A. 343,159 19,923 347 46,637 27,464 -

A.2 subject to significant influence: 4. Global Assistance S.p.A. 8,254 3,231 712 3,486 1,876 -

5. Istituto Centrale delle Banche Popolari Italiane S.p.A. 4,717,513 130,841 35,126 313,528 71,098 -

6. Aperta Gestioni Patrimoniali S.A. 10,159 7,422 2,364 7,057 2,270 -

7. Banca di Cividale S.p.A. 2,473,799 166,543 11,250 247,242 96,779 -

8. Serv.Int.Sicilia S.r.l. 50 39 -14 21 17 -

9. Sondrio Città Centro S.r.l. 2,858 161 -20 56 30 -

10. Progetti Industriali Valtellina S.r.l. 3,701 8 -118 92 49 -

11.Soc. Coop. del Polo dell'Innovazione della Valtellina 358 99 - 245 50 -

The shareholders’ equity and net income (loss) are taken from the 2007 financial statements approved by the respective Shareholders’’ Meetings, or, if these are not available, from the draft financial statements approved by the respective boards of directors, except for those of Serv. Int. Sicilia S.r.l., of Sondrio Città Centro S.r.l. and of Progetti Industriali Valtellina S.r.l., which are taken from the 2006 financial statements. The financial statement figures of Aperta Gestioni S.A. are expressed in thousands of CHF. The figures of Istituto Centrale Banche Popolari Italiane relate to the consolidated financial statements.

10.3 – Investments in associates and companies subject to joint control: annual changes

2007 2006 A. Opening balance 166,830 151,056

B. Increases 40,873 26,021

B.1 Purchases 20,504 12,771

B.2 Recoveries - -

B.3 Revaluations 13,329 13,250

B.4 Other changes 7,040 -

C. Decreases -6,013 -10,247

C.1 Sales - -1,553

C.2 Value adjustments - -

C.3 Other changes -6,013 -8,694

D. Closing balance 201,690 166,830

E. Total revaluations 19,442 31,808

F. Total adjustments 10,092 2,809

The purchases of shareholdings include no. 1,677,427 shares of Banca della Ciociaria S.p.A for EUR 20.5 million.

143

10.4 – Commitments referred to Investments in companies subject to joint control

Commitments referred to Investments in companies subject to joint control amount to EUR 51,842 thousand.

10.5 – Commitments referred to Investments in companies subject to significant influence

Commitments referred to Investments in companies subject to significant influence amount to EUR 161,985 thousand.

SECTION 12 – PROPERTY, PLANT AND EQUIPMENT – ITEM 120

12.1 – Property, plant and equipment: breakdown of assets measured at cost

31/12/2007 31/12/2006Asset/Amounts A. Assets used in the business 1.1 Owned 386,356 375,194

a) land 61,223 59,418

b) buildings 290,441 282,383

c) furniture 21,335 20,375

d) electronic systems 3,890 3,782

e) other 9,467 9,236

1.2 acquired through a finance lease - -

a) land - -

b) buildings - -

c) furniture - -

d) electronic systems - -

e) other - -

Total A 386,356 375,194

B. Investment properties 2.1 Owned 6,934 12,092

a) land 1,117 3,037

b) buildings 5,817 9,055

c) furniture - -

2.2 acquired through a finance lease - -

a) land - -

b) buildings - -

c) furniture - -

Total B 6,934 12,092

Total (A+B) 393,290 387,286

144

12.3 – Assets used in the business: annual changes

2007 Land Buildings Furniture Electronic systems Other Total

A. Opening balance, gross 59,418 339,388 69,243 42,780 96,405 607,234

A.1 Total net value reductions - 57,005 48,868 38,998 87,169 232,040

A.2 Opening balance, net 59,418 282,383 20,375 3,782 9,236 375,194

B. Increases 1,805 27,859 4,697 1,681 4,499 40,541

B.1 Purchases - 7,436 4,684 1,663 4,463 18,246

B.2 Capitalised improvement expenditure - 15,872 - - - 15,872

B.3 Recoveries - - - - - -

B.4 Positive changes in fair value recorded under: - - - - - -

a) shareholders’ equity - - - - - -

b) income statement - - - - - -

B.5 Positive exchange rate differences - - - - - -

B.6 Transfers of investment properties - - - - - -

B.7 Other changes 1,805 4,551 13 18 36 6,423

C. Decreases - -19,801 -3,737 -1,573 -4,268 -29,379

C.1 Sales - -508 -1 - -163 -672

C.2 Depreciation - -10,024 -3,598 -1,546 -4,061 -19,229

C.3 Value adjustments from impairment recorded under: - - - - - -

a) shareholders’ equity - - - - - -

b) income statement - - - - - -

C.4 Negative changes in fair value recorded under: - - - - - -

a) shareholders’ equity - - - - - -

b) income statement - - - - - -

C.5 Negative exchange rate differences - - - - - -

C.6 Transfers to: - - - - - -

a) property, plant and equipment held for investment - - - - - -

b) discontinued operations - - - - - -

C.7 Other changes - -9,269 -138 -27 -44 -9,478

D. Closing balance, net 61,223 290,441 21,335 3,890 9,467 386,356

D.1 Total net value reductions - 67,029 52,466 40,544 91,230 251,269

D.2 Closing balance, gross 61,223 357,470 73,801 44,434 100,697 637,625

E. Valuation at cost - - - - - -

145

12.4 - Investment properties: annual changes

2007 Land Buildings A. Opening balance, gross 3,037 10,440

A.1 Total net value reductions - 1,385

A.2 Opening balance, net 3,037 9,055

B. Increases - 56

B.1 Purchases - -

B.2 Capitalised improvement expenditure - 1

B.3 Positive changes in fair value - -

B.4 Recoveries - -

B.5 Positive exchange rate differences - -

B.6 Transfers from property used in the business - -

B.7 Other changes - 55

C. Decreases -1,920 -3,294

C.1 Sales - -20

C.2 Depreciation - -133

C.3 Negative changes in fair value - -

C.4 Impairment losses - -

C.5 Negative exchange rate differences - -

C.6 Transfers to other asset portfolios a) property used in the business - -

b) non current assets and discontinued operations - -

C.7 Other changes -1,920 -3,141

D. Closing balance, net 1,117 5,817

D.1 Total net value reductions - 1,518

D.2 Closing balance, gross 1,117 7,335

E. Valuation at fair value 1,114 6,155

Property, plant and equipment are all valued at cost as adjusted by any accumulated depreciation and losses/recoveries of value.

SECTION 13 – INTANGIBLE ASSETS – ITEM 130

13.1 – Intangible assets: breakdown by type

31/12/2007

31/12/2006

Asset/Amounts Finite Indefinite Finite Indefinite life life life life A.1 Goodwill X 101,897 X 103,086

A.1.1 pertaining to the group X 101,897 X 103,086

A.1.2 pertaining to third parties X - X -

A.2 Other intangible assets 5,032 - 5,729 -

A.2.1 Assets measured at cost: 5,032 - 5,729 -

a) internally generated intangible assets - - 3,679 -

b) other assets 5,032 - 2,050 -

A.2.2 Assets designated at fair value: - - - -

a) internally generated intangible assets - - - -

b) other assets - - - -

Total 5,032 101,897 5,729 103,086

146

13.2 – Intangible assets: annual changes

2007

Goodwill Other intangible assets generated

internally

Other intangible assets other

Total

Finite Indefin. Finite Indefin. A. Opening balance 138,003 3,679 - 2,036 - 143,718

A.1 Total net value reductions 34,917 - - - - 34,917

A.2 Opening balance, net 103,086 3,679 - 2,036 - 108,801

B. Increases 10 643 - 3,366 - 4,019

B.1 Purchases - 643 - 3,366 - 4,009

B.2 Increases in internal intangible assets X - - - - -

B.3 Recoveries X - - - - -

B.4 Positive changes in fair value - to shareholders’ equity X - - - - -

- to the income statement X - - - - -

B.5 Positive exchange rate differences - - - - - -

B.6 Other changes 10 - - - - 10

C. Decreases -1,199 -2,558 - -2,134 - -5,891

C.1 Sales - - - - - -

C.2 Value adjustments - Amortisation X -2,448 - -1,642 - -4,090

- Write-downs + shareholders’ equity X - - - - -

+ income statement -1,199 - - - - -1,199

C.3 Negative changes in fair value - to shareholders’ equity X - - - - -

- to the income statement - - - - - -

C.4 Transfers to non-current assets held for sale . - - - - - -

C.5 Negative exchange rate differences - - - - - -

C.6 Other changes - -110 - -492 - -602

D. Closing balance, net 101,897 1,764 - 3,268 - 106,929

D.1 Total net value adjustments 36,116 2,448 - 1,642 - 40,206

E. Closing balance, gross 138,013 4,212 - 4,910 - 147,135

F. Valuation at cost - - - - - -

Key - Finite: finite life Indefin.: indefinite life

147

SECTION 14 – TAX ASSETS AND LIABILITIES – ITEM 140 UNDER ASSETS AND ITEM 80 UNDER LIABILITIES

14.1 – Deferred tax assets: breakdown

31/12/2007 31/12/2006

IRES Entertaining expenses 249 224

Provisions for claims by bankruptcy liquidators 7,655 9,107

Loans write-down surplus 27,035 24,836

Non-deductible amortisation 2,090 2,501

Other 15,245 7,235

Total 52,274 43,903

IRAP Entertaining expenses 38 35

Provisions for claims by bankruptcy liquidators 555 934

Loans write-down surplus - -

Non-deductible amortisation 402 317

Other 847 320

Total 1,842 1,606

14.2 – Deferred tax liabilities: breakdown

31/12/2007 31/12/2006

IRES

Capital gains 328 249

Goodwill 1,427 1,895

Valuation of trading portfolio shares 180 -

Valuation of AFS portfolio 163 209

Employee Termination Indemnity Fund - discounting 1,404 955

Other 2,117 142

Total 5,619 3,450

IRAP Capital gains 35 28

Goodwill 187 282

Valuation of trading portfolio shares 32 -

Other 1,137 502

Total 1,391 812

As regards both IRES and IRAP, the item "Other" includes deferred tax liabilities contained in the consolidated financial statements for timing differences that arise when the value of an investment in subsidiaries, associates and companies subject to joint control differs from the related tax base. In particular, deferred tax liabilities of EUR 1.4 million were recorded (EUR 0.6 million for IRES and EUR 0.8 million for IRAP).

148

14.3 – Changes in deferred tax assets (as a balancing entry in the income statement)

2007 2006 1. Opening balance 45,123 66,228

2. Increases 18,613 28,507

2.1 Prepaid taxes recorded during the year 18,603 28,506

a) relative to previous periods 2 -

b) due to changes in accounting criteria - -

c) recoveries 81 -

d) other 18,520 28,506

2.2 New taxes or increases in tax rates - -

2.3 Other increases 10 1

3. Decreases -10,950 -49,612

3.1 Prepaid taxes cancelled during the year -684 -39,858

a) reversals -684 -39,413

b) write-downs of unrecoverable amounts - -445

b) due to changes in accounting criteria - -

3.2 Reduction in tax rates -7,036 -

3.3 Other decreases -3,230 -9,754

4. Closing balance 52,786 45,123

14.4 - Changes in deferred taxes (as a balancing entry in the income statement)

2007 2006 1. Opening balance 3,788 17,994

2. Increases 11,832 2,425

2.1 Deferred taxes recorded during the year 2,899 2,425

a) relative to previous periods - -

b) due to changes in accounting criteria - -

c) other 2,899 2,425

2.2 New taxes or increases in tax rates 1,486 -

2.3 Other increases 7,447 -

3. Decreases -8,772 -16,631

3.1 Deferred taxes cancelled during the year -4,816 -13,839

a) reversals -4,226 -13,839

b) due to changes in accounting criteria - -

c) other -590 -

3.2 Reduction in tax rates -3,254 -

3.3 Other decreases -702 -2,792

4. Closing balance 6,848 3,788

149

14.5 – Changes in deferred tax assets (as a balancing entry to shareholders’ equity)

2007 2006 1. Opening balance 386 -

2. Increases 944 386

2.1 Prepaid taxes recorded during the year 944 386

a) relative to previous periods - -

b) due to changes in accounting criteria - 45

c) other 944 341

2.2 New taxes or increases in tax rates - -

2.3 Other increases - -

3. Decreases - -

3.1 Prepaid taxes cancelled during the year - -

a) reversals - -

b) write-downs of unrecoverable amounts - -

b) due to changes in accounting criteria - -

3.2 Reduction in tax rates - -

3.3 Other decreases - -

4. Closing balance 1,330 386

14.6 – Changes in deferred taxes (as a balancing entry to shareholders’ equity)

2007 2006 1. Opening balance 474 111

2. Increases 39 363

2.1 Deferred taxes recorded during the year 39 363

a) relative to previous periods - -

b) due to changes in accounting criteria - -

c) other 39 363

2.2 New taxes or increases in tax rates - -

2.3 Other increases - -

3. Decreases -351 -

3.1 Deferred taxes cancelled during the year - -

a) reversals - -

b) due to changes in accounting criteria - -

c) other - -

3.2 Reduction in tax rates -351 -

3.3 Other decreases - -

4. Closing balance 162 474

150

SECTION 16 – OTHER ASSETS – ITEM 160

16.1 – Other assets: breakdown

31/12/2007 31/12/2006Amounts due from the tax authorities for withholdings on interest paid to customers and other amounts due 75,239 67,626

Cheques drawn on the bank to be settled 56,370 94,079

Counterparts for securities and coupon payments to be received 5,630 18,415

Sundry items to be debited to customers and banks 135,850 32,251

Value date differences on portfolio transactions 1,131 673

Real estate inventory 17,944 19,359

Costs and advances pending financial allocation 3,694 2,883

Refurbishment of third-party buildings 16,569 13,709

Accruals other than those capitalised 134 118

Sundry and residual items 72,415 77,654

Total 384,976 326,767

151

LIABILITIES

SECTION 1 – DUE TO BANKS – ITEM 10

1.1 - Due to banks: breakdown by type

Type of transaction/Amounts 31/12/2007 31/12/20061. Due to central banks - -

2. Due to banks 848,452 967,762

2.1 Current accounts and unrestricted deposits 110,421 34,478

2.2 Restricted deposits 520,584 932,265

2.3 Loans 160 1,019

2.3.1 Finance lease - -

2.3.2 other 160 1,019

2.4 Payables for commitments to repurchase own equity instruments - -

2.5 Liabilities for assets sold and not cancelled from the balance sheet 217,156 -

2.5.1 funding repurchase agreements 217,156 -

2.5.2 other - -

2.6 Other payables 131 -

Total 848,452 967,762

Fair value 848,506 967,581

SECTION 2 – DUE TO CUSTOMERS – ITEM 20

2.1 - Due to customers: breakdown by type

Type of transaction/Amounts 31/12/2007 31/12/20061 Current accounts and unrestricted deposits 7,719,822 7,473,556

2 Restricted deposits 20,663 8,183

3 Public funds administered - -

4. Loans 899,207 676,004

4.1 finance leases - -

4.2 other 899,207 676,004

5 Payables for commitments to repurchase own equity instruments - -

6. Liabilities for assets sold and not cancelled from the balance sheet 1,123,802 862,671

6.1 funding repurchase agreements 1,123,802 862,671

6.2 other - -

7. Other payables 95,427 75,982

Total 9,858,921 9,096,396

Fair value 9,857,556 9,036,295

Item 4.2 “Loans other” refers to deposit repurchase agreements.

152

SECTION 3 – SECURITIES ISSUED – ITEM 30

3.1 - Securities issued: breakdown by type

Type of security/Amounts 31/12/2007 31/12/2006 BV FV BV FV A. Listed securities 1,579,216 1,566,784 1,347,061 1,349,369

1. Bonds 1,579,216 1,566,784 1,347,061 1,349,369

1.1 structured - - 119,539 119,292

1.2 other 1,579,216 1,566,784 1,227,522 1,230,077

2. Other securities - - - -

2.1 structured - - - -

2.2 other - - - -

B. Unlisted securities 2,270,519 2,260,184 1,630,242 1,623,120

1 Bonds 2,111,005 2,100,670 1,438,419 1,431,294

1.1 structured 1,019 982 20,643 20,962

1.2 other 2,109,986 2,099,688 1,417,776 1,410,332

2. Other securities 159,514 159,514 191,823 191,826

2.1 structured - - - -

2.2 other 159,514 159,514 191,823 191,826

Total 3,849,735 3,826,968 2,977,303 2,972,489

Key: BV = book value FV = fair value

3.2 – Analysis of item 30 "Securities issued" subordinated securities

The above bonds include the subordinated bond issues “Credito Valtellinese 2003/2013 EMTN”, “Credito Valtellinese 2005/ 2015 EMTN”, “Credito Artigiano 2003/2009 TV”, “Credito Artigiano 2007/2012 subordinato” and "Credito Artigiano 2006/2011 subordinato" for a total book value of EUR 499,944 thousand.

153

SECTION 4 – FINANCIAL LIABILITIES HELD FOR TRADING – ITEM 40

4.1.- Financial liabilities held for trading: breakdown by type

Type of security/Amounts 31/12/2007 31/12/2006

NV FV FV* NV FV FV* Q NQ Q NQ A. Cash liabilities 1. Due to banks - - - - - - - -

2. Due to customers - - - - - - - -

3. Debt securities - - - X - - - X 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 - - - - - - - -

B. Derivatives 1. Financial derivatives: X 220 7,930 X X - 6,789 X 1.1 Trading X 220 7,930 X X - 6,789 X

1.2 Connected with fair value option X - - X X - - X

1.3 Other X - - X X - - X 2. Credit derivatives X - - X X - - X 2.1 Trading X - - X X - - X

2.2 Connected with fair value option X - - X X - - X

2.3 Other X - - X X - - X Total B X 220 7,930 X X - 6,789 X Total (A+B) X 220 7,930 X X - 6,789 X

Key: FV = fair value FV* = fair value calculated by excluding the variations in value due to changes in the issuer’s creditworthiness with respect to the issue date. NV = nominal or notional value Q= quoted NQ= Not quoted

154

4.4.- Financial liabilities held for trading: derivatives

Types of derivatives/Underlying assets Interest rates

Currencies and gold

Equity securitie

s Loans Other 31/12/2007 31/12/2006

A) Listed Derivatives 1) Financial derivatives: - with exchange of capital 239 - 10 - - 249 -

- options issued - - - - - - -

- other derivatives 239 - 10 - - 249 -

- without exchange of capital - - - - - - -

- options issued - - - - - - -

- other derivatives - - - - - - -

2) Credit derivatives: - with exchange of capital - - - - - - -

- without exchange of capital - - - - - - -

Total A 239 - 10 - - 249 -

B) Unlisted Derivatives 1) Financial derivatives: - with exchange of capital 25 6,607 - - - 6,632 2,919

- options issued - - - - - - -

- other derivatives 25 6,607 - - - 6,632 2,919

- without exchange of capital 803 - 466 - - 1,269 3,870

- options issued - - 466 - - 466 2,057

- other derivatives 803 - - - - 803 1,813

2) Credit derivatives: - with exchange of capital - - - - - - -

- without exchange of capital - - - - - - -

Total B 828 6,607 466 - - 7,901 6,789

Total (A+B) 1,067 6,607 476 - - 8,150 6,789

SECTION 8 – TAX LIABILITIES – ITEM 80

See section 14 under assets.

155

SECTION 10 – OTHER LIABILITIES – ITEM 100

10.1 Other liabilities: breakdown

31/12/2007 31/12/2006 Amounts due to the tax authorities for indirect taxes - 2,591

Amounts due to social security and welfare institutions 8,313 8,264

Amounts due to public entities on behalf of third parties 50,011 31,393

Sundry items to be debited to customers and banks 143,745 175,838

Amounts available to customers 52,314 43,191

Amounts payable to employees 22,078 16,196

Value date differences on portfolio transactions 198,321 132,052

Items in transit between branches 3,644 4,153

Guarantees given 669 582

Accruals other than those capitalised 4,086 2,437

Negative value of management contracts - -

Payables related to the supply of goods and services 35,136 29,041

Sundry and residual items 107,939 113,739

Total 626,256 559,477

SECTION 11 – EMPLOYEE TERMINATION INDEMNITIES – ITEM 110

11.1 – Employee termination indemnities: annual changes

2007 2006 A. Opening balance 55,218 55,629

B. Increases 11,086 8,883

B.1 Provision for the year 11,010 8,576

B.2 Other increases 76 307

C. Decreases -13,135 -9,294

C.1 Indemnities paid -4,887 -3,061

C.2 Other decreases -8,248 -6,233

D. Closing balance 53,169 55,218

The employee termination indemnity may be included among the defined benefit plans not directly financed. This amount has been actuarially calculated, for all Group Companies, in accordance with the “Projected Unit Credit Method” and using the following actuarial hypotheses:

- Personnel turnover rate equal to 3%; - Discount rate equal to 4.5%; - Inflation rate equal to 2%.

Following the enactment of the new supplementary welfare reform pursuant to legislative Decree no. 252/05 the Employee termination indemnity is reported as specified in the Notes to the financial statements (Part A.2 – Main items in the financial statements). This change gave rise to a decrease in the amount of the Indemnity (curtailment), with a contra item being recorded in the income statement, of EUR 536 thousand.

156

SECTION 12 – PROVISIONS FOR RISKS AND CHARGES – ITEM 120

12.1 - Provisions for risks and charges: breakdown

Items/Amounts 31/12/2007 31/12/2006

1. Company pension funds 32,738 33,600

2. Other provisions for risks and charges 34,954 31,097

2.1 legal disputes 28,429 28,397

2.2 personnel expenses 3,066 -

2.3 other 3,459 2,700

Total 67,692 64,697

12.2 - Provisions for risks and charges: annual changes

2007

Items/Amounts Pension funds

Other funds

A. Opening balance 33,600 31,097

B. Increases 1,400 11,043

B.1 Provision for the year 1,400 11,043

B.2 Changes over time - -

B.3 Variations due to changes in the discount rate - -

B.4 Other changes - -

C. Decreases -2,262 -7,186

C.1 Utilisation in the year -2,262 -7,186

C.2 Variations due to changes in the discount rate - -

C.3 Other changes - -

D. Closing balance 32,738 34,954

12.3 - Defined benefit company pension funds

12.3.1 – Description of pension funds

The defined benefit company pension funds, which do not feature autonomous and separate management, consist of a provision for the commitment undertaken by Credito Valtellinese S.c., by Credito Artigiano S.p.A., by Bankadati S.l. S.p.a and by Stelline S.l. S.p.a towards their retired employees, and for what regards Credito Artigiano S.p.A., towards the employees that have opted for the defined benefit annuity option. Since 31 December 2003 there have been no new entries. The amount allocated represents the estimated actuarial debt, which amounted to EUR 43,990 thousand as at 31 December 2007. The actuarial calculation is performed at each year end with the collaboration of an actuary.

157

12.3.2 – Changes in pension funds during the period

As at 31 December 2006, the present value of defined benefit liability was equal to EUR 45,167 thousand. During the period under review a total of EUR 2,897 thousand benefits were disbursed, interest expense matured amounted to EUR 1,975 thousand and the actuarial gains calculated amounted to EUR 179 thousand. The outstanding liability as at 31 December 2007, equal to EUR 43,990 thousand, derives from non-directly funded plans for EUR 32,738 thousand, and from a directly funded plan, relative to retired personnel of Credito Artigiano S.p.A., for EUR 11,252 thousand. Attention is drawn to the fact that the defined benefit plan set up for Credito Artigiano S.p.A., in accordance with the provisions of IAS 19 is not highlighted under balance sheet assets, nor is it included in the related tables of the Notes to the financial statements as it is set off against the corresponding plan assets.

12.3.3 - Changes during the year in pension plan assets and other information

As at 31 December 2006, the assets allocated directly to the defined benefit pension plan of Credito Artigiano S.p.A. amounted to EUR 11,568 thousand . They have been used during the year to pay pension benefits for a total of EUR 712 thousand. Considering the return on plan management, equal to EUR 233 thousand, and the contribution paid by the company, equal to EUR 163 thousand as at 31 December 2007 , the assets amount to EUR 11,252 thousand. The breakdown is as follows: bond and equity securities for EUR 11,193 thousand, and liquidity for EUR 59 thousand.

12.3.5 - Description of the main actuarial hypotheses

The current value of the mathematical reserve of the retired employees is equal to the current actuarial value of the pension that they will be paid in the future, considering the possibility of reversion. The value of the assets mathematical reserve is equal to the current actuarial value of the future benefits, net of the product of the current actuarial value of the future benefits and the set contribution percentage. The technical bases used are as follows:

- Interest rate – 4.5%; - remuneration increase rate – 1.5%; - Demographic base – IPS55.

12.3.6 – Comparatives

As at 31 December 2007 the estimated actuarial debt amounts to EUR 43,990 thousand compared to EUR 45,167 thousand in 2006 and EUR 39,412 thousand in 2005. As at 31 December 2007 the assets allocated to the directly funded defined-benefit plan amount to EUR 11,252 thousand compared to EUR 11,568 thousand in 2006 and to EUR 10,829 thousand in 2005.

SECTION 15 - GROUP EQUITY – ITEMS 140, 160, 170, 180, 190, 200 AND 220

15.1 - Group equity: breakdown

Items/Amounts 31/12/2007 31/12/20061. Capital 562,061 272,914

2 Share premium reserve 738,631 323,023

3. Reserves 118,084 93,432

4. (Treasury shares) a) Parent Bank -1,338 -761

b) subsidiaries - -

5. Valuation reserves 73,444 123,929

6 - Equity instruments: - 708

7. Net income (loss) for the year pertaining to the group 85,773 68,614

Total 1,576,655 881,859

158

15.2 - "Share capital" and "Treasury shares": breakdown

In April, the conversion of the third and final tranche of the “Credito Valtellinese 2.8% 20042007 convertible” bond loan resulted in the issue of 16,087,885 new ordinary shares, with a par value of EUR 3 each, and a consequent increase in share capital of EUR 48,264 thousand. In May, following the share capital increase resolved by the Extraordinary Shareholders’ Meeting of Credito Valtellinese on 10 February 2007, the nominal value of each share in issue was increased by EUR 0.5 through reserves for EUR 53,530 thousand. In June 53,416,567 new shares of EUR 3.5 nominal value each were issued in connection with the exercise of the option rights at the end of the offer period (21 May – 22 June 2007), whilst in July 113,021 new shares were issued in relation to the rights that had remained unexercised. Thus, at the end of the financial year the share capital of Credito Valtellinese. fully subscribed and paid - amounted to EUR 562,061 thousand, and was made up of 160,588,764 shares of EUR 3.5 nominal value each.

15.3 - Share capital – number of shares of the Parent company: annual changes

2007 Items/Types Ordinary Other A. Shares at the beginning of the year - fully paid-up 90,971,291 -

- not fully paid up - -

A.1 Treasury shares (-) -64,646 -

A.2 Shares issued: opening balance 90,906,645 -

B. Increases 70,380,094 -

B.1 New issues 69,617,473 -

- against payment: 69,617,473 -

- business combinations - -

- conversion of bonds 16,087,885 -

- exercising of warrants - -

- other 53,529,588 -

- free: - -

- on behalf of employees - -

- on behalf of directors - -

- other - -

B.2 Sale of treasury shares 762,621 -

B.3 Other changes - -

C. Decreases -817,692 -

C.1 Cancellation - -

C.2 Purchase of treasury shares -817,692 -

C.3 Disposals of companies - -

C.4 Other changes - -

D. Shares issued: closing balance 160,469,047 -

D.1 Treasury shares (+) 119,717 -

D.2 Shares outstanding at the end of the year 160,588,764 -

- fully paid-up 160,588,764 -

- not fully paid-up - -

159

15.5 - Profit reserves: other information

The item “Profit reserves” includes the Legal Reserve (allocated pursuant to the laws in force), the Statutory reserve (allocated pursuant to an option provided by the articles of association, which derives its funds from the profits exceeding the legal reserve and dividend distribution), other reserves and the Consolidation reserves (deriving from consolidation effects).

15.6 - Valuation reserves: breakdown

Items/Amounts 31/12/2007 31/12/2006

1 - Financial assets available for sale 11,662 8,617

2. Property, plant and equipment - -

3. Intangible assets - -

4. Hedging of foreign investments - -

5. Cash flow hedging - -

6. Exchange rate differences - -

7. Non-current assets and discontinued operations - -

8. Special revaluation laws 61,782 115,312

Total 73,444 123,929

15.7 - Valuation reserves: annual changes

2007

Financial

assets available for sale

Property, plant and

equipmentIntangible

assets Hedging of

foreign investments

Cash flow hedging

Exchange rate

differences

Non current assets and

discontinued operations

Special revaluation

laws

A. Opening balance 8,617 - - - - - - 115,312

B. Increases 3,045 - - - - - - -

B.1 Increases in fair value 3,045 - - - - - - X B.2 Other changes - - - - - - - -

C. Decreases - - - - - - - -53,530

C.1 Decreases in fair value - - - - - - - X C.2 Other changes - - - - - - - -53,530

D. Closing balance 11,662 - - - - - - 61,782

160

15.8 – Valuation reserves for financial assets available for sale: breakdown

Asset/Amounts 31/12/2007 31/12/2006

Positive reserve

Negative reserve

Positive reserve

Negative reserve

1. Debt securities - - - -

2. Equity securities 11,662 - 8,617 -

3. Quotas of UCI - - - -

4. Loans - - - -

Total 11,662 - 8,617 -

15.9 – Valuation reserves for financial assets available for sale: annual changes

2007

Debt securities

Equity securities Quotas of UCI Loans

1. Opening balance - 8,617 - -

2. Positive changes - 3,045 - -

2.1 Increases in fair value - 3,045 - -

2.2 Transfer of negative reserves to the income statement: - from impairment - - - -

- on disposal - - - -

2.3 Other changes - - - -

3. Negative changes - - - -

3.1 Decreases in fair value - - - -

3.2 Adjustments from impairment - - - -

3.3 Transfer of positive reserves to the income statement: on disposal - - - -

3.4 Other changes - - - -

4. Closing balances - 11,662 - -

SECTION 16 – MINORITY INTERESTS – ITEM 210

16.1 - Minority interests: breakdown

Items/Amounts 31/12/2007 31/12/2006

1. Capital 81,347 82,331

2 Share premium reserve 45,922 50,390

3. Reserves 48,272 32,870

4. (Treasury shares) - -

5. Valuation reserves 25,052 25,427

6 - Equity instruments - -

7. Net income (loss) for the period pertaining to third parties 16,341 12,513

Total 216,934 203,531

161

16.2 - Valuation reserves: breakdown

Items/Amounts 31/12/2007 31/12/20061 - Financial assets available for sale -28 -34

2. Property, plant and equipment: - -

3. Intangible assets - -

4. Hedging of foreign investments - -

5. Cash flow hedging - -

6. Exchange rate differences - -

7. Non-current assets and discontinued operations - -

8. Special revaluation laws 25,080 25,461

Total 25,052 25,427

16.4 – Valuation reserves for financial assets available for sale: breakdown

31/12/2007

Asset/Amounts Positive reserve

Negative reserve

1. Debt securities - -

2. Equity securities - -28

3. Quotas of UCI - -

4. Loans - -

Total - -28

16.5 - Valuation reserves: annual changes

2007

Financial

assets available for

sale

Property, plant and

equipment Intangible

assets Hedging of

foreign investments

Cash flow hedging

Exchange rate

differences

Non current assets held for sale and discontinue

d operations

Special revaluation

laws

A. Opening balance -34 - - - - - - 25,461

B. Increases 6 - - - - - - -

B1. Increases in fair value 6 - - - - - - X B2. Other changes - - - - - - - -

C. Decreases - - - - - - - -381

C1. Decreases in fair value - - - - - - - X C2. Other changes - - - - - - - -381

D. Closing balance -28 - - - - - - 25,080

162

OTHER INFORMATION

1. – Guarantees given and commitments

Transactions 31/12/2007 31/12/20061) Financial guarantees a) Banks - -

b) Customers 94,070 81,658

2) Commercial guarantees a) Banks 84,934 62,126

b) Customers 1,051,877 929,877

3) Irrevocable commitments to grant finance a) Banks i) certain to be called on 40,057 44,977

ii) not certain to be called on 22,831 47,457

b) Customers i) certain to be called on 88,188 41,267

ii) not certain to be called on 798,727 496,402

4) Commitments underlying credit derivatives: sales of protection - -

5) Assets lodged to guarantee third-party obligations - -

6) Other commitments 222,731 222,697

Total 2,403,415 1,926,461

2 – Assets lodged to guarantee the Bank’s liabilities and commitments

Portfolios 31/12/2007 31/12/20061. Financial assets held for trading 1,030,208 1,050,600

2. Financial assets designated at fair value - -

3 - Financial assets available for sale - -

4 - Financial assets held to maturity - -

5. Due from banks 747,556 -

6. Loans to customers - -

7. Property, plant and equipment: - -

3 - Information on operating leases

In terms of operating leases, the Group acts solely as lessee. The counterparties in the main operating lease contracts stipulated by Group companies, which cannot be cancelled, are the following: - Overlease S.r.l., for car rental, in respect of which minimum future payments due within one year

amount to EUR 782 thousand, after one to five years amount to EUR 1,040 thousand; no amounts are due after more than five years. Additional costs of between EUR 39 and EUR 160 per 1,000 Km are envisaged for some of these contracts if the maximum mileage indicated in the contract is exceeded.

- Pitney Bowes Italia S.r.l. for the leasing of stamping and envelope sealing machines, with the following minimum future payments:

a. EUR 24 thousand within one year b. EUR 60 thousand after one to five years c. No payment due after more than five years.

163

- Cicrespi S.p.A. and C.A.S.T. di Randazzo F.M. for the leasing of banknote counting machines, with the following minimum future payments:

a. EUR 46 thousand within one year b. EUR 66 thousand after one to five years c. No payment due after more than five years.

- Sundry suppliers, for the leasing of photocopiers, in respect of which minimum future payments due are as follows: EUR 230 thousand within one year, EUR 103 thousand after one to five years and no amounts due after more than five years, with the option to have the equipment replaced in case of wear and tear. For all these contracts, in 2007 minimum payments totalling EUR 1,115 thousand were recorded as costs.

5 - Administration and trading on behalf of third parties

Type of service 31/12/2007 31/12/20061. Trading of financial instruments on behalf of third parties

a) Purchases 1. settled - -

2. unsettled - -

b) Sales 1. settled 19 11

2. unsettled - -

2. Asset management

a) individual 4,170,553 4,416,422

b) collective - -

3. Custody and administration of securities

a) third-party securities held on deposit: when acting as custodian bank (excluding asset management)

1. Securities issued by companies included in the scope of consolidation - -

2. other securities - -

b) other third-party securities held on deposit (excluding asset management): other 1. Securities issued by companies included in the scope of consolidation 2,071,604 1,694,598

2. other securities 4,586,843 4,720,878

c) third-party securities deposited with third parties 6,547,266 6,828,327

d) portfolio securities deposited with third parties 1,737,955 1,426,250

4. Other transactions 1,308,335 1,420,132

164

PART C – INFORMATION ON THE CONSOLIDATED INCOME STATEMENT

SECTION 1 – INTEREST – ITEMS 10 AND 20

1.1 - Interest income and similar income: breakdown

Items/Technical forms

Performing

financial

assets

Impaired

financial

assets

Other assets 2007 2006 Change

%

Debt securities Loans

1. Financial assets held for trading 16,370 - - 200 16,570 6,588 151.52%

2. Financial assets designated at fair value - - - - - - -

3 - Financial assets available for sale - - - - - - -

4 - Financial assets held to maturity - - - - - - -

5. Due from banks 1,460 21,836 - 12 23,308 26,512 -12.09%

6. Loans to customers 21 750,941 8,444 - 759,406 543,565 39.71%

7 - Hedging derivatives: X X X - - 197 -100.00%

8. Financial assets sold and not cancelled 41,647 - - - 41,647 23,605 76.43%

9. Other assets X X X 1,089 1,089 978 11.35%

Total 59,498 772,777 8,444 1,301 842,020 601,445 40.00%

1.2 - Interest income and similar income: differentials relative to hedging transactions

Items/Sectors 2007 2006 Change %

A. Positive differentials relative to following transactions: -

A.1 Assets fair value hedging - - -

A.2 Liabilities fair value hedging - - -

A.3 Interest rate risk macro-hedging - 331 -100.00%

A.4 Asset cash flow hedging - - -

A.5 Liabilities cash flow hedging - - -

A.6 Cash flow macro-hedging - - -

Total positive differentials (A) - 331 -100.00%

B. Negative differentials relative to the following transactions: -

B.1 Assets fair value hedging - - -

B.2 Liabilities fair value hedging - - -

B.3 Interest rate risk macro-hedging - (134) -100.00%

B.4 Assets cash flow hedging - - -

B.5 Liabilities cash flow hedging - - -

B.6 Cash flow macro-hedging - - -

Total negative differentials (B) - (134) -100.00%

C. Balance (A-B) - 197 -100.00%

165

1.3 - Interest income and similar income: other information

1.3.1 - Interest income on financial assets in foreign currency

2007 2006 Change %

Interest on foreign currency assets 21,319 15,368 38.72%

1.3.2 - Interest income on finance lease transactions

2007 2006 Change %

Interest on finance lease transactions 44,900 31,952 40.52%

1.4 - interest expense and similar expenses: breakdown

Items/Technical forms Payables Securities

Other liabiliti

es 2007 2006 Change

%

1. Due to banks (27,932) X - (27,932) (28,538) -2.12%

2. Due to customers (170,099) X - (170,099) (136,586) 24.54%

3. Securities issued X (134,922) - (134,922) (84,017) 60.59%

4. Trading liabilities - - (152) (152) (210) -27.62%

5. Financial liabilities designated at fair value - - - - - -

6. Financial liabilities for assets sold and not cancelled (62,941) - - (62,941) (4,719) 1233.78%

7. Other liabilities X X - - - -

8. Hedging derivatives: X X - - - -

Total (260,972) (134,922) (152) (396,046) (254,070) 55.88%

1.6 - Interest expense and similar expenses: other information

1.6.1 - Interest expense on foreign currency liabilities

2007 2006 Change %

Interest on foreign currency liabilities (5,699) (8,534) -33.22%

166

SECTION 2 – FEES AND COMMISSIONS – ITEMS 40 AND 50

2.1 - Fee and commission income: breakdown

Type of service/Sector 2007 2006 Change %

a) guarantees given 6,979 6,339 10.10%

b) credit derivatives - - -

c) management, dealing and consulting services: 67,356 68,053 -1.02%

1. trading of financial instruments 31 16 93.75%

2. currency dealing 5,086 4,701 8.19%

3. Asset management 37,408 38,197 -2.07%

3.1 individual 35,866 36,880 -2.75%

3.2 collective 1,542 1,317 17.08%

4. Custody and administration of securities 1,112 1,134 -1.94%

5. custodian bank - - -

6. placement of securities 5,288 6,250 -15.39%

7. collection of orders 7,758 6,826 13.65%

8. consultancy services 771 1,192 -35.32%

9. distribution of services to third parties 9,902 9,737 1.69%

9.1. Asset management - - -

9.1.1 individual - - -

9.1.2 collective - - -

9.2 insurance products 9,902 9,737 1.69%

9.3 other products - - -

d) collection and payment services 45,349 47,202 -3.93%

e) servicing services for securitisation transactions - - -

f) factoring transaction services - - -

g) tax collection services 3,550 867 309.46%

h) other services 88,424 85,520 3.40%

Total 211,658 207,981 1.77%

Commission income shown under item “h) other services” refer to commissions on current accounts and deposits of EUR 46,866 thousand, commissions credit transactions of EUR 29,156 thousand and commissions on other transactions of 12,402 thousand.

167

2.2 - Fee and commission income: distribution channels of products and services

Channels/Amounts 2007 2006 Change %

a) at Bank branches: 49,194 50,399 -2.39%

1. asset management 35,725 36,288 -1.55%

2. placement of securities 3,847 4,526 -15.00%

3. third-party products and services 9,622 9,585 0.39%

b) outside bank branches: - - -

1. asset management - - -

2. placement of securities - - -

3. third-party products and services - - -

c) other distribution channels: 3,750 3,785 -0.92%

1. asset management 1,683 1,909 -11.84%

2. placement of securities 1,788 1,724 3.71%

3. third-party products and services 279 152 83.55%

2.3 - Fee and commission expense: breakdown

Services/Sectors 2007 2006 Change %

a) guarantees received (36) (64) -43.75%

b) credit derivatives - - -

c) management and dealing services (946) (1,493) -36.64%

1. trading of financial instruments - (58) -100.00%

2. currency dealing (385) (383) 0.52%

3. Asset management: - - -

3.1 own portfolio - - -

3.2 third party portfolio - - -

4. custody and administration of securities (561) (535) 4.86%

5. placement of financial instruments - (517) -100.00%

6. offer outside banking premises of financial instruments, products and services - - -

d) collection and payment services (14,913) (14,148) 5.41%

e) other services (3,103) (2,111) 46.99%

Total (18,998) (17,816) 6.63%

168

SECTION 3 – DIVIDENDS AND SIMILAR INCOME – ITEM 70

3.1 - Dividends and similar income: breakdown

2007 2006 Change %

Items/Income DividendsIncome

from quotas of

UCI Dividends

Income from

quotas of UCI

Dividends Income

from quotas of UCI

A. Financial assets held for trading 475 - 3 - 15700.00% -

B. Financial assets available for sale 1,178 - 1,177 - -3.40% -

C. Financial assets designated at fair value - - - - - -

D. Investments in associates and companies subject to joint control - X - X - X

Total 1,653 - 1,180 - 40.08% -

SECTION 4 – PROFITS (LOSSES) ON TRADING ACTIVITIES – ITEM 80

4.1 - Profits (losses) on trading activities: breakdown

Transactions/Income components Capital gains (A)

Profit ontrading

(B)

Capital losses

(C)

Losses on

trading (D)

Net profit (loss)

[(A+B)-(C+D)]

1. Financial assets held for trading 1,176 13,486 (6,804) (1,071) 6,787

1.1 Debt securities 241 11,342 (5,874) (528) 5,181

1.2 Equity securities - 1,153 (865) (533) (245)

1.3 Quotas of UCI 935 991 (65) (10) 1,851

1.4 Loans - - - - -

1.5 Other - - - - -

2. Trading liabilities - - - - -

2.1 Debt securities - - - - -

2.2 Payables - - - - -

2.3 Other - - - - -

3. Other financial assets and liabilities: exchange rate differences X X X X 2,265

4. Derivatives 3,440 10,914 (2,495) (11,639) 1,161

4.1 Financial derivatives: - On debt securities and interest rates 2,974 10,914 (2,029) (11,639) 220

- On equity securities and share indices 466 - (466) - -

- On currencies and gold X X X X 941

- Other - - - - -

4.2 Credit derivatives - - - - -

Total 4,616 24,400 (9,299) (12,710) 10,213

169

SECTION 5 – PROFITS (LOSSES) ON TRADING ACTIVITIES – ITEM 90

5.1 - Fair value adjustments in hedge accounting: breakdown

Income components/Amounts 2007 2006 Change %

A. Income from: A.1 Fair value hedges - - -

A.2 Financial assets with fair value hedges - - -

A.3 Financial liabilities with fair value hedges - 161 -100.00%

A.4 Financial derivatives for cash flow hedges - - -

A.5 Assets and liabilities denominated in foreign currencies - - -

Total income from hedging activities (A) - 161 -100.00%

B. Charges from:

B.1 Fair value hedges - (147) -100.00%

B.2 Financial assets with fair value hedges - - -

B.3 Financial liabilities with fair value hedges - - -

B.4 Financial derivatives for cash flow hedges - - -

B.5 Assets and liabilities denominated in foreign currencies - - -

Total charges from hedging activities (B) - (147) -100.00%

C. Fair value adjustments in hedge accounting (A-B) - 14 -100.00%

SECTION 6 - PROFIT (LOSS) FROM DISPOSALS/REPURCHASES - ITEM 100

6.1 – Profit (loss) from disposals/repurchases: breakdown

2007 2006 Change %

Items/Income components Profits Losses Net

result Profits Losses Net result Profits Losses Net

result Financial assets 1. Due from banks - - - - - - - - -

2. Loans to customers - - - - (93) (93) - -100.00% -100.00%

3 - Financial assets available for sale

3.1 Debt securities - - - - - - - - -

3.2 Equity securities 8 - 8 3,288 - 3,288 -99.76% - -99.76%

3.3 Quotas of UCI - - - - - - - - -

3.4 Loans - - - - - - - - -

4 - Financial assets held to maturity - - - - - - - - -

Total assets 8 - 8 3,288 (93) 3,195 -99.76% -100.00% -99.75%

Financial liabilities 1. Due to banks - - - - - - - - -

2. Due to customers - - - - - - - - -

3. Securities issued 556 - 556 400 (165) 235 39.00% -100.00% 136.60%

Total liabilities 556 - 556 400 (165) 235 39.00% -100.00% 136.60%

170

SECTION 8 – NET LOSSES/RECOVERIES ON IMPAIRMENT – ITEM 130

8.1 - Net losses/recoveries on impairment of loans: breakdown

Value

adjustm.

Recoveries 2007 2006

Transactions/Income components Specific Portfolio Specific - Portfolio

Cancellation Other A B A B

A. Due from banks - - - - - - 104 104 (116)

B. Loans to customers (7,955) (91,973) (15,329) 22,026 16,791 340 958 (75,142) (57,991)

C. Total (7,955) (91,973) (15,329) 22,026 16,791 340 1,062 (75,038) (58,107)

Key A = from interest B = other recoveries

Transactions/Income components 2007 2006 Change %

A. Due from banks 104 (116) -189,66%

B. Loans to customers (75.142) (57.991) 29,58%

C. Total (75.038) (58.107) 29,14%

8.4 - Net losses/recoveries on impairment of other financial transactions: breakdown

Value adjust

m. Recove

ries 2007 2006

Transactions/Income components Specific Portfolio Specific Portfolio

Cancellation Other A B A B

A. Guarantees given - (194) (19) - 85 - 41 (87) 29

B. Credit derivatives - - - - - - - - -

C. Commitments to grant finance - - - - - - - - -

D. Other transactions - - - - - - - - -

E. Total - (194) (19) - 85 - 41 (87) 29

Key A = from interest B = other recoveries

Transactions/Income components 2007 2006 Change %

A. Guarantees given (87) 29 -400.00%

B. Credit derivatives - - -

C. Commitments to grant finance - - -

D. Other transactions - - -

E. Total (87) 29 -400.00%

171

SECTION 11 – ADMINISTRATIVE EXPENSES - ITEM 180

11.1 - Personnel expenses: breakdown

Type of expense/Amounts 2007 2006 Change %

1) Employees (228,729) (216,759) 5.52%

a) wages and salaries (141,806) (129,625) 9.40%

b) social security charges (40,635) (42,744) -4.93%

c) termination indemnity (3,497) (1,776) 96.90%

d) pension expenses - - -

e) provision to termination indemnities (10,879) (9,957) 9.26%

f) provision to the pension fund and similar commitments: -

- defined contribution - - -

- defined benefit (1,499) (8,141) -81.59%

g) payments to external supplementary pension funds: -

- defined contribution (5,783) (4,622) 25.12%

- defined benefit - - -

h) costs from equity payments - - -

i) other employee benefits (24,630) (19,894) 23.81%

2) Other personnel (1,279) (1,227) 4.24%

3) Directors (6,055) (5,004) 21.00%

Total (236,063) (222,990) 5.86%

The individual items relative to employees include the share of costs relative to staff seconded from other companies.

11.2 - Average number of employees by category

2007 2006 Employees: 3,418 3,307

a) executives 55 51

b) total middle managers 1,079 1,019

- 3rd and 4th level 511 477

c) other employees 2,284 2,237

Other staff 130 143

Total 3,548 3,450

11.3 - Defined benefit company pension funds: total costs

The total costs for the year amount to EUR 1,796 thousand and include interests for EUR 1,975 thousand and actuarial gains for EUR 179 thousand.

172

11.5 – Other administrative expenses: breakdown

2007 2006 Change %

Fees for professional and consultancy services (17,456) (14,726) 18.54%

Statutory auditors’ fees (1,039) (656) 58.38%

Insurance premiums (3,558) (3,600) -1.17%

Advertising (6,856) (6,103) 12.34%

Postage, telegraph and telephone (11,906) (10,000) 19.06%

Print and stationery (1,704) (2,124) -19.77%

Maintenance and repairs (3,588) (3,482) 3.04%

Data processing services (11,722) (10,084) 16.24%

Hardware lease rentals (72) (970) -92.58%

Electricity, heating and shared property service charges (7,203) (7,223) -0.28%

Charges for miscellaneous services provided by third parties (19,081) (18,431) 3.53%

Cleaning costs (3,530) (4,029) -12.39%

Transport and travel (1,553) (1,434) 8.30%

Security and transport of valuables (7,866) (7,583) 3.73%

Membership fees (1,765) (1,555) 13.50%

Independent auditors’ fees (1,245) (1,280) -2.73%

Commercial information and searches (4,996) (4,409) 13.31%

Subscriptions to newspapers, magazines and publications (641) (634) 1.10%

Rents payable (15,794) (13,943) 13.28%

Entertaining expenses (1,676) (1,534) 9.26%

Taxes and dues (39,917) (36,841) 8.35%

Contractual charges for cash management services (1,754) (1,683) 4.22%

Training costs (2,284) (1,940) 17.73%

Miscellaneous items (3,140) (4,197) -25.18%

Total (170,346) (158,461) 7.50%

SECTION 12 – NET PROVISIONS FOR RISKS AND CHARGES – ITEM 190

12.1 - Net provisions for risks and charges: breakdown

Items 2007 2006 Change %

Provision for legal disputes and claims from liquidators (4,551) (7,783) -41.53%

Provision for sundry risks and charges (1,914) (874) 118.99%

Total (6,465) (8,657) -25.32%

173

SECTION 13 – NET ADJUSTMENTS TO/RECOVERIES ON PROPERTY, PLANT AND EQUIPMENT – ITEM 200

13.1 - Net adjustments to property, plant and equipment: breakdown

2007

Assets/Income components Depreciation (a)

Value adjustm.

Recoveries (c)

Net profit (loss)

on

impairment (b)

(a+b-c)

A. Property, plant and equipment A.1 Owned - Used in the business (19,230) - - (19,230)

- For investment (133) - - (133)

A.2 Acquired through a finance lease - Used in the business - - - -

- For investment - - - -

Total (19,363) - - (19,363)

SECTION 14 – NET ADJUSTMENTS TO/RECOVERIES ON INTANGIBLE ASSETS – ITEM 210

14.1 - Net adjustments to Intangible assets: breakdown

2007

Assets/Income components Amortisation (a)

Value adjustm.

Recoveries (c)

Net profit (loss)

on

impairment (b)

(a+b-c)

A. Intangible assets A.1 Owned - generated internally (2,448) - - (2,448)

- Other (1,642) - - (1,642)

A.2 Acquired through a finance lease - - - -

Total (4,090) - - (4,090)

SECTION 15 - OTHER OPERATING INCOME AND EXPENSES - ITEM 220

15.1 - Other operating expenses: breakdown

2007 2006 Change %

Depreciation of leasehold improvements (5,997) (5,806) 3.29%

Other charges (3,036) (5,775) -47.43%

Total (9,033) (11,581) -22.00%

174

15.2 - Other operating income: breakdown

2007 2006 Change %

Rentals receivable 1,044 1,129 -7.53%

Income from data processing services 5,185 3,325 55.94%

Income from other services 1,043 876 19.06%

Recovery of indirect taxes 30,751 27,552 11.61%

Recovery of insurance policy payments 1,622 1,683 -3.62%

Recovery of legal and notarial costs 6,229 5,884 5.86%

Other income 9,501 16,129 -41.10%

Total 55,375 56,578 -2.13%

SECTION 16 – PROFIT (LOSSES) ON INVESTMENTS IN ASSOCIATES AND COMPANIES SUBJECT TO JOINT CONTROL - ITEM 240

16.1 - Profit (loss) on investments in associates and companies subject to joint control breakdown

Income components/Amounts 2007 2006 Change %

1) Companies subject to joint control A. Income 1,739 1,831 -5.02%

1.Revalutations 1,739 1,831 -5.02%

2. - Profit from disposals - - -

3. Recoveries - - -

4. Other positive changes - - -

B. Charges - - -

1. Write-downs - - -

2. Losses on impairment - - -

3. Losses from disposals - - -

4. Other negative changes - - -

Net profit (loss) 1,739 1,831 -5.02%

2) Companies subject to significant influence A. Income 11,590 11,419 1.50%

1.Revalutations 11,568 11,419 1.30%

2. Profit from disposals 22 - -

3. Recoveries - - -

4. Other positive changes - - -

B. Charges - - -

1. Write-downs - - -

2. Losses on impairment - - -

3. Losses from disposals - - -

4. Other negative changes - - -

Net profit (loss) 11,590 11,419 1.50%

Total 13,329 13,250 0.60%

175

SECTION 18 - GOODWILL IMPAIRMENT – ITEM 260

18.1 Goodwill impairment: breakdown

2007 2006 Change %

Creset (1,199) - -

Total (1,199) - -

SECTION 19 - PROFIT (LOSSES) ON DISPOSAL OF INVESTMENTS - ITEM 270

19.1 - Profit (losses) on disposal of investments: breakdown

Income components/Amounts 2007 2006 Change %

A. Property - - Profit from disposals 228 562 -59.43%

- Losses from disposals (13) - -

B. Other assets - Profit from disposals 120 64 87.50%

- Losses from disposals (46) (11) 318.18%

Net profit (loss) 289 615 -53.01%

SECTION 20 – TAXES ON INCOME FROM CONTINUING OPERATIONS – ITEM 290

20.1 - Taxes on income from continuing operations: breakdown

Income components/Amounts 2007 2006 Change %

1. Current taxes (-) (100,821) (62,780) 60.59%

2. Changes in current taxes of prior periods (+/-) (41) (261) -84.29%

3. Reduction in current taxes for the year (+) - - -

4. Change in prepaid taxes (+/-) 7,663 (21,105) -136.31%

5. Change in deferred taxes (+/-) (3,060) 14,206 -121.54%

6. Income taxes for the yea (-) (-1 +/-2 +3 +/-4 +/-5) (96,259) (69,940) 37.63%

176

20.2 – Reconciliation between theoretical tax expense and actual tax expense - IRES

2007 Income (loss) before tax from continuing operations 198,373

Profit (loss) from groups of discontinued operations -

Taxable income 198,373

Theoretical tax expense - IRES (65,462)

Effect of non-deductible negative components of income (10,596)

Effect of non-taxable positive components of income 6,606

Actual tax expense - IRES (69,452)

- on continuing operations (69,452)

- on groups of discontinued operations -

The negative and positive income components also include the reduction of prepaid and deferred taxes deriving from the reduction in the IRES rate from 33% to 27.5% introduced by the 2008 Finance Act (Law no. 244/07).

20.2 – Reconciliation between theoretical tax expense and actual tax expense - IRAP

2007 Profit (loss) before tax from continuing operations 198,373

Profit (loss) from groups of discontinued operations -

Taxable income 198,373

Theoretical tax expense - IRAP (10,340)

Effect of non-deductible negative components of income (17,063)

Effect of non-taxable positive components of income 1,690

Effect of lower tax rates (1,094)

Actual tax expense - IRAP (26,807)

- on continuing operations (26,807)

- on groups of discontinued operations -

The negative and positive income components also include the effect of the reduction of prepaid and deferred taxes deriving from the reduction in the IRAP rate from 5.25% to 3.9% introduced by the 2008 Finance Act (Law no. 244/07).

177

SECTION 21 - INCOME (LOSS) FROM GROUPS OF DISCONTINUED OPERATIONS (AFTER TAX) – ITEM 310

21.1 - Income (loss) from groups of assets/liabilities associated with discontinued operations (after tax): breakdown

Income components/Sectors 2007 2006 Change %

Group of assets/liabilities

1. Income - 25 -100.00%

2. Charges - (87) -100.00%

3. Result of the valuation of the group of assets and associated liabilities - - -

4. Profit (loss) on disposal - 1,109 -100.00%

5. Taxes and dues - (4) -100.00%

Profit (loss) - 1,043 -100.00%

21.2 – Breakdown of income taxes related to groups of assets/liabilities assets/liabilities associated with discontinued operations

2007 2006 Change %

1. Current taxation (-) - (4) -100.00%

2. Change in prepaid taxes (+/-) - - -

3. Change in deferred taxes (+/-) - - -

4. Income taxes for the year (-1+/-2 +/-3) - (4) -100.00%

SECTION 22 – MINORITY INTERESTS – ITEM 330

22.1 – breakdown of item 330 “Minority interests”

The main components concern the following investee companies:

2007 2006 Change %

Credito Artigiano (13,068) (9,826) 32.99%

Credito Siciliano (1,731) (832) 108.05%

Banca dell’Artigianato e dell’Industria (141) 192 -173.44%

Mediocreval (1,137) (1,334) -14.77%

Bancaperta (398) (830) -52.05%

Other 134 117 14.53%

178

SECTION 24 – EARNINGS PER SHARE

The basic earnings per share and diluted earnings per share are calculated according to the methods described in IAS 33 – Earnings per share. The basic earnings per share are defined as the profit or loss attributable to ordinary equity holders divided by the weighted average number of ordinary shares outstanding during the period. The diluted earnings per share are calculated taking into account also the dilutive effects of the conversion of the potential ordinary shares, defined as financial instruments that attribute to the holder the right to obtain ordinary shares. As a result, for the purposes of the calculation, the numerator and denominator of the ratio are adjusted to take account of the effects of additional shares which would be outstanding in case of conversion of all the potential ordinary shares with dilutive effects. The following table displays the basic earnings per share.

2007 2006

Attributable profit 82,463 66,078

Weighted average number of ordinary shares 130,347,319 87,226,387

Basic earnings per share 0.63 0.76 The diluted earnings per share also take account of the potential ordinary shares resulting from the share capital increase carried out in the first half of the year. In particular, reference is made to the warrants issued (warrants expiring on 30 April 2008 and on 30 April 2009), the "bonus share" owed to the subscribers of the share capital increase (a new share will be assigned free of charge for every 10 shares subscribed and held uninterruptedly until 12 July 2008). The following table displays the diluted earnings per share.

2007 2006

Adjusted attributable profit 82,463 68,326

Weighted average number of ordinary shares 147,521,227 103,362,287

Diluted earnings per share 0.56 0.66

179

PART D – SEGMENT REPORTING IAS 14 establishes principles for reporting financial information by segment (information about the different types of products and services an entity produces and the different geographical areas in which it operates) to help users of financial statements:

- better understand the entity’s past performance; - better assess the entity’s risks and returns; - make more informed judgements about the entity as a whole.

Standard 14 requires that an entity provide segment information through a primary and a secondary format. The dominant source and nature of an entity’s risks and returns governs whether its primary segment reporting format will be business segments or geographical segments. If the entity’s risks and rates of return are affected predominantly by differences in the products and services it produces, its primary format for reporting segment information shall be business segments, with secondary information reported geographically. Similarly, if the entity’s risks and rates of return are affected predominantly by the fact that it operates in different countries or other geographical areas, its primary format for reporting segment information shall be geographical segments, with secondary information reported for business segments. A business segment is a distinguishable component of an entity that is engaged in providing an individual product or service or a group of related products or services and that is subject to risks and returns that are different from those of other business segments. Factors that shall be considered in determining whether products and services are related include:

- the nature of the products or services; - the nature of the production processes; - the type or class of customer for the products or services; - the methods used to distribute the products or provide the services; - if applicable, the nature of the regulatory environment, for example, banking, insurance, or public

utilities. A geographical segment is a distinguishable component of an entity that is engaged in providing products or services within a particular economic environment and that is subject to risks and returns that are different from those of components operating in other economic environments. The factors that should be considered in identifying the geographical sectors include:

- similarity of economic and political conditions; - relationships between the various geographical areas; - proximity of operations; - special risks associated with operations in a particular area; - exchange control regulations; - the underlying currency risks.

A detailed analysis of both the specificities of the Credito Valtellinese Banking Group and of IAS 14 brought to the identification of business segment for the primary reporting format. The geographical distribution of business activities, deemed less significant in comparison with the analysis by business segment, was identified as secondary reporting format. The segment-related financial information has been disclosed according to the following criteria:

- if the whole activity of an entity of the Group was entirely ascribable to a specific business segment, the accounts of the entity have been included in such business segment, net of the consolidation entries of the entity;

- if the whole activity of an entity of the Group was ascribable to different business segments, the accounts of the entity have been divided and included in such business segments, net of the consolidation entries of the entity.

- the interest margin of the segments has been determined using applicable internal rates of transfer.

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A. PRIMARY REPORTING FORMAT The Credito Valtellinese Group carries out its banking activities mainly in the retail segment (households, trades, professionals, small- and medium-sized companies) and offers a wide and developed range of products and services in the payment system and asset management segments. The central functions (administration, planning and control, risk management, marketing, HR, organisation, auditing) and the production activities are delegated to special purpose companies that provide support services to the banking activity, especially as regards IT, communication technology and real estate management. The specialisation and the univocality of each Group entity’s mission allow the assignment of each company or its divisions to a specific segment. Consistently with the management approach, the activity of the Group can be ascribed to the following three business segments:

1. Retail banking; 2. Asset management; 3. Corporate center.

In the report by business segment, the most significant segment is represented by the four territorial banks (Credito Valtellinese, Credito Artigiano, Credito Siciliano, Banca dell’Artigianato e dell’Industria) and by Mediocreval, whose activities may be ascribed almost entirely to the Retail Banking segment. The Asset Management segment includes the activities of Aperta SGR and the revenues from asset management of the territorial banks. The Corporate Center segment includes activities of the Group’s special purpose companies, the treasury's activities, the management of strategic investments and the management of impaired loans.

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A.1 – A.2 Breakdown by business segment: economic and financial figures The following table displays a summary of the economic and financial figures of the business segments described above. Business segments

Figures in thousands of Euro Retail banking Asset management Corporate center Consolidated

2007 2006 Change %

2007 2006 Change % 2007 2006 Change %

2007 2006 Change %

INCOME STATEMENT DATA Interest margin17 410,658 343,769 19.5% - - - 35,316 3,606 879.4% 445,974 347,375 28.4% Net fee and commission income 162,780 162,551 0.1% 29,876 27,620 8.2% 4 -6 -166.7% 192,660 190,165 1.3% Other revenues - - - - - - 12,430 27,044 -54.0% 12,430 27,044 -54.0% Net interest and other banking income

573,438 506,320 13.3% 29,876 27,620 8.2% 47,750 30,644 55.8% 651,064 564,584 15.3%

Net losses for impairment -73,075 -57,474 27.1% - - - -2,050 -604 239.4% -75,125 -58,078 29.4% Net income from banking activities 500,363 448,846 11.5% 29,876 27,620 8.2% 45,700 30,040 52.1% 575,939 506,506 13.7% Operating expenses -319,213 -310,058 3.0% -3,856 -3,502 10.1% -66,916 -56,787 17.8% -389,985 -370,347 5.3% Other income and charges 289 589 -50.9% - - - 12,130 13,276 -8.6% 12,419 13,865 -10.4% Income (loss) before tax from continuing operations

181,439 139,377 30.2% 26,020 24,118 7.9% -9,086 -13,471 -32.6% 198,373 150,024 32.2%

BALANCE SHEET FIGURES Loans to customers 13,629,004 11,314,896 20.5% 544 574 -5.2% 124,785 130,315 -4.2% 13,754,333 11,445,785 20.2% Due from banks - - - - - - 760,025 879,784 -13.6% 760,025 879,784 -13.6% Treasury securities and investments in associates and companies subject to joint control

- - - - - - 1,556,539 1,503,517 3.5% 1,556,539 1,503,517 3.5%

Direct deposits 13,708,656 12,073,699 13.5% - - - - - - 13,708,656 12,073,699 13.5% - Due to customers 9,858,921 9,096,396 8.4% - - - - - - 9,858,921 9,096,396 8.4% - Securities issued 3,849,735 2,977,303 29.3% - - - - - - 3,849,735 2,977,303 29.3%

Due to banks - - - - - - 848,452 967,762 -12.3% 848,452 967,762 -12.3%

ORGANISATIONAL FIGURES Personnel 2,964 2,777 6.7% 22 20 10.0% 493 536 -8.0% 3,479 3,333 4.4%

17 The significant rise in interest margin reported by the corporate segment is attributable to the capital increase resolved by the Extraordinary Shareholders' Meeting of 10 February 2007

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Retail banking Retail banking is the core business of the Group, as it includes all the (lending, investment and transfer) products and services offered to the customers of the Group, traditionally represented by households, trades, professionals and small- and medium-sized enterprises. Consequently, the income statement and balance sheet aggregates of this segment are largely ascribable to the territorial banks of the Group. During 2007, the Retail Banking segment generated net interest and other banking income for EUR 573.4 million, a 13.3% increase compared with the previous year’s figure. The segment accounts for 88.1% of the net interest and other banking income of the Group. The revenues in the segment were mainly driven by the interest margin, which registered a significant growth (+19.5%). The operating expenses amounted to EUR 319.2 million (+3%) and a strengthened territorial network. The income (loss) before tax from continuing operations amounted to EUR 181.4 million, an increase of 30.2%. At year end, the Retail banking segment had 389 branches, compared to 368 at the end of 2006. The human resources employed in the segment were 2,964, equal to 85.2% of the total employees of the Group. The direct deposits of the Retail Banking segment amounted to EUR 13,708.7 million, a 13.5% increase. Indirect deposits reached EUR 12,371.3 million (- 1.9%). Also loans to customers registered a strong performance (+20.5%), equal to EUR 13,629.0 million.

Figures in thousands of Euro Retail banking 2007 2006 Change %

INCOME STATEMENT FIGURES

Interest margin 410,658 343,769 19.5%Net fee and commission income 162,780 162,551 0.1%Other revenues - - -Net interest and other banking income 573,438 506,320 13.3%Net losses for impairment -73,075 -57,474 27.1%Net income from banking activities 500,363 448,846 11.5%Operating expenses -319,213 -310,058 3.0%Other income and charges 289 589 -50.9%Income (loss) before tax from continuing operations 181,439 139,377 30.2%

BALANCE SHEET FIGURES

Loans to customers 13,629,004 11,314,896 20.5%Direct deposits 13,708,656 12,073,699 13.5% - Due to customers 9,858,921 9,096,396 8.4% - Securities issued 3,849,735 2,977,303 29.3%Indirect deposits 12,137,335 12,370,896 -1.9%Total deposits 25,845,991 24,444,595 5.7%

ORGANISATIONAL FIGURES

Personnel 2,964 2,777 6.7%Branches 389 368 5.7%

Asset management The Asset Management segment includes the managed savings products offered both to the retail customers (distributed through the territorial banking network of the Group) and to the institutional investors. The segment includes the activities of Aperta SGR and the revenues of the territorial banks deriving from the offer of managed savings products. During the period the Asset Management segment generated net interest and other banking income for EUR 29.9 million (+8.2%), accounting for 4.6% of the Group net interest and other banking income, and registered Income before tax from continuing operations for EUR 26.0 million (+7.9%).

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At year end, assets under management stood at EUR 4,565.0 million, an increase of 0.8% compared to EUR 4,528.2 million at the end of 2006.

Business segments

Figures in thousands of Euro Asset management 2007 2006 Change

%INCOME STATEMENT FIGURES

Interest margin - - -Net fee and commission income 29,876 27,620 8.2%Other revenues - - -Net interest and other banking income 29,876 27,620 8.2%Net losses for impairment - - -Net income from banking activities 29,876 27,620 8.2%Operating expenses -3,856 -3,502 10.1%Other income and charges - - -Income (loss) before tax from continuing operations 26,020 24,118 7.9%

BALANCE SHEET FIGURES

Managed assets 4,565,018 4,528,154 0.8% - collective 359,697 256,839 40.0% - individual 4,205,321 4,271,315 -1.5%

ORGANISATIONAL FIGURES

Personnel 22 20 10.0%

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Corporate center The Corporate Center comprises the central functions performed for the benefit of the whole Group and, to a lesser extent, of third parties. The scope of the segment includes revenues generated from the treasury securities portfolio and profits from investments. The segment includes the activities of the Group’s special purpose companies. During 2007, the Corporate center segment generated net interest and other banking income for EUR 47.8 million (+55.8%) accounting for 7.3% of the Group’s net interest and other banking income. The performance of this component benefited from the positive trend of the net interest margin. Operating expenses stood at EUR 66.9 million. The result of the segment was EUR -9.1 million, compared to -13.5 million of the previous period. The improvement is due to the positive trend in revenues. At year end, the amount of “Due from banks” for the segment amounted to EUR 760.0 million (-13.6%), while the amount of “Due to banks” was equal to EUR 848.5 million (-12.3%). Investments in securities and in associates and companies subject to joint control amounted to EUR 1,556.5 million (+3.5%). The human resources employed in the Corporate center were 493, equal to 14.2% of the Group’s employees.

Business segments

Figures in thousands of Euro Corporate center 2007 2006 Change

%INCOME STATEMENT FIGURES

Interest margin 35,316 3,606 879.4%Net fee and commission income 4 -6 -166.7%Other revenues 12,430 27,044 -54.0%Net interest and other banking income 47,750 30,644 55.8%Net losses for impairment -2,050 -604 239.4%Net income from banking activities 45,700 30,040 52.1%Operating expenses -66,916 -56,787 17.8%Other income and charges 12,130 13,276 -8.6%Income (loss) before tax from continuing operations

-9,086 -13,471 -32.6%

BALANCE SHEET FIGURES

Loans to customers 124,785 130,315 -4.2%Due from banks 760,025 879,784 -13.6%Treasury securities and investments in associates and companies subject to joint control

1,556,539 1,503,517 3.5%

Due to banks 848,452 967,762 -12.3%

ORGANISATIONAL FIGURES

Personnel 493 536 -8.0%

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B. SECONDARY REPORTING FORMAT The Credito Valtellinese Group operates in Northern and Central Italy (branch network of the Parent Company, of Credito Artigiano and Banca dell'Artigianato e dell’Industria) and in Southern Italy (branch network of Credito Siciliano). The Group does not include foreign branches. The results have been broken down according to the site of the branches, which substantially reflects the actual location of the clientele in the markets covered by the banks of the Group. Therefore, the income statement and balance sheet data of Southern Italy are mainly ascribable to the activities of Credito Siciliano, while the geographical segment Northern and Central Italy includes the results of the other territorial banks of the Group, and of the special purpose companies. B.1 – B.2 Breakdown by geographical areas: economic and financial figures The following table displays the income statement and balance sheet figures of the geographical segments described above.

Geographical segments

Figures in thousands of Euro

Northern and Central Italy Southern Italy Consolidated

2007 2006 Change %

2007 2006 Change %

2007 2006 Change %

INCOME STATEMENT FIGURES

Interest margin 338,617 264,612 28.0% 107,357 82,763 29.7% 445,974 347,375 28.4%Net fee and commission income

145,414 143,315 1.5% 47,246 46,850 0.8% 192,660 190,165 1.3%

Other revenues 11,631 23,054 -49.5% 799 3,990 -80.0% 12,430 27,044 -54.0%Net interest and other banking income

495,662 430,981 15.0% 155,402 133,603 16.3% 651,064 564,584 15.3%

BALANCE SHEET FIGURES

Loans to customers 11,532,027 9,603,133 20.1% 2,222,306 1,842,652 20.6% 13,754,333 11,445,785 20.2%

Due from banks 740,666 857,504 -13.6% 19,359 22,280 -13.1% 760,025 879,784 -13.6%

Treasury securities 1,338,294 1,274,127 5.0% 16,555 62,560 -73.5% 1,354,849 1,336,687 1.4%

Direct deposits 11,299,073 9,841,822 14.8% 2,409,583 2,231,877 8.0% 13,708,656 12,073,699 13.5% - Due to customers 7,671,767 7,058,294 8.7% 2,187,154 2,038,102 7.3% 9,858,921 9,096,396 8.4% - Securities issued 3,627,306 2,783,528 30.3% 222,429 193,775 14.8% 3,849,735 2,977,303 29.3%

Due to banks 844,691 966,351 -12.6% 3,761 1,411 166.5% 848,452 967,762 -12.3%

Indirect deposits 10,633,489 10,865,392 -2.1% 1,503,846 1,505,504 -0.1% 12,137,335 12,370,896 -1.9%

Total deposits 21,932,562 20,707,214 5.9% 3,913,429 3,737,381 4.7% 25,845,991 24,444,595 5.7%

ORGANISATIONAL FIGURES

Personnel 2,673 2,487 7,5% 806 846 -4,7% 3,479 3,333 4,4%Branches 253 232 9,1% 136 136 0,0% 389 368 5,7%

Northern and Central Italy During 2007, the Northern and Central segment generated net interest and other banking income for EUR 495.7 million, a 15.0% increase compared with the previous year’s figure. The segment accounts for 76.1%

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of the net interest and other banking income of the Group. The revenues in the segment were mainly driven by the interest margin, which registered a significant growth (+28.0%). At year end, the segment had 253 branches, compared to 232 of the previous year. The human resources employed in the segment were 2,673, equal to 76.8% of the total employees of the Group. The direct deposits of the segment rose by 14.8% reaching EUR 11,299.1 million. Indirect deposits reached EUR 10,633.5 million (-2.1%). Loans to customers amounted to EUR 11,532.0 million (+20.1%). Southern Italy During 2006, the Southern segment generated net interest and other banking income for EUR 155.4 million (16.3% compared with 2006) accounting for 23.9% of the Group’s net interest and other banking income. The trend of revenues was mainly driven by the positive performance of the interest margin. At the end of 2007, the segment operated through 136 branches. The human resources employed in the segment were 846, equal to 23.2% of the total employees of the Group. The direct deposits of the segment rose by 8.0% reaching EUR 2,409.6 million. Indirect deposits reached EUR 1,504 million (-0.1%). Also loans to customers registered a strong performance (20.6%), equal to EUR 2,222.3 million.

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PART E – INFORMATION ON RISKS AND HEDGING POLICIES

SECTION 1 – RISKS OF THE BANKING GROUP

The clear identification of risks to which the Group is potentially exposed constitutes the essential prerequisite for a knowledgeable assumption of said risks and their effective management, making use of the appropriate mitigation and transfer tools and techniques. Careful risk management, based on criteria of prudence and implemented within a specific organisational sphere, aims to limit the volatility of expected results In line with its focus on retail banking, the Group is mainly exposed to credit risk. The set of internal rules, operating procedures and control structures established to oversee company risks is structured according to a model that integrates control methods at various levels, all converging with the objectives of ensuring efficiency and effectiveness of operating processes, safeguarding integrity of corporate assets, protecting from losses, ensuring reliability and integrity of information and verifying proper execution of activities with respect to the internal and external regulation. Controls may be of various types, namely:

- line controls, aimed at ensuring proper execution of transactions, normally incorporated into the procedures or attributed to the productive structures and carried out as part of back office activities;

- controls on risk management, assigned to structures other than the productive ones, aimed at defining risk measurement methods, verifying respect of assigned powers and control of the consistency of operations within the single areas with the risk-return objectives assigned;

- internal auditing controls, aimed at identifying anomalous trends and violations of procedures and regulations, as well as evaluation of the functions of the overall internal control systems, attributed, also through on-site inspections, continuously, periodically or, in exceptional cases, to independent structures outside of the operating units.

The entire internal auditing system is periodically verified by the Boards of Directors and the Internal Control Committees set up with the aim of constantly adjusting operating strategies and processes as well as evaluating business risks.

SECTION 1 – CREDIT RISK Qualitative information 1. General aspects The attention paid to the development of the territorial areas where the Group operates continues to be the feature of its credit activity, particular care being given to all those sectors, such as tourism and real estate, which guarantee a sound base for a significant improvement of the local production framework. The aggregate in question is represented by households and SMEs which absorb a good share of the loans granted by the Group. 2. Credit risk management policies 2.1 Organisational aspects The organisational structure of the credit area, parallel at the various territorial banks of the Group, is distributed over the sales network with hierarchically ascending powers and competences towards central structures in order to take advantage of the local knowledge while maintaining more and more specialist competences within the central structures. Thus, every loan proposal is formulated by bodies within the territorial network, which then complete the related decision-making procedure. Applications for larger credit

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lines, differentiated also on the basis of risk, are automatically forwarded to central structures, which decide on a case-by-case basis. In this perspective, all the credit lines files which are dealt with by the Executive Committee and the Board of Directors of the various banks, in addition to any particularly important topic related to lending issues, are systematically and compulsorily monitored by the Credit Risk Management Department of Mediocreval, the Group company managing credit risk, which expresses a mandatory though not binding opinion. On the other hand, the new mission assigned to Mediocreval has led to a different allocation of the Group Credit Risk Management which, form 1 January 2008 has started operating within the Parent Bank which, as prescribed by the banking supervision rules, houses the management, coordination and verification functions that are responsible for ensuring that the rules on capital adequacy, risk mitigation and internal control of the whole Group are complied with. The new management has been assigned the task of managing the quality of assets for the whole Group, defining the policies and criteria that are necessary for assessing and managing credit risks. This organisational change has been matched by a change in the composition of the Credit Committee of the Group which has the task of allowing Credito Valtellinese, as the Parent Bank, to supervise the credit activity of controlled banks, by carrying out controls and giving instructions to optimise the type and extent of credit risks that the Group is exposed to. As regards the control function assigned to the parent banks of the banking groups by current legal regulations, the implementation of the resolutions passed by the Boards of Directors of the banks of the Group with regard to new credit lines granted or changes to existing credit lines exceeding the limits set for each Bank, is expected to be subordinated to a congruence opinion by the Executive Committee of Credito Valtellinese. The Board of Directors of each Bank, the only body authorised to grant powers, is regularly informed during its meetings on the exercise of delegated powers and the performance of the most significant loans (including anomalously performing loans and doubtful loans). Furthermore, the Board of Directors of Credito Valtellinese, as the Parent Bank’s body, also extends its examination to the loans of the entire Group. Any performance anomalies can be identified through advanced IT systems which are extremely versatile and easy to use. Particularly serious omissions can lead to normal operations being halted until these are clearly outlined, the relevant bodies have been notified and the competent functions have authorised them. The Risk Control Department of the Loans Department of each Bank is responsible for managing of at-risk loans (falling in the “watchlist”, “substandard” and “restructured” loan categories) and ensure that these files are adequately monitored. In order to guarantee the highest level of objectivity in the assessment, the Loans Department reports to the General Management of the bank autonomously and independently from the Sales Department. On the other hand, worthy of notice are some significant changes which, from 1 January 2008, applied to the territorial banks, where inspection activities, already assigned to the Risk Control Department of the Loans Departments, have now been assigned to the Inspection Services of the banks. Following such changes, the Credit Performance Management Department (the new name of the Risk Control Department), relieved of the line tasks previously carried out, may assist the network in managing anomalous positions better and directly, whilst the Inspection Service, that is not involved in managing activities, may report directly to the general Management and the Board of Statutory Auditors (with the possibility of joining the inspections on operating risk and those on loans). The two services will be preferential contacts and will follow the guidelines of the Auditing Department and the New Group Credit Risk Management Department and their collaboration will allow the coordination of the various operating units and harmonise Group operations. 2.2. Management, measurement and control systems The factors that enable to evaluate and manage credit risk include all the traditional quantitative (income items, financial statement analysis and internal performance data) and qualitative elements, such as the in-depth knowledge of the customer, the competitive context in which it operates and, especially as far as the corporate segment is concerned, the assessment of management effectiveness. All these evaluation elements are complemented by all the modern databases available to credit operators such as risk centres, sector studies and the scoring of performance analyses.

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High levels of loan fragmentation contribute to keeping the portfolio risk under control. In fact, at year end no consolidated loan exposures could be qualified as major risks according to supervisory regulations. In May 2007 the new corporate rating model became effective. Business customers, defined as the group of counterparties of any legal form which carry out the production and/or sale of goods and services, are divided into two segments:

- corporate, which includes companies with turnover in excess of EUR 5 million or credit lines greater than EUR 250,000. This segment comprises a limited number of counterparties which, however, absorb a significant portion of loans;

- small business, which includes companies with turnover of up to EUR 5 million and credit lines up to EUR 250,000. This segment comprises a high number of counterparties with loans of small amounts.

The model used to assign the rating may be traced back to systems that rely on automation and includes objectified qualitative elements excluding the so-called overrides made by the analysts. This model is structured according to a module-based scheme or partial approach; there are five modules: quantitative analysis of financial statement indicators; trend of the enterprise – Banking Group relationship, enterprise position vis-à-vis the banking system; macro-economic assessments concerning the enterprise activity sector and qualitative analysis of the enterprise. Each module is independent of the other modules and generates a partial assessment score. Depending on the scores obtained in the various enterprise assessments, the enterprise is assigned to a specific rating class. There are 9 rating classes for performing counterparties and a class for defaulting ones. The assignment of the rating is linked to the credit granting process and is triggered upon granting credit facilities or reviewing credit line files. Ratings are automatically reviewed on a monthly basis. Considering that the backtesting activities carried out on the model highlighted a good match between the creditworthiness rating classes and historical default frequencies, the model was considered to be reliable to be used in managing the various credit processing stages. At 31 December 2007, loans to enterprises, which were assigned a rating, represented 81% of loans to customers of the Group. The following chart shows the distribution of the portfolio of loans to enterprises by rating class. Chart 1 - Distribution of loans to enterprises by rating class

4.540

5.948

8.258

10.898 10.977

8.404

4.491

2.050

5.364

1.868

903.942964.503

2.044.595

1.309.376

45.599

2.005.708

1.839.791

1.580.088

868.244

348.143

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12 . 0 0 0

AAA AA A BBB BB B CCC C C C Unr a t e d

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COMPANIES EXPOSURE

Compared to 30 June 2007, the distribution of loans highlights that the portfolio quality has improved. Performance scoring systems ((A.R.I.E.T.E.) have also been in use for some time in order to highlight particularly serious positions and implement simplified procedures to review the credit line of those companies that have passed the strict selection procedures. The entire credit process is constantly monitored and accurately verified. Please note that also this year all the Territorial Banks of the Group passed the test to obtain the quality certification of the “Loan application, granting and management” process which Credito Valtellinese has been awarded since 1995. The

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certification activities entail a constant and stringent verification of the entire lending process, the drafting of documents (Quality Manual and Operating Instructions) adequately examined by top management and distributed to the various departments of the company, as well as the timely updating of controls carried out by the appropriate Loans Department and by the Inspection Service (which reports to the General Management). The aim is to guarantee maximum stringency in the assessment of risk, yet maintaining a streamlined and efficient assessment and management process. Also the ABI PattiChiari Project relating to the average response time for granting credit to SMEs has highlighted, since the very first quarterly publications, the efficiency of the decision-making process used, which sees all the territorial banks constantly ranking first at national level. 2.3 Credit risk mitigation techniques The acquisition of guarantees undergoes a rigorous procedure, which envisages that the employee in charge of the collection can be unambiguously identified and that the formal and substantial validity of the guarantee is assessed, including also the verification of legal capacity required for the assignment. In case of interpretation difficulties, the Group Legal Service becomes involved and provides further verifications or recommendations in order to ensure the necessary legal effectiveness. The control is further reinforced at central level, where the security or the contracts are kept, and periodically sample-checked by the Inspection Service. In the event of pledges, the procedure requires the assessment of only pre-determined and readily liquid elements. In case of mortgages, the assets are evaluated by external experts, possibly employed by other Group companies but who are not involved in the creditworthiness evaluation process. This does not apply to special mortgages or mortgages of small amount. The acceptance of personal guarantees is often preceded by verifications carried out at the competent Property Registry, with the purpose of ascertaining that the property is effectively owned by the guarantor, always taking well into account the fact that the asset in question may suffer a swift and unexpected fall in value. In any case, the guarantees are always treated as an additional element to the credit line file and do not represent the sole basis for granting credit. 2.4 Impaired financial assets As regards impaired loans, that is doubtful and substandard loans, the Group Banks use technical and organisational procedures and homogeneous methodologies that are illustrated below. Substandard loans are identified by the Risk Control Departments of the single banks on the basis of a set of analyses on internal performance indicators (particular attention being paid to positions that are overdue by more than 90/180 days), responses received from the risk centres, sector data and the figures of the financial statements of the borrowers as well as the presence of prejudicial encumbrances. Loans become substandard when so resolved by the Credit Committee of each Bank, normally upon proposal by the Risk Control Department. When passing the resolution, the Committee also decides on the amount of provisions to be made in the financial statements. Likewise, the reversal of a substandard loan to "performing" status is also approved by the Credit Committee of the bank. The decision-making powers granted to the bodies of the individual banks do not apply to substandard and “under control” loans which are managed exclusively by the Boards. Substandard loans are systematically verified by the Risk Control Department, using also a set of checks available on the web, which provides constant support each branch on how to manage relationships and on any actions required to turn substandard loans into performing loans.

In order to support the branches and guarantee the correct application of supervisory regulations, a web-based procedure has been implemented since 2006 with regard to “objective substandard” loans, that is those loans to be repaid by instalments which reach predetermined default parameters. The procedure requires the anomaly to be highlighted in the electronic diary of the concerned corporate functions. If the anomaly is not adequately resolved within six-months, it is gradually transferred from the branches to the up from the to the attention of the area heads and then to the Risk Control Department so that the loan may be properly labelled as "substandard". Moving onto the examination of the management of substandard loans, it is worth noting that said activity, within the Group, is controlled by Finanziaria San Giacomo which, in line with the rationalisation of the credit

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activities of the Group, was assigned the majority of the non-performing loans of Group banks and the management of non-assigned ones. The aim of centralising this specialist activity within a single company was to promote the transfer of the best operating modalities to the various units operating nationwide and generate a significant improvement of the overall management of problem loans. A Legal Dispute Committee has been set up within Finanziaria San Giacomo with the aim of managing, within the delegated powers, any ownership files and expressing a mandatory yet not binding opinion on those falling under the jurisdiction of the Board of Directors, as well as those directly managed by it.

The extent of the provisions to be set up for each doubtful loan is established in accordance with a formal Group policy, approved by the Boards of Directors of the Banks, which indicates, for the various types of doubtful loans classified on the basis of the single procedures, the criteria to be applied in calculating the doubtful amounts. The decision on the amount of the provision made on a case-by-case basis, as well as any changes, is taken by the Credit Committees upon recommendation by the competent functions of Finanziaria San Giacomo. In order to further improve the management of doubtful loans a web-based procedure (W2PEC) was developed to allow the constant monitoring of the status of the single recovery procedures. In particular, it is now possible to monitor the status of doubtful loans by mapping them on the basis of a wealth of selection criteria (amount range, stage of procedures, manager, loan application administrator, generating unit, reference legal advisor, etc.). The monitoring of impaired loans through the aforesaid methodologies helped bring the ratio of net doubtful loans/loans down to 1.4%, that is a rather low and further reducing level compared to 1.6% of the previous year.

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QUANTITATIVE INFORMATION

A. QUALITY OF CREDIT

A.1 IMPAIRED AND PERFORMING POSITIONS: AMOUNTS, VALUE ADJUSTMENTS, TRENDS, ECONOMIC AND TERRITORIAL DISTRIBUTION

A.1.1 Distribution of financial assets by portfolio and credit quality (book values)

Portfolio/Quality Doubtful loans

Substandard loans

Restructured positions

Past-due positions

Country risk

Other assets Total

1. Financial assets held for trading - - - - 29 1,284,531 1,284,560

2 - Financial assets available for sale - - - - - 70,288 70,288

3 - Financial assets held to maturity - - - - - 1 1

4. Due from banks - - - - 35 759,990 760,025

5. Loans to customers 186,582 122,671 4,136 85,575 158 13,355,211 13,754,333

6. Financial assets designated at fair value - - - - - - -

7. Financial assets held for sale - - - - - - -

8 - Hedging derivatives - - - - - - -

Total at 31/12/2007 186,582 122,671 4,136 85,575 222 15,470,021 15,869,207

Total at 31/12/2006 180,401 91,538 1,726 108,838 351 13,279,402 13,662,256

A.1.2 - Distribution of financial assets by portfolio and credit quality (gross and net values)

Portfolio/Quality Impaired assets Other assets Total

Gross exposure

Specific adjustments

Portfolio adjustments

Net exposure

Gross exposure

Portfolio adjustments

Net exposure

(net exposure)

1. Financial assets held for trading - - - - X X 1,284,560 1,284,560

2 - Financial assets available for sale - - - - 70,288 - 70,288 70,288

3 - Financial assets held to maturity - - - - 1 - 1 1

4. Due from banks - - - - 760,040 -15 760,025 760,025

5. Loans to customers 813,062 -414,085 -13 398,964 13,428,730 -73,361 13,355,369 13,754,333

6. Financial assets designated at fair value - - - - X X - -

7. Financial assets held for sale - - - - - - - -

8 - Hedging derivatives - - - - X X - -

Total at 31/12/2007 813,062 -414,085 -13 398,964 14,259,059 -73,376 15,470,243 15,869,207

Total at 31/12/2006 583,802 -201,293 -6 382,503 12,056,440 -64,100 13,279,753 13,662,256

193

A.1.3 - Cash and off-balance sheet exposures to banks: gross and net values

31/12/2007 Gross exposure Value adjustm. adjustments

Value adjustm. adjustments Net exposure

Type of exposure/Amount

A. CASH EXPOSURES a) Doubtful loans - - - -

b) Substandard loans - - - -

c) Restructured loans - - - -

d) Past-due positions - - - -

e) Country risk 50 X -15 35

f) Other assets 986,399 X - 986,399

TOTAL A 986,449 - -15 986,434

B. OFF-BALANCE SHEET EXPOSURES

a) Impaired 13 - -4 9

b) Other 313,486 X -1 313,485

TOTAL B 313,499 - -5 313,494

A.1.4 - Cash exposures to banks: trend of impaired positions and positions exposed to “country risk” (gross value)

2007 Doubtful loans

Substandard loans

Past-due exposures Past-due positions Country risk

Causes/Categories

A. Opening exposure (gross) - - - - 398

- of which: positions sold and not cancelled - - - - -

B. Increases - - - - -

B.1 transfers from performing loans - - - - -

B.2 transfers from other categories of impaired loans - - - - -

B.3 other increases - - - - -

C. Decreases - - - - -348

C.1. transfers to performing loans - - - - -

C.2 write-offs - - - - -

C.3 collections - - - - -348

C.4 gains on disposals - - - - -

C0.5 transfers from other categories of impaired loans - - - - -

C.6 other decreases - - - - -

D. Closing exposure (gross) - - - - 50

- of which: positions sold and not cancelled - - - - -

194

A.1.5 - Cash exposures to banks: trend in total value adjustments

2007 Doubtful loans

Substandard loans

Restructured positions

Past-due exposures Country risk

Causes/Categories

A. Opening total adjustments - - - - 119

- of which: positions sold and not cancelled - - - - -

B. Increases - - - - -

B.1 value adjustments - - - - -

B.2 transfers from other categories of impaired loans - - - - -

B.3 other increases - - - - -

C. Decreases - - - - -104

C.1 recoveries from valuations - - - - -

C.2 recoveries from collections - - - - -104

C.3 write-offs - - - - -

C.4 transfers from other categories of impaired loans - - - - -

C.5 other decreases - - - - -

D. Closing total adjustments - - - - 15

- of which: positions sold and not cancelled - - - - -

A.1.6 - Cash and off-balance sheet exposures to customers: gross and net values

2007 Gross exposure Specific value adjustments Portfolio value adjustments Net exposure Type of exposure/Amount

A. CASH EXPOSURES a) Doubtful loans 584,350 -397,768 - 186,582

b) Substandard loans 137,054 -14,378 -5 122,671

c) Restructured loans 4,268 -126 -6 4,136

d) Past-due positions 87,390 -1,813 -2 85,575

e) Country risk 247 X -60 187

f) Other assets 14,547,554 X -73,301 14,474,253

TOTAL A 15,360,863 -414,085 -73,374 14,873,404

B. OFF-BALANCE SHEET EXPOSURES

a) Impaired 4,283 -638 - 3,645

b) Other 2,095,671 X -26 2,095,645

TOTAL B 2,099,954 -638 -26 2,099,290

195

A.1.7 - Cash exposures to customers: trend of impaired positions and positions exposed to “country risk” (gross value)

2007 Doubtful loans

Substandard loans

Past-due exposures Past-due positions Country

Risk Causes/Categories

A. Opening exposure (gross) 568,826 106,038 1,841 111,095 74

- of which: positions sold and not cancelled - - - - -

B. Increases 117,503 124,896 4,646 76,418 214

B.1 transfers from performing loans 48,073 102,049 3,854 62,927 173

B.2 transfers from other categories of impaired loans 63,680 16,514 - 172 -

B.3 other increases 5,750 6,333 792 13,319 41

C. Decreases -101,979 -93,880 -2,219 -100,123 -41

C.1. transfers to performing loans -172 -12,301 - -61,108 -

C.2 write-offs -68,623 -109 - -383 -

C.3 collections -33,050 -25,748 -67 -16,119 -4

C.4 gains on disposals - - -21 - -

C.5 transfers from other categories of impaired loans - -55,722 -2,131 -22,513 -

C.6 other decreases -134 - - - -37

D. Closing exposure (gross) 584,350 137,054 4,268 87,390 247

- of which: positions sold and not cancelled - - - - -

A.1.8 - Cash exposures to customers: trend in total value adjustments

2007 Doubtful loans

Substandard loans

Past-due exposures

Past-due exposures Country risk

Causes/Categories

A. Opening total adjustments 388,424 14,500 115 2,257 1

- of which: positions sold and not cancelled - - - - -

B. Increases 114,923 12,491 132 1,507 60

B.1 value adjustments 102,065 11,790 126 1,216 60

B.2 transfers from other categories of impaired loans 11,171 339 - 94 -

B.3 other increases 1,687 362 6 197 -

C. Decreases -105,579 -12,608 -115 -1,949 -1

C.1 recoveries from valuations -21,466 -252 -28 -174 -1

C.2 recoveries from collections -16,050 -1,045 -21 -1,078 -

C.3 write-offs -68,061 -153 - -211 -

C.4 transfers from other categories of impaired loans - -11,106 -66 -432 -

C.5 other decreases -2 -52 - -54 -

D. Closing total adjustments 397,768 14,383 132 1,815 60

- of which: positions sold and not cancelled - - - - -

196

A.2 – CLASSIFICATION OF EXPOSURES BASED ON INTERNAL AND EXTERNAL RATINGS

A.2.1 - Distribution of cash and off-balance sheet exposures by external rating class (book values)

In consideration of the composition of the portfolio of loans to customers of the Group, mostly comprised of loans to small and medium-sized companies, family and craft businesses, professionals and households, the distribution of cash and off-balance sheet exposures by external rating class is not significant. The table below highlights the distribution of cash and off-balance sheet exposures to banks by external rating class.

External rating classes No rating Total

Loans AAA/AA- A+/A- BBB+/BBB- BB+/BB- B+/B- Less than B- A. Cash exposures 118,382 188,835 178,316 - - - 500,901 986,434

B. Derivatives 1,447 34 865 - - - 1,324 3,670

B.1 Financial derivatives 1,447 34 865 - - - 1,324 3,670

B.2 Credit derivatives - - - - - - - -

C. Guarantees given - - 71,041 - - - 13,893 84,934

D. Commitments to grant finance 1,599 38 20,120 - - - 203,133 224,890

Total 121,428 188,907 270,342 - - - 719,251 1,299,928

A.3 – DISTRIBUTION OF SECURED LOANS BY TYPE OF GUARANTEE

A.3.1 – Secured cash exposures to banks and customers

31/12/2007 Value of exposure Collateral Total

Property Securities Other assets

1. Secured loans to banks: 1.1 fully secured - - - - -

1.2 partially secured - - - - -

2. Secured loans to customers: 2.1 fully secured 6,799,356 4,881,508 196,438 47,239 5,125,185

2.2 partially secured 576,262 2,555 98,721 8,178 109,454

31/12/2007 Value of exposure Personal guarantees: Credit derivatives Total

Governments

Other public entities Banks Other parties

1. Secured loans to banks: 1.1 fully secured - - - - - -

1.2 partially secured - - - - - -

2. Loans to customers: 2.1 fully secured 6,799,356 - - - - -

2.2 partially secured 576,262 - - - - -

197

31/12/2007 Value of exposure Personal guarantees: Credit commitments Total

Governments

Other public entities Banks Other parties

1. Secured loans to banks: 1.1 fully secured - - - - - -

1.2 partially secured - - - - - -

2. Secured loans to customers: 2.1 fully secured 6,799,356 - 22 10,805 2,714,654 2,725,481

2.2 partially secured 576,262 - 220 1,579 318,122 319,921

31/12/2007 Value of exposure Collateral Personal

guarantees: Credit derivatives

Personal guarantees: Credit

commitments Total

1. Secured loans to banks: 1.1 fully secured - - - - -

1.2 partially secured - - - - -

2. Secured loans to customers: 2.1 fully secured 6,799,356 5,125,185 - 2,725,481 7,850,666

2.2 partially secured 576,262 109,454 - 319,921 429,375

A.3.2 - Secured off-balance sheet exposures to banks and customers

31/12/2007 Value of exposure Collateral Total

Property Securities Other assets

1. Secured loans to banks: 1.1 fully secured 68 - - - -

1.2 partially secured - - - - -

2. Secured loans to customers: 2.1 fully secured 584,863 310,481 35,755 16,663 362,899

2.2 partially secured 36,764 8 16,428 562 16,998

31/12/2007 Value of exposure Personal guarantees: Credit derivatives Total

Governments

Other public entities Banks Other parties

1. Secured loans to banks: 1.1 fully secured 68 - - - - -

1.2 partially secured - - - - - -

2. Secured loans to customers: 2.1 fully secured 584,863 - - - - -

2.2 partially secured 36,764 - - - - -

198

31/12/2007 Value of exposure Personal guarantees: Credit commitments Total

Governments

Other public entities Banks Other parties

1. Secured loans to banks: 1.1 fully secured 68 - - - 68 68

1.2 partially secured - - - - - -

2. Secured loans to customers: 2.1 fully secured 584,863 - - 51,386 220,698 272,084

2.2 partially secured 36,764 - - - 11,845 11,845

31/12/2007 Value of exposure Collateral

Personal guarantees:

Credit derivatives

Personal guarantees:

Credit commitments

Total

1. Secured loans to banks: 1.1 fully secured 68 - - 68 68

1.2 partially secured - - - 68 -

2. Secured loans to customers: 2.1 fully secured 584,863 362,899 - 272,084 634,983

2.2 partially secured 36,764 16,998 - 11,845 28,843

199

A.3.3 - Secured, impaired cash exposures to banks and customers

31/12/2007 Secured exposures to banks: Secured loans to customers:

Beyond 150%

Between 100%

and 150%

Between 50%

and 100% Within 50%

Beyond 150%

Between 100%

and 150% Between 50%

and 100% Within 50%

Value of exposure - - - - 330,154 57,815 18,187 7,565

Amount secured - - - - 355,503 88,887 18,853 3,995

GUARANTEES (FAIR VALUE) Collateral A. Property - - - - 324,331 3,572 - 1,500

B. Securities - - - - 1,245 3,871 1,317 474

C. Other assets - - - - 40 901 1,133 4

Personal guarantees A. Credit derivatives A.1 Governments and Central Banks - - - - - - - -

A.2 Other public entities - - - - - - - -

A.3 Banks - - - - - - - -

A.4 Financial businesses - - - - - - - -

A.5 Insurance companies - - - - - - - -

A.6 Non-financial businesses - - - - - - - -

A.7 Other - - - - - - - -

B. Credit commitments B.1 Governments and Central Banks - - - - - - - -

B.2 Other public entities - - - - 4 - - -

B.3 Banks - - - - - - - -

B.4 Financial businesses - - - - - - - -

B.5 Insurance companies - - - - - - - -

B.6 Non-financial businesses - - - - - - - -

B.7 Other - - - - 29,883 80,543 16,403 2,017

Total - - - - 355,503 88,887 18,853 3,995

Surplus of fair value of guarantee - - - - - - - -

200

A.3.4 – Secured, impaired “off-balance” sheet exposures to banks and customers

31/12/2007 Secured exposures to banks: Secured loans to customers:

Beyond 150%

Between 100%

and 150%

Between 50% and

100% Within 50%

Beyond 150%

Between 50% and

100%

Between 50% and

100% Within 50%

Value of exposure - - - - 19 8,425 208 3,146

Amount secured - - - - 19 10,786 205 1,353

GUARANTEES (FAIR VALUE) Collateral A. Property - - - - - 6,099 - -

B. Securities - - - - 4 16 16 22

C. Other assets - - - - - 331 - -

Personal guarantees A. Credit derivatives A.1 Governments and Central Banks - - - - - - - -

A.2 Other public entities - - - - - - - -

A.3 Banks - - - - - - - -

A.4 Financial businesses - - - - - - - -

A.5 Insurance companies - - - - - - - -

A.6 Non-financial businesses - - - - - - - -

A.7 Other - - - - - - - -

B. Credit commitments B.1 Governments and Central Banks - - - - - - - -

B.2 Other public entities - - - - - - - -

B.3 Banks - - - - - - - -

B.4 Financial businesses - - - - - - - -

B.5 Insurance companies - - - - - - - -

B.6 Non-financial businesses - - - - - - - -

B.7 Other - - - - 15 4,340 189 1,331

Total - - - - 19 10,786 205 1,353

Surplus of fair value of guarantee - - - - - - - -

201

B. DISTRIBUTION AND CONCENTRATION OF CREDIT

B.1 – Distribution of cash and off-balance sheet exposures to customers by sector

Exposures/Counterparts Governments and Central Banks Other public entities

Gross exposure

Portfolio value

adjustments

Portfolio value

adjustments

Net exposure Gross exposure

Portfolio value

adjustments

Portfolio value

adjustments

Net exposure

A. Cash exposures A.1 Doubtful loans - - - - - - - -

A.2 Substandard loans - - - - - - - -

A.3 Restructured loans - - - - - - - -

A.4 Past-due loans - - - - - - - -

A.5 Other loans 1,048,725 X - 1,048,725 98,566 X -65 98,501

TOTAL 1,048,725 - - 1,048,725 98,566 - -65 98,501

B. Off-balance sheet exposures

B.1 Doubtful loans - - - - - - - -

B.2 Substandard loans - - - - - - - -

B.3 Other impaired assets - - - - - - - -

B.4 Other loans 48,038 X - 48,038 16,702 X - 16,702

TOTAL 48,038 - - 48,038 16,702 - - 16,702

TOTAL 31/12/2007 1,096,763 - - 1,096,763 115,268 - -65 115,203

TOTAL 31/12/2006 1,084,914 - - 1,084,914 116,311 - -23 116,288

Exposures/Counterparts Financial businesses Insurance companies

Gross exposure

Specific value

adjustments

Portfolio adjustment

s Net exposure Gross

exposure

Specific value

adjustments

Portfolio adjustment

s Net exposure

A. Cash exposures A.1 Non-performing loans 1,421 -778 - 643 5 -2 - 3

A.2 Substandard loans 163 -6 - 157 - - - -

A.3 Restructured loans - - - - - - - -

A.4 Past-due loans 150 -3 - 147 - - - -

A.5 Other loans 430,242 X -359 429,883 2,935 X - 2,935

TOTAL 431,976 -787 -359 430,830 2,940 -2 - 2,938

B. Off-balance sheet exposures

B.1 Doubtful loans - - - - - - - -

B.2 Substandard loans - - - - - - - -

B.3 Other impaired assets - - - - - - - -

B.4 Other loans 136,321 X - 136,321 258 X - 258

TOTAL 136,321 - - 136,321 258 - - 258

TOTAL 31/12/2007 568,297 -787 -359 567,151 3,198 -2 - 3,196

TOTAL 31/12/2006 662,426 -1,651 -29 660,746 5,205 -44 -2 5,159

202

Exposures/Counterparts Non-financial businesses Other parties

Gross exposure

Specific value

adjustments Portfolio

adjustments Net exposure Gross exposure

Specific value

adjustments Portfolio

adjustments Net exposure

A. Cash exposures A. Non-performing loans 402,909 -269,755 - 133,154 180,015 -127,232 - 52,783

A.2 Substandard loans 110,591 -12,682 -10 97,899 24,187 -1,691 - 22,496

A.3 Restructured loans 4,268 -126 -6 4,136 - - - -

A.4 Past-due loans 53,602 -1,071 -2 52,529 33,487 -739 - 32,748

A.5 Other loans 10,799,802 X -64,118 10,735,684 2,169,795 X -8,814 2,160,981

TOTAL 11,371,172 -283,634 -64,136 11,023,402 2,407,484 -129,662 -8,814 2,269,008

B. Off-balance sheet exposures

B.1 Doubtful loans 1,134 -430 - 704 1,363 -109 - 1,254

B.2 Substandard loans 536 -76 - 460 140 -3 - 137

B.3 Other impaired assets 911 -18 - 893 199 -2 - 197

B.4 Other loans 1,556,134 X -18 1,556,116 338,218 X -8 338,210

TOTAL 1,558,715 -524 -18 1,558,173 339,920 -114 -8 339,798

TOTAL 31/12/2007 12,929,887 -284,158 -64,154 12,581,575 2,747,404 -129,776 -8,822 2,608,806

TOTAL 31/12/2006 10,747,372 -285,294 -57,599 10,404,479 2,215,109 -118,823 -6,402 2,089,884

B.2 – Distribution of loans to non-financial resident businesses

31/12/2007 31/12/2006

a) Other services for sale 3,582,373 2,645,730

d) Commerce, salvage and repairs 2,091,373 1,771,085

c) Building and public works 1,706,714 1,175,685

d) Hotel and commercial business 483,867 429,947

b) Textiles, leather and footwear, apparel 409,711 346,213

f) Other 2,666,688 2,560,367

Total 10,940,726 8,929,027

203

B.3 – Distribution of cash and off-balance sheet exposures to customers by region

Exposure/Geographical area ITALY OTHER EUROPEAN COUNTRIES AMERICA

Gross exposure

Net exposure

Gross exposure

Net exposure

Gross exposure

Net exposure

A. Cash exposures A.1 Doubtful loans 584,350 186,582 - - - -

A.2 Substandard loans 136,929 122,548 125 123 - -

A.3 Restructured loans 4,268 4,136 - - - -

A.4 Past-due loans 87,362 85,548 22 21 3 3

A.5 Other loans 14,491,907 14,418,721 48,146 48,004 7,551 7,527

TOTAL 15,304,816 14,817,535 48,293 48,148 7,554 7,530

B. Off-balance sheet exposures

B.1 Doubtful loans 2,497 1,958 - - - -

B.2 Substandard loans 676 597 - - - -

B.3 Other impaired assets 1,108 1,070 2 2 - -

B.4 Other loans 2,082,264 2,082,256 13,407 13,407 - -

TOTAL 2,086,545 2,085,881 13,409 13,409 - -

TOTAL 31/12/2007 17,391,361 16,903,416 61,702 61,557 7,554 7,530

TOTAL 31/12/2006 14,554,758 14,085,617 267,765 267,102 8,792 8,730

Exposure/Geographical area ASIA REST OF THE WORLD

Gross exposure

Net exposure

Gross exposure

Net exposure

A. Cash exposures A.1 Doubtful loans - - - -

A.2 Substandard loans - - - -

A.3 Restructured loans - - - -

A.4 Past-due loans 1 1 2 2

A.5 Other loans 181 173 16 15

TOTAL 182 174 18 17

B. Off-balance sheet exposures B.1 Doubtful loans - - - -

B.2 Substandard loans - - - -

B.3 Other impaired assets - - - -

B.4 Other loans - - - -

TOTAL - - - -

Total at 31/12/2007 182 174 18 17

Total at 31/12/2006 19 18 5 5

204

B.4 - Distribution of cash and off-balance sheet exposures to banks by region

Exposure/Geographical area ITALY OTHER EUROPEAN COUNTRIES AMERICA

Gross exposure

Net exposure

Gross exposure

Net exposure

Gross exposure

Net exposure

A. Cash exposures A.1 Doubtful loans - - - - - -

A.2 Substandard loans - - - - - -

A.3 Restructured loans - - - - - -

A.4 Past-due loans - - - - - -

A.5 Other loans 963,641 963,626 16,804 16,804 3,753 3,753

TOTAL 963,641 963,626 16,804 16,804 3,753 3,753

B. Off-balance sheet exposures

B.1 Doubtful loans - - - - - -

B.2 Substandard loans - - - - - -

B.3 Other impaired assets - - - - - -

B.4 Other loans 210,250 210,250 103,046 103,046 21 21

TOTAL 210,250 210,250 103,046 103,046 21 21

TOTAL 31/12/2007 1,173,891 1,173,876 119,850 119,850 3,774 3,774

TOTAL 31/12/2006 1,171,449 1,171,448 48,489 48,489 3,908 3,908

Exposure/Geographical area ASIA REST OF THE WORLD

Gross exposure

Net exposure

Gross exposure

Net exposure

A. Cash exposures A.1 Doubtful loans - - - -

A.2 Substandard loans - - - -

A.3 Restructured loans - - - -

A.4 Past-due loans - - - -

A.5 Other loans 1,135 1,135 1,116 1,116

TOTAL 1,135 1,135 1,116 1,116

B. Off-balance sheet exposures B.1 Doubtful loans - - - -

B.2 Substandard loans - - - -

B.3 Other impaired assets - - 13 9

B.4 Other loans 130 130 39 38

TOTAL 130 130 52 47

Total at 31/12/2007 1,265 1,265 1,168 1,163

Total at 31/12/2006 1,853 1,738 1,681 1,664

205

B.5 – Significant exposures

At 31 December 2007 there were no significant exposures.

C. SECURITISATION TRANSACTIONS AND DISPOSAL OF ASSETS

C.1 – SECURITISATION TRANSACTIONS

Exposures deriving from own securitisation transactions

The Parent Bank and the other consolidated companies did not perform any securitisation transaction. At the balance sheet date, there we no transactions of this type in place.

Exposures deriving from own securitisation transactions

The following security is held in the portfolio in relation to the securitisation of health receivables of the Sicily Region – Sicilia CSR 03/11 4.152% (Code ISTN IT0003426563); nominal value of EUR 8 million (the securitisation transaction amounted in total to EUR 654.9 million).

C.1.1 – Exposures deriving from securitisation transactions analysed by the quality of the underlying assets

Cash exposures Senior Mezzanine Junior Quality of Gross Net Gross Net Gross Net underlying assets/Exposures exposure exposure exposure exposure exposure exposure A. With own underlying assets - - - - - -

a) Impaired - - - - - -

b) Other - - - - - -

A. With third party’s underlying assets 3,750 3,733 - - - -

a) Impaired - - - - - -

b) Other 3,750 3,733 - - - -

206

Guarantees given Senior Mezzanine Junior Quality of Gross Net Gross Net Gross Net underlying assets/Exposures exposure exposure exposure exposure exposure exposure A. With own underlying assets - - - - - -

a) Impaired - - - - - -

b) Other - - - - - -

A. With third party’s underlying assets - - - - - -

a) Impaired - - - - - -

b) Other - - - - - -

Credit lines Senior Mezzanine Junior Quality of Gross Net Gross Net Gross Net underlying assets/Exposures exposure exposure exposure exposure exposure exposure A. With own underlying assets - - - - - -

a) Impaired - - - - - -

b) Other - - - - - -

A. With third party’s underlying assets - - - - - -

a) Impaired - - - - - -

b) Other - - - - - -

C.1.3 – Exposures deriving from the main third party’s securitisation transactions analysed by type of securitised asset and type of exposure

Cash exposures Senior Mezzanine Junior Type of securitised assets Book Adjustments/ Book Adjustments/ Book Exposure /Exposures value recoveries value recoveries value recoveries A.1 Sicilia CSR 3,733 -17 - - - -

Guarantees given Senior Mezzanine Junior Type of securitised assets Book Adjustments/ Book Adjustments/ Book Exposure /Exposures value recoveries value recoveries value recoveries A.1 Sicilia CSR - - - - - -

207

Credit lines Senior Mezzanine Junior Type of securitised assets Book Adjustments/ Book Adjustments/ Book Exposure /Exposures value recoveries value recoveries value recoveries A.1 Sicilia CSR - - - - - -

C.1.4 – Exposures to securitisations analysed by portfolio and by type

Exposure Financial

assets held for trading

Financial

assets (fair

value option)

Financial assets

available for sale

Financial assets held to

maturity

Loans 31/12/2007 31/12/2006

portfolio - -

1. Cash exposures - - - - - - -

. - - - - - - -

- Senior 3,733 - - - - 3,733 4,595

- Mezzanine - - - - - - -

- Junior - - - - - - -

Off balance sheet exposures - - - - - -

. - - - - - - -

- Senior - - - - - - -

- Mezzanine - - - - - - -

- Junior - - - - - - -

208

C.2 – DISPOSAL TRANSACTIONS

C.2.1. Financial assets sold and not cancelled

31/12/2007 Technical forms/Portfolio

Financial assets held for trading Financial assets designated at fair value

A B C A B C A. Cash assets 1,009,655 - - - - -1. Debt securities 1,009,655 - - - - -2. Equity securities - - - - - -3. UCI - - - - - -4. Loans - - - - - -5. Impaired assets - - - - - -B. Derivatives - - - X X X TOTAL 31/12/2007 1,009,655 - - - - -TOTAL 31/12/2006 857,202 - - - - -

31/12/2007 Technical forms/Portfolio

Financial assets available for sale

Financial assets held to maturity

A B C A B C A. Cash assets - - - - - -1. Debt securities - - - - - -2. Equity securities - - - X X X 3. UCI - - - X X X 4. Loans - - - - - -5. Impaired assets - - - - - -B. Derivatives X X X X X X TOTAL 31/12/2007 - - - - - -TOTAL 31/12/2006 - - - - - -

31/12/2007 31/12/2006 Technical forms/Portfolio

Due from banks Loans to customers Total Total

A B C A B C A. Cash assets 271,796 - - - - - 1,281,451 857,2021. Debt securities 271,796 - - - - - 1,281,451 857,2022. Equity securities X X X X X X - -3. UCI X X X X X X - -4. Loans - - - - - - - -5. Impaired assets - - - - - - - -B. Derivatives X X X X X X - -TOTAL 31/12/2007 271,796 - - - - - 1,281,451 857,202TOTAL 31/12/2006 - - - - - - 857,202 857,202

A = financial assets sold recorded in full (book value). B = financial assets sold recorded in part (book value). C = financial assets sold recorded in part (full value).

209

C.2.2. Financial liabilities for assets sold and not cancelled

Financial Financial Financial Financial - - -

assets assets assets assets Due Loans -

Liabilities/Asset portfolio held for valued available held from banks

to customers Total

trading at fair value for sale to maturity - - -

1. Due to customers 1,103,503 - - - 20,299 - 1,123,802

a) for assets recorded - - - - - - -

In full 1,103,503 - - - 20,299 - 1,123,802

b) for assets recorded - - - - - - -

In part - - - - - - -

2. Due to banks - - - - 217,156 - 217,156

a) for assets recorded

In full - - - - 217,156 - 217,156

b) for assets recorded

In part - - - - - - -

TOTAL 31/12/2007 1,103,503 - - - 237,455 - 1,340,958

TOTAL 31/12/2006 862,671 - - - - - 862,671

210

D. CREDIT RISK MEASUREMENT MODELS

Please refer to the qualitative information on credit risk.

1.2 – MARKET RISK

1.2.1 – INTEREST RATE RISK – SUPERVISORY TRADING PORTFOLIO

In accordance with supervisory legislation, the portfolio of financial instruments subject to capital requirements for market risks is part of the "trading portfolio”.

QUALITATIVE INFORMATION

A. General aspects The trading portfolio consists of:

- bonds; - shares; - harmonised quotas of UCI; - trading derivatives.

The bond component of the portfolio consists mainly of floating rate securities. The fixed-rate portion (BOT with varying expiries) has a limited duration. The bonds held are issued almost exclusively by the Italian Republic or by banks with ratings of higher than investment grade. The UCIs in which the Bank holds quotas are also prevalently bond-based. The direct equity investments, residual in size, mainly involve shares listed on the Italian Stock Exchange and with high degree of liquidity. The financial instruments in the portfolio are almost exclusively in euro. B. Management processes and measurement methods for interest rate risk The Group’s investment policy is based on the criteria of containing market risk, with reference to all of its components:

- interest rate risk; - price risk; - exchange rate risk.

No positions involving commodities risk are normally adopted. The portfolio is managed using risk-hedging tools and techniques. The investment and trading activity is carried out in compliance with the guidelines established by the relative Group governance levels and is implemented as part of an extensive system of assigned management powers and according to detailed regulations on, among other things, modification of the set stock, type of negotiable assets, the investment market, type of issuer, maturity of the securities and rating. For the daily trading activities, there are maximum daily loss limits and overall open position limits. Risk is measured through both analytical calculations (establishing the duration of the bond portfolio with regard to the exposure to interest rate risk) and statistical techniques (estimate of the overall value at risk, after the mitigation generated by the portfolio diversification). The portfolio approach is based on the daily estimate of parametric VaR over a 10-day period and a 99% confidence interval. The VaR measures the maximum loss that the trading portfolio may undergo based on volatility and historic correlations of the individual risk factors (interest rates, share prices and exchange rates). This model is not used to determine the minimum capital requirement with respect to market risk.

211

QUANTITATIVE INFORMATION

1. Supervisory trading portfolio: distribution by residual duration (by repricing date) of cash financial assets and liabilities and derivatives

Currency: EURO

On demand

Up to 3 months

Beyond 3

months and up

to 6 months

Beyond 6months

and up to 1 year

Beyond one year

And up to 6 years

Beyond 5 years

and up to 10 years

Beyond 10 years

Unspecified maturity

Type/Residual duration ---------------- ---------------- ------------ ----------------- ------------- ----------------- --------------- -

A. Cash assets 118 672,974 557,379 2,599 25,287 2,694 825 -

1.1 Debt securities 118 645,998 557,379 2,599 25,287 2,694 825 -

- with early repayment option - - - - - - - -

- other 118 645,998 557,379 2,599 25,287 2,694 825 -

1.2 Other assets - 26,976 - - - - - -

2. Cash liabilities - 796,259 102,655 293 - - - -

2.1 Funding repurchase agreements - 796,259 102,655 293 - - - -

2.2 Other liabilities - - - - - - - -

3. Financial derivatives: 116 -15,253 -4,822 10,207 -398 144 - -

3.1 With underlying security - 55 - - - - - -

- Options - - - - - - - -

+ long positions - - - - - - - -

+ short positions - - - - - - - -

- Other - 55 - - - - - -

+ long positions - 290 - - - - - -

+ short positions - 235 - - - - - -

3.2 Without underlying security 116 -15,308 -4,822 10,207 -398 144 - -

- Options - - - - - 144 - -

+ long positions - - - 466 - 144 - -

+ short positions - - - 466 - - - -

- Other 116 -15,308 -4,822 10,207 -398 - - -

+ long positions 124 261,717 45,242 13,779 24,264 4,961 - -

+ short positions 8 277,024 50,064 3,572 24,661 4,961 - -

212

Other currencies

On demand

Up to 3 months

Beyond 3

months and up

to 6 months

Beyond 6 months

and up to 1 years

Beyond 1 year ad up to 5 years

Beyond 5 years and up to 10 years

Beyond 10 years

Unspecified

maturity

Type/Residual duration ---------------- ---------------- ------------ ----------------- ---------------- -----------------

--------------- -

A. Cash assets - 63 93 74 244 63 3 -

1.1 Debt securities - 63 93 74 244 63 3 -

- with early repayment option - - - - - - - -

- other - 63 93 74 244 63 3 -

1.2 Other assets - - - - - - - -

2. Cash liabilities - - - - - - - -

2.1 Funding repurchase agreements - - - - - - - -

2.2 Other liabilities - - - - - - - -

3. Financial derivatives: -115 15,009 15,817 -9,438 -3,728 - - -

3.1 With underlying security - - - - - - - -

- Options - - - - - - - -

+ long positions - - - - - - - -

+ short positions - - - - - - - -

- Other - - - - - - - -

+ long positions - - - - - - - -

+ short positions - - - - - - - -

3.2 Without underlying security -115 15,009 15,817 -9,438 -3,728 - - -

- Options - - - - - - - -

+ long positions - - - - - - - -

+ short positions - - - - - - - -

- Other -115 15,009 15,817 -9,438 -3,728 - - -

+ long positions 8 221,225 39,523 1,659 - - - -

+ short positions 123 206,216 23,706 11,097 3,728 - - -

The main currency of the Supervisory trading portfolio included among “other currencies” is the US dollar. 2. Supervisory trading portfolio – internal models and other sensitivity analysis methods The Group uses a single model to monitor the risk to which the trading portfolio is exposed. Thus, the following tables show information on the VaR, including all the risk factors that contribute to it. During the financial year the VaR values remained rather small in relation to the size of the portfolio. The main risks that it is exposed to are interest rate risk and the risk associated with hedge fund units. Credit risk associated with bond investments is rather low considering the type and creditworthiness of the issuers. Table 1 – Supervisory trading portfolio – VaR performance (in thousands of EUR)

2007 2006

Average Minimum Maximum 31.12.2007 Average Minimum Maximum

1,267 678 1,807 1,739 1,448 856 2,354

213

Chart 1 - Supervisory trading portfolio - VaR performance

Group VaR 2007

600.000

800.000

1.000.000

1.200.000

1.400.000

1.600.000

1.800.000

2.000.000

2-gen 31-gen 1-mar 30-mar 3-mag 1-giu 29-giu 30-lug 29-ago 27-set 26-ott 27-nov 28-dic

VaR Table 2 – Supervisory trading portfolio – Contribution by risk factors to the calculation of VaR

Position at 31.12.2007

Price risk Interest

rate risk

Exchange rate risk

Issuer risk Quotas of UCI

Hedge funds

Diversification benefit

7.2% 47.6% 0.9% 1.1% 3.6% 48.2% -8.6%

Table 3 – Supervisory trading portfolio – Composition of bond exposures by type of issuer

Sovereign issuers Public issuers Banks

Insurance companies and other financial

businesses

Corporate

83.1% 0.9% 16.0% 0.0% 0,0%

1.2.2 – Interest rate risk – Banking portfolio The banking portfolio is made up of all the financial instruments, whether assets or liabilities, that are not included in the trading portfolio. It mainly comprises amounts receivable from/payable to banks and customers. Qualitative information A. General aspects, management processes and measurement methods for interest rate risk Usually, the financial statements of financial intermediaries are mostly made up of financial assets and liabilities whose value may vary in relation to fluctuations in interest rates.

214

In line with the Group's retail mission, which mostly entails the assumption of credit risk with regard to specific customer segments, the exposure to interest rate risk generated by typical banking activities remains small. Risk management aims at minimising the impact of unfavourable variations in the rates curve on the value of the Bank, as well as on the cash flows generated by balance sheet items. The exposure to interest rate risk is mainly contained by indexing balance sheet assets and liabilities to money market parameters (typically the Euribor) and by matching the duration of assets and liabilities at low levels. The interest rate risk affecting the banking book is measured using the economic value approach, where the economic value is represented by the difference between the present value of assets and liabilities. Measurement is made on the basis of predetermined variations of the interest rate structure, applied to balance sheet items at the reference date (static ALM). The reaction to interest rate variation is measured through sensitivity indicators (changed duration). The impact of instantaneous parallel shifts in the interest rate structure by ± 100 b.p. and ± 200 b.p. is determined on the basis of the changed duration of the assets being assessed. The variations are then normalised in relation to the regulatory capital. B. Fair value hedges No fair value hedges are pending or were carried out. C. Cash flow hedging No cash flow hedges are pending or were carried out.

QUANTITATIVE INFORMATION

1. Banking portfolio: distribution by residual duration (by repricing date) of financial assets and liabilities

This table is not prepared because a sensitivity analysis to interest rate risk based on internal models is provided in the following point.

2. Banking portfolio: internal models and other sensitivity analysis methods

At year end, the changed duration calculated for all balance sheet assets and liabilities was contained; as a result the change in the Group’s capital value due to instantaneous shocks to the rate curve was limited. Assuming an instantaneous and parallel shift in the interest rate curve by +100 basis points, the capital value would register a drop of EUR 31.7 million, that is approximately 1.7% of the capital for supervisory purposes. In the event of a shift of -100 basis points, there would be an increase of EUR 34.1 million, equal to 1.8% of the capital for supervisory purposes.

1.2.3 – Price risk – Supervisory trading portfolio Qualitative information A. General aspects The price risk affecting the supervisory trading portfolio is generated by investments in quotas of UCI and in equity securities. B. Management processes and measurement methods for price risk

215

As regards price risk management and measurement processes please refer to paragraph “2.1 Interest rate risk – Supervisory trading portfolio – Qualitative information”.

QUANTITATIVE INFORMATION

1. Supervisory trading portfolio: cash exposures in equity securities and UCI

31/12/2007 Book value Type of exposure/Amount Listed Unlisted A. Equity securities 2,517 -

A.1 Shares 2,517 -

A.2 Innovative equity instruments - -

A.3 Other equity securities - -

B. UCI 7,262 39,084

B.1 Italian - 33,893

- harmonised open-ended - 6,063

- non-harmonised open-ended - -

- closed-ended - -

- reserved - -

- speculative - 27,830

B.2 Other EU countries 7,262 5,191

- harmonised 2,071 -

- non-harmonised open-ended - -

- non-harmonised closed-ended 5,191 5,191

B.3 Non-EU countries - -

- open-ended - -

- closed-ended - -

Total 9,779 39,084

2. Supervisory trading portfolio: distribution of exposures in equity securities and share indices for the main Countries of the quoting market

Listed Unlisted

Type/quoting index ITALY OTHER

EUROPEAN COUNTRIES

AMERICA

A. Equity securities 1,180 - - -

- long positions 1,180 - - -

- short positions - - - -

B. Purchases/sales still unsettled - - - -

on equity securities - - - -

- long positions - - - -

- short positions - - - -

C. Other derivatives on equity securities - - - -

- long positions - - - -

- short positions - - - -

D. Derivatives on share indices - - - -

- long positions - - - 466

- short positions - - - -466

216

3. Supervisory trading portfolio: internal models and other sensitivity analysis methods

As regards internal models for price risk please refer to paragraph “2.1 Interest rate risk – Supervisory trading portfolio – Quantitative information”.

1.2.4 PRICE RISK – BANKING PORTFOLIO

Qualitative information A. General aspects, management processes and measurement methods for price risk The banking portfolio consists of listed and unlisted shares which, held as part of more in-depth relations with specific companies or representing the instrument supporting significant initiatives undertaken in the Bank's reference territory. The price risk management methods for said financial instruments, therefore, tend more towards the management approach for investments, rather than the risk measurement techniques and instruments used for the trading portfolio. b. Price risk hedging Equity investments allocated to the banking portfolio are not subject to hedging.

QUANTITATIVE INFORMATION

1. Banking portfolio: cash exposures in equity securities and UCI

31/12/2007 Book value Items Listed Unlisted A. Equity securities 28,089 54,222

A.1 Shares 28,089 54,222

A.2 Innovative equity instruments - -

A.3 Other equity securities - -

B. UCI - -

B.1 Italian - -

- harmonised open-ended - -

- non-harmonised open-ended - -

- closed-ended - -

- reserved - -

- speculative - -

B.2 Other EU countries - -

- harmonised - -

- non-harmonised open-ended - -

- non-harmonised closed-ended - -

B.3 Non-EU countries - -

- open-ended - -

- closed-ended - -

Total 28,089 54,222

217

1.2.5 EXCHANGE RATE RISK

Qualitative information A. General aspects, management processes and measurement methods for exchange rate risk Exposure by the Bank to exchange rate risk, which is negligible, is largely due to transactions carried out with customers, inter-bank transactions and, to a lesser extent, positions in bonds. As regards exchange rate risk management and measurement processes regarding the trading portfolio please refer to paragraph “2.1 Interest rate risk – Supervisory trading portfolio – Qualitative information”. b. Exchange rate risk hedging All foreign currency positions generated by transaction with customers are collectively managed through the analysis of open gaps (non-offset positions). The monitoring of exchange rate risk is based on defined limits in terms of maximum acceptable loss, forward gap position and overall open gap position.

QUANTITATIVE INFORMATION

1. Distribution of assets, liabilities and derivatives by currency

31/12/2007 Currencies Items

US dollars Swiss francs Yen Sterling Canadian

dollars Other

currencies

A. Financial assets A.1 Debt securities 349 - 43 63 - 100

A.2 Equity securities - - - - - -

A.3 Loans to banks 6,609 1,171 1,120 1,051 1,308 2,660

A.4 Loans to customers 38,674 48,976 11,741 4,056 79 353

A.5 Other financial assets - - - - - -

B. Other assets 1,845 1,881 206 1,674 245 861

C. Financial liabilities C.1 Due to banks 16,040 20,171 7,390 21,764 209 288

C.2 Due to customers 84,611 7,055 3,381 3,877 11,319 1,676

C.3 Debt securities - - - - - -

C.4 Other financial liabilities 929 14 - 69 10 -

D. Other liabilities 307 390 - 59 - -

E. Financial derivatives - Options + Long positions - - - - - -

+ Short positions - - - - - -

- Other + Long positions 270,014 29,069 44,891 35,644 3,600 7,478

+ Short positions 223,760 52,697 50,296 16,793 3,701 9,526

Total assets 317,491 81,097 58,001 42,488 5,232 11,452

Total liabilities 325,647 80,327 61,067 42,562 15,239 11,490

Difference (+/-) -8,156 770 -3,066 -74 -10,007 -38

218

2. Internal models and other sensitivity analysis methods

As regards exchange rate risk management and measurement processes regarding the trading portfolio please refer to paragraph “2.1 Interest rate risk – Supervisory trading portfolio – Quantitative information”.

1.2.6 DERIVATIVE FINANCIAL INSTRUMENTS

A. FINANCIAL DERIVATIVES

A.1 Supervisory trading portfolio: notional values at year-end and averages

Type of transaction/Underlying Debt securities

and interest rates

Equity-based securities and share indices

Currency and gold-based securities

Other valuables

Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted 1. Forward rate agreement - - - - - - - -

2. Interest rate swap - 64,975 - - - - - -

3. Domestic currency swap - - - - - - - -

4. Currency interest rate swap - - - - - - - -

5. Basis swap - - - - - - - -

6. Trading of share indices - - - - - - - -

7. Trading of real indices - - - - - - - -

8. Futures - - - - - - - -

9. Cap options - purchased - - - - - - - -

- issued - - - - - - - -

10. Floor options - purchased - - - - - - - -

- issued - - - - - - - -

11. Other options -

- purchased - Plain vanilla - - - - - - - -

- Exotic - - - 2,151 - - - -

- Issued - Plain vanilla - - - - - - - -

- Exotic - - - 1,000 - - - -

12. Forward contracts - Purchases 27,523 28,697 - 54 - 287,215 - -

- Sales 26,740 28,831 4 258 - 238,910 - -

- Currency against currency - - - - - - - -

13. Other derivatives contracts - - - - - - - -

Total 54,263 122,503 4 3,463 - 526,125 - -

Average values 44,525 563,831 1,213 44,172 - 489,187 - -

219

Type of transaction/Underlying 31/12/2007 31/12/2006 Listed Unlisted Listed Unlisted 1. Forward rate agreement - - - -

2. Interest rate swap - 64,975 - 1,240,513

3. Domestic currency swap - - - -

4. Currency interest rate swap - - - -

5. Basis swap - - - -

6. Trading, stock mkt. indices - - - -

7. Trading of real indices - - - -

8. Futures - - 302,500 -

9. Cap options -

- purchased - - - -

- Issued - - - -

10. Floor options - -

- purchased - - - -

- Issued - - - -

11. Other options - -

- purchased - -

- Plain vanilla - - - 8,084

- Exotic - 2,151 - 26,000

- Issued - -

- Plain vanilla - - - 2,735

- Exotic - 1,000 - 26,000

12. Forward contracts - -

- Purchases 27,523 315,966 4,353 218,086

- Sales 26,744 267,999 4,353 116,968

- currency against currency - - - -

13. Other derivatives contracts - - - -

Total 54,267 652,091 311,206 1,638,386

Average values 45,738 1,097,190 309,848 1,511,988

220

A.2 - Banking portfolio: notional values at year-end and averages

A.2.1 - Hedging

Type of transaction/Underlying

Debt securities and interest rates

Equity-based securities and share indices

Currency and gold-based securities

Other valuables

Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted 1. Forward rate agreement - - - - - - - -

2. Interest rate swap - - - - - - - -

3. Domestic currency swap - - - - - - - -

4. Currency interest rate swap - - - - - - - -

5. Basis swap - - - - - - - -

6. Trading of share indices - - - - - - - -

7. Trading of real indices - - - - - - - -

8. Futures - - - - - - - -

9. Cap options - purchased - - - - - - - -

- Issued - - - - - - - -

10. Floor options - purchased - - - - - - - -

- Issued - - - - - - - -

11. Other options - purchased - Plain vanilla - - - - - - - -

- Exotic - - - - - - - -

- Issued - Plain vanilla - - - - - - - -

- Exotic - - - - - - - -

12. Forward contracts - Purchases - - - - - - - -

- Sales - - - - - - - -

- Currency against currency - - - - - - - -

13. Other derivatives contracts - - - - - - - -

Total - - - - - - - -

Average values - - - - - - - -

221

Type of transaction/Underlying 31/12/2007 31/12/2006 Listed Unlisted Listed Unlisted 1. Forward rate agreement - - - -

2. Interest rate swap - - - -

3. Domestic currency swap - - - -

4. Currency interest rate swap - - - -

5. Basis swap - - - -

6. Trading of share indices - - - -

7. Trading of real indices - - - -

8. Futures - - - -

9. Cap options - purchased - - - -

- Issued - - - -

10. Floor options - purchased - - - -

- Issued - - - -

11. Other options - purchased - Plain vanilla - - - -

- Exotic - - - -

- Issued - Plain vanilla - - - -

- Exotic - - - -

12. Forward contracts - Purchases - - - -

- Sales - - - -

- Currency against currency - - - -

13. Other derivatives contracts - - - -

Total - - - -

Average values - - - 5,302

222

A.2.2 - Other derivatives

Type of transaction/Underlying

Debt securities and interest rates

Equity-based securities and share indices

Currency and gold-based securities

Other valuables

Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted 1. Forward rate agreement - - - - - - - -

2. Interest rate swap - - - - - - - -

3. Domestic currency swap - - - - - - - -

4. Currency interest rate swap - - - - - - - -

5. Basis swap - - - - - - - -

6. Trading of share indices - - - - - - - -

7. Trading of real indices - - - - - - - -

8. Futures - - - - - - - -

9. Cap options - purchased - - - - - - - -

- Issued - - - - - - - -

10. Floor options - purchased - - - - - - - -

- Issued - - - - - - - -

11. Other options - purchased - Plain vanilla - - - - - - - -

- Exotic - - - - - - - -

- Issued - Plain vanilla - - - - - - - -

- Exotic - - - - - - - -

12. Forward contracts - Purchases - - - - - - - -

- Sales - - - - - - - -

- Currency against currency - - - - - - - -

13. Other derivatives contracts - - - - - - - 222,731

Total - - - - - - - 222,731

Average values - - - - - - - 224,434

223

Type of transaction/Underlying 31/12/2007 31/12/2006 Listed Unlisted Listed Unlisted 1. Forward rate agreement - - - -

2. Interest rate swap - - - -

3. Domestic currency swap - - - -

4. Currency interest rate swap - - - -

5. Basis swap - - - -

6. Trading of share indices - - - -

7. Trading of real indices - - - -

8. Futures - - - -

9. Cap options - purchased - - - -

- Issued - - - -

10. Floor options - purchased - - - -

- Issued - - - -

11. Other options - purchased - Plain vanilla - - - -

- Exotic - - - -

- Issued - Plain vanilla - - - -

- Exotic - - - -

12. Forward contracts - Purchases - - - -

- Sales - - - -

- Currency against currency - - - -

13. Other derivatives contracts - 222,731 - 222,689

Total - 222,731 - 222,689

Average values - 223,434 - 208,174

224

A.3 – Financial derivatives: purchase and sale of underlying

Type of transaction/Underlying Debt securities and interest rates

Equity-based securities and share indices

Currency and gold-based securities

Other valuables

Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted A. Supervisory trading portfolio: 1. Transactions with exchange of capital - Purchases 27,523 28,697 - 54 - 287,215 - -

- Sales 26,740 28,831 4 258 - 238,910 - -

- Currency against currency - - - - - - - -

Transactions without exchange of capital - Purchases - 25,300 - 2,151 - - - -

- Sales - 39,675 - 1,000 - - - -

- Currency against currency - - - - - - - -

B. Banking portfolio: B.1 Hedging 1. Transactions with exchange of capital - Purchases - - - - - - - -

- Sales - - - - - - - -

- Currency against currency - - - - - - - -

Transactions without exchange of capital - Purchases - - - - - - - -

- Sales - - - - - - - -

- Currency against currency - - - - - - - -

B.2 Other derivatives 1. Transactions with exchange of capital - Purchases - - - - - - - 222,731

- Sales - - - - - - - -

- Currency against currency - - - - - - - -

Transactions without exchange of capital - Purchases - - - - - - - -

- Sales - - - - - - - -

- Currency against currency - - - - - - - -

225

Type of transaction/Underlying 31/12/2007 31/12/2006 Listed Unlisted Listed Unlisted A. Supervisory trading portfolio: 1. Transactions with exchange of capital - Purchases 27,523 315,966 4,353 184,893

- Sales 26,744 267,999 4,353 132,201

- Currency against currency - - - -

Transactions without exchange of capital - Purchases - 27,451 - 465,641

- Sales - 40,675 - 1,137,798

- Currency against currency - - - -

B. Banking portfolio: B.1 Hedging 1. Transactions with exchange of capital - Purchases - - - -

- Sales - - - -

- Currency against currency - - - -

Transactions without exchange of capital - Purchases - - - -

- Sales - - - -

- Currency against currency - - - -

B.2 Other derivatives 1. Transactions with exchange of capital - Purchases - 222,731 - 222,689

- Sales - - - -

- Currency against currency - - - -

Transactions without exchange of capital - Purchases - - - -

- Sales - - - -

- Currency against currency - - - -

226

A.5 – “Over the counter” financial derivatives: positive fair value – counterparty risk

Counterparty / Underlying Debt securities and interest rates

Equity-based securities and share indices

Currency and gold-based securities

Non-offset

gross amount

Offset gross

amount Future

exposure Non-offset

gross amount

Offset gross

amount Future

exposure Non-offset

gross amount

Offset gross

amount Future

exposure

A. Supervisory trading portfolio: A.1 Governments and Central Banks - - - - - - - - -

A.2 Public entities - - - - - - - - -

A.3 Banks 1,378 - 277 620 - 175 1,672 - 1,327

A.4 Financial businesses - - - - - - - - -

A.5 Insurance companies - - - - - - - - -

A.6 Non-financial businesses 14 - - - - - 1,732 - 601

A.7 Other 20 - - - - - 2,221 - 405

Total A 31/12/2007 1,412 - 277 620 - 175 5,625 - 2,333

Total A 31/12/2006 5,162 - 116 2,068 - 2,084 1,611 - 1,000

B. Banking portfolio: B.1 Governments and Central Banks - - - - - - - - -

B.2 Public entities - - - - - - - - -

B.3 Banks - - - - - - - - -

B.4 Financial businesses - - - - - - - - -

B.5 Insurance companies - - - - - - - - -

B.6 Non-financial businesses - - - - - - - - -

B.7 Other - - - - - - - - -

Total B 31/12/2007 - - - - - - - - -

Total B 31/12/2006 - - - - - - - - -

227

Counterparty / Underlying Other valuables Different underlying

Non-offset gross amount

Offset gross amount Future exposure Offset Future exposure

A. Supervisory trading portfolio: A.1 Governments and Central Banks - - - - -

A.2 Public entities - - - - -

A.3 Banks - - - - -

A.4 Financial businesses - - - - -

A.5 Insurance companies - - - - -

A.6 Non-financial businesses - - - - -

A.7 Other - - - - -

Total A 31/12/2007 - - - - -

Total A 31/12/2006 - - - - -

B. Banking portfolio: B.1 Governments and Central Banks - - - - -

B.2 Public entities - - - - -

B.3 Banks - - - - -

B.4 Financial businesses - - - - -

B.5 Insurance companies - - - - -

B.6 Non-financial businesses - - - - -

B.7 Other - - - - -

Total B 31/12/2007 - - - - -

Total B 31/12/2006 - - - - -

228

A.5 - “Over the counter” financial derivatives: negative fair value - financial risk

Counterparty / Underlying Debt securities and interest rates

Equity-based securities and share indices

Currency and gold-based securities

Non-offset gross

amount

Offset gross

amount Future

exposure

Non-offset gross

amount

Offset gross

amount Future

exposure

Non-offset gross

amount

Offset gross

amount Future

exposure

A. Supervisory trading portfolio

A.1 Governments and Central Banks - - - - - - - - -

A.2 Public entities - - - - - - - - -

A.3 Banks 731 - 103 466 - 60 4,436 - 1,861

A.4 Financial businesses - - - - - - - - -

A.5 Insurance companies - - - - - - - - -

A.6 Non-financial businesses 118 - 45 - - - 411 - 259

A.7 Other 218 - - 10 - - 1,760 - 207

Total A 31/12/2007 1,067 - 148 476 - 60 6,607 - 2,327

Total A 31/12/2006 1,848 - 187 2,066 - 2,440 2,875 - 1,371

B. Banking portfolio: - B.1 Governments and Central Banks - - - - - - - - -

B.2 Public entities - - - - - - - - -

B.3 Banks - - - - - - - - -

B.4 Financial businesses - - - - - - - - -

B.5 Insurance companies - - - - - - - - -

B.6 Non-financial businesses - - - - - - - - -

B.7 Other - - - - - - - - -

Total B 31/12/2007 - - - - - - - - -

Total B 31/12/2006 - - - - - - - - -

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Counterparty / Underlying Other valuables Different underlying

Non-offset gross amount

Offset gross amount Future exposure Offset Future exposure

A. Supervisory trading portfolio: A.1 Governments and Central Banks - - - - -

A.2 Public entities - - - - -

A.3 Banks - - - - -

A.4 Financial businesses - - - - -

A.5 Insurance companies - - - - -

A.6 Non-financial businesses - - - - -

A.7 Other - - - - -

Total A 31/12/2007 - - - - -

Total A 31/12/2006 - - - - -

B. Banking portfolio: B.1 Governments and Central Banks - - - - -

B.2 Public entities - - - - -

B.3 Banks - - - - -

B.4 Financial businesses - - - - -

B.5 Insurance companies - - - - -

B.6 Non-financial businesses - - - - -

B.7 Other - - - - -

Total B 31/12/2007 - - - - -

Total B 31/12/2006 - - - - -

A.6 – Residual life of "over the counter” financial derivatives: notional values

Underlying/Residual life Up to 1 year

Beyond 1 year ad up to 5

years

Beyond 5 years Total

A. Supervisory trading portfolio - - - -

A.1 Financial derivatives on debt securities and interest rates 112,692 42,075 22,000 176,767

B.2 Financial derivatives on equity securities and share indices 2,313 - 1,155 3,468

A.3 Financial derivatives on exchange rates and gold 516,674 9,451 - 526,125

A.4 Financial derivatives on other valuables - - - -

B. Banking portfolio - - - -

B.1 Financial derivatives on debt securities and interest rates - - - -

B.2 Financial derivatives on equity securities and share indices - 222,731 - 222,731

B.3 Financial derivatives on exchange rates and gold - - - -

B.4 Financial derivatives on other valuables - - - -

Total at 31/12/2007 631,679 274,257 23,155 929,091

Total at 31/12/2006 1,869,893 293,317 9,071 2,172,281

As regards the so-called “Day One Profit” (difference, upon initial recognition, between the fair value of a financial instrument that is not quoted on an active market and the amount determined at that date using a

230

valuation technique), taking account of the composition of the financial instrument portfolio and of the results of the analyses carried out, no significant amounts were identified in this respect.

B. CREDIT DERIVATIVES

No credit derivatives are in place.

1.3 LIQUIDITY RISK

Qualitative information A. General aspects, management processes and measurement methods for liquidity risk Generally, the management of liquidity risk envisages the integration of the “cash flow matching” approach (which tends to make expected cash inflows coincide with expected cash outflows for each time horizon) with the “liquid assets” approach (which requires the financial statements to include a set number of financial instruments that can be readily converted into cash). The objective of the Group is to finance assets at the best possible terms under normal operating circumstances and to be able to fulfil its commitments in case of liquidity crises. The aforesaid objective is achieved by:

- centralising the management of liquidity within Bancaperta so that financings by non-group subjects are kept to a minimum and access to markets is more efficient;

- adequately diversifying funding sources, as regards both technical deposit forms and counterparties. From the operating point of view, the management of liquidity entails two processes:

- The management of short-term liquidity aims at ensuring that the Group is always able to meet its commitments. The objective is pursued by aiming at achieving an adequate balance of cash inflows and outflows. Moreover, keeping assets that can be readily converted into cash meets the need to face possible unforeseen requirements;

The management of structural liquidity mainly concerns the financing of assets which, in the last analysis, entails assessments about the overall business strategy (size growth objectives and related time schedule; loan and deposit policies by use, source, duration, technical form and cost).

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QUANTITATIVE INFORMATION

1. Time distribution of financial assets and liabilities by residual contractual duration

Currency: EURO

Items/Time periods On

demand

Beyond 1 day

and up to 7 days

Beyond 7 days and up to 16 days

Beyond 15 days and up

to 1 month

Beyond one

month and up

to 3 months

Beyond 3

months and up

to 6 months

Beyond 6

months and up

to 1 year

Beyond 1 year ad up to 5

years

Beyond 5 years

Indefinite

duration

-

Cash assets 4,568,356 171,501 188,815 908,395 952,804 430,071 796,777 6,708,353 2,235,043 187,620

A.1 Government bonds 337 - 2,912 239 30,534 1,363 1,351 990,220 588 X A.2 Listed debt securities 87 - 58 11 616 61 290 26,594 5,274 X A.3 Other debt securities 212 - 99 3 20,370 15,389 357,669 1,640,103 47,893 X A.4 Quotas of UCI - - - - - - - 30,466 8,501 X Doubtful securities X X X X X X X X X -

Past due securities X X X X X X X X X -

A.5 Loans 4,567,721 171,501 185,746 908,142 901,285 413,257 437,467 4,020,970 2,172,787 X - Banks 270,544 - 28 11,806 32,498 - - - - X - Customers 4,297,177 171,501 185,718 896,336 868,787 413,257 437,467 4,020,970 2,172,787 X Doubtful loans X X X X X X X X X 186,582

Past due loans X X X X X X X X X 1,038

Cash liabilities 7,855,339 338,864 436,233 941,730 946,183 421,942 343,417 2,802,584 307,793 -

B.1 Deposits 7,766,461 67,774 30,309 339,145 27,747 1,583 59 74,574 - X - Banks 117,343 67,774 15,306 338,965 27,264 1,342 - 425 - X - Customers 7,649,118 - 15,003 180 483 241 59 74,149 - X B.2 Debt securities 37,794 2,833 13,126 20,319 117,964 278,286 341,646 2,727,972 307,793 X B.3 Other liabilities 51,084 268,257 392,798 582,266 800,472 142,073 1,711 38 - X Off-balance sheet transactions -134,228 -60,504 -37,534 -849 71,975 56,362 113,980 123,737 175,375 -

C.1 Financial derivatives with exchange of capital 308 -63,443 -37,534 -849 52,772 -16,620 9,683 4,189 - -

- Long positions 316 82,395 25,627 50,938 83,907 24,888 11,449 4,189 - X - Short positions 8 145,838 63,161 51,787 31,135 41,508 1,766 - - X C.2 Deposits and loans to be received - - - - - - - - - -

- Long positions - - - - - - - - - X - Short positions - - - - - - - - - X C.3 Irrevocable commitments to grant finance

-134,536 2,939 - - 19,203 72,982 104,297 119,548 175,375 -

- Long positions 82,873 2,939 - - 19,203 72,982 104,297 342,279 175,375 X - Short positions 217,409 - - - - - - 222,731 - X

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Other currencies

Items/Time periods On

demand

Beyond 1 day

and up to 7 days

Beyond 7 days and up to 16 days

Beyond 15 days and up

to 1 month

Beyond one

month and up

to 3 months

Beyond 3

months and up

to 6 months

Beyond 6

months and up

to 1 years

Beyond 1 year ad up to 5

years

Beyond 5 years

Indefinite

duration

Cash assets 97,542 45,350 7,974 5,298 3,761 465 58 385 58 -

A.1 Government bonds 9 - - - - 4 4 96 - X A.2 Listed debt securities 6 - - - 2 31 51 282 58 X A.3 Other debt securities - - - - - - 3 7 - X A.4 Quotas of UCI - - - - - - - - - X Doubtful securities X X X X X X X X X -

Past due securities X X X X X X X X X -

A.5 Loans 97,527 45,350 7,974 5,298 3,759 430 - - - X - Banks 545 45,350 7,845 5,040 656 - - - - X - Customers 96,982 - 129 258 3,103 430 - - - X Doubtful loans X X X X X X X X X -

Past due loans X X X X X X X X X -

Cash liabilities 92,949 4,741 1,018 18,997 38,035 5,283 2,001 - - -

B.1 Deposits 92,949 4,741 1,018 17,530 38,035 5,283 - - - X - Banks 190 4,741 889 17,252 34,932 4,853 - - - X - Customers 92,759 - 129 258 3,103 430 - - - X B.2 Debt securities - - - - - - 2,001 - - X B.3 Other liabilities - - - 1,467 - - - - - X Off-balance sheet transactions -4,891 50,945 36,349 724 -51,572 15,817 -9,437 -3,728 - -

C.1 Financial derivatives with exchange of capital -304 46,357 36,349 724 -51,572 15,817 -9,437 -3,728 - -

- Long positions 8 86,261 63,328 52,721 29,654 39,523 1,660 - - X - Short positions 312 39,904 26,979 51,997 81,226 23,706 11,097 3,728 - X C.2 Deposits and loans to be to be received -10,669 10,669 - - - - - - - -

- Long positions - 10,669 - - - - - - - X - Short positions 10,669 - - - - - - - - X C.3 Irrevocable commitments to grant finance 6,082 -6,081 - - - - - - - -

- Long positions 6,246 - - - - - - - - X - Short positions 164 6,081 - - - - - - - X

The main currency found under “other currencies” is the US dollar.

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2. Distribution of financial liabilities by sector

Governments

and Central Banks

Other public entities

Financial businesse

s

- insurance companies

Non-financial

businesses

Other parties

Exposures/Counterparts

1. Due to customers 95,770 201,669 404,300 10,142 3,322,855 5,824,185

2. Securities issued - - 133,914 - - 3,715,821

3. Trading liabilities - - 6,712 - 560 878

4. Financial liabilities designated at fair value - - - - - -

TOTAL 31/12/2007 95,770 201,669 544,926 10,142 3,323,415 9,540,884

TOTAL 31/12/2006 68,591 171,706 342,002 29,000 3,050,363 8,418,826

3. Distribution of financial liabilities by region

ITALY

OTHER EUROPE

AN COUNTRI

ES

AMERICA ASIA REST

OF THE WORLD

Exposures/Counterparts

1. Due to customers 9,765,705 73,064 18,051 536 1,565

2. Due to banks 684,381 164,041 30 - -

3. Securities issued 3,849,735 - - - -

4. Trading liabilities 4,343 3,807 - - -

5. Financial liabilities designated at fair value - - - - -

TOTAL at 31/12/2007 14,304,164 240,912 18,081 536 1,565

TOTAL at 31/12/2006 12,786,367 226,486 33,125 578 1,694

1.4 OPERATIONAL RISK

Qualitative information A. General aspects, management processes and measurement methods for operational risk Operational risk management is part of the risk integrated management strategy which aims at containing the overall risk also by preventing the propagation and transformation of risks. Operational risks, which represent a very heterogeneous class, are not risks that are typical of banking or business activities. These risks may originate either internally or externally and may extend to outside the corporate area. The definition adopted by the group, in line with supervisory legislation, identifies operational risk as the risk of suffering losses due to the inadequacy or inefficiency of procedures, human resources and internal systems and external events. It includes, inter alia, losses deriving from frauds, human error, interruption of

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operations, system break-down, contractual non-performance, natural disasters. Operational risk includes legal risk, whilst it excludes strategic and reputational risks. Risk containment also aims at protecting the reputation and the brand of the Group. The operational risk management activity is founded on the following guidelines:

- Increase the overall operating efficiency; - Prevent or reduce the probability of occurrence of operating loss-generating events by taking

adequate legal, organisational, procedural and training actions; - Mitigate the effects expected from such events; - Transfer unwanted risks through adequate insurance products.

An advanced operational risk management system is represented by a complex set of processes, functions and resources for the identification, evaluation and control of operational risks, especially with the aim of ensuring an effective prevention and mitigation of the risks. In line with best practices, the model that is currently being adopted to establish operational risks requires the combined use, based on a bottom-up approach, of the four elements envisaged by prudential regulations for advanced measurement approaches (AMAs):

- Internal operating loss data; - External operating loss data; - Scenario analysis (self-assessment); - Factors in the operating context and internal auditing system.

From an organisational point of view, the operational risk management function is basically at group and corporate level. At group level, the Risk Management Department of Deltas helps to define risk management policies, develops valuation models, guides and coordinates Group structures in defining and carrying out prudential regulation compliance activities. At corporate level, the activity of the Risk Management Department is supported by subjects who are in charge of handling information and provide the Group structures with adequate knowledge of company matters and exchanging with these the necessary information flows. The network of corporate subjects in charge of handling information, through the use of a software developed within the IT platform used by the Group, ensures the availability of information on potential or effective loss data recorded in operations and the information on the trend of the risk indicators adopted for the various processes. The electronic procedure that aims at the timely and prompt recording of events that may potentially generate operating losses, allows to integrate in the analyses the valuations and estimates of damages, any accounting and off-the-books actual figures and the effects of the mitigation through insurance products. In line with the policy guidelines on operational risks, the identification, valuation and monitoring of operational risks tend to carry out mitigation actions. Risk containment is pursued also through legal, organisational, procedural and training actions. Any critical areas, identified through the joint analysis of the various data sources, are examined in depth by the managers in charge of the activities, who contribute to identify, with the help of the Risk Management Department, any necessary corrective actions. Moreover, Group companies have taken out a number of insurance policies which guarantee a wide cover of various types of potentially harmful events. The optimisation of such covers, in line with the different risk scenarios faced, is one of the objectives of operational risk management. B. Legal risks The risks relating to legal disputes involving various Group banks and companies are constantly monitored by Credito Valtellinese, as the Parent Bank, and by the single banks and companies concerned. If a legal and accounting analysis reveals that a legal dispute is likely to be lost and damages paid, the bank makes a reliable estimate thereof and the provision of risk and charges is adequately increased out of prudence. The following paragraphs deal with the most significant and complex legal disputes. Legal dispute on compound interest (anatocism) The sentence by the Court of Cassation (Joint sitting) no. 21095 of 4 November 2004, confirmed the principle regarding the contractual nature of the clause on the compounding of quarterly interest that was

235

generally included in old current account contracts and therefore, the fact that such clause cannot allow a departure from the general prohibition of compounding interest pursuant to art. 1283 of the Civil Code. The aforesaid legal stance is open to criticism and cannot be shared on several legal grounds as well as on the plane of substantial fairness. Credito Valtellinese, and all the Group banks and companies, just like the rest of the banking system, have always challenged the above before the relevant courts of jurisdiction, asserting at least the need to calculate interest income and expense on a quarterly basis also for periods preceding the well-known resolution issued by CICR which introduced the reciprocity criterion in this subject area. The prominence given by the newspapers to the aforesaid sentence and the initiatives undertaken by consumers associations led to numerous complaints being filed by the consumers, against Credito Valtellinese and other Group banks, aimed at having the so-called “compound” interest recalculated and refunded. This was particularly prominent for Credito Siciliano. In the event that legal proceedings are instituted following such complaints, Credito Valtellinese and the other Group banks shall adequately increase the provision for risks and charges, as and when required, to hedge against such risks as quantified by the accounting reconstructions made. Legal dispute on bond default The insolvency collapse of Argentina’s Government and of some major national companies such as Parmalat, Cirio and Giacomelli in the 2001-2003 period led to a number of disputes, even lawsuits, filed by the customers that had bought the defaulted bonds. In this respect, Credito Valtellinese and the other Group banks have always been sensitive to fairness and inexpensiveness criteria, avoiding, whenever possible, sterile and costly lawsuits and taking account of the legal stance consolidated over time. In this context, Credito Valtellinese, as the Parent Bank, has often promoted, also with the other Group banks, settling logics either on the basis of complaints received or in Court. Conversely, some particular lawsuits were challenged up to the stage when the Court issued a decision. In any case, however, based on a preliminary analysis of the legal dispute and the type of defaulted bond concerned, the single banks make the necessary provisions for risks and charges. Legal dispute on bankruptcy claims The recent bankruptcy law later integrated by the so-called “amending decree” certainly weakened the scope of the action carried out by the receiverships pursuant to Art. 67 of the Finance Act. Some bankruptcy claims filed according to the legal regulations in force before the reform are still pending, as provided for by the new temporary regulations. In these cases, Credito Valtellinese, as the Parent Bank, promotes careful and well-pondered settlement logics according to an in-depth analysis of the grounds underpinning the action, that is the existence of both subjective and objective elements. More specifically, the Group banks normally perform ex-ante accounting verifications in order to quantify risk hence set up a provision out of prudence. OTHER RISKS The types of risks outlined in the previous Sections represent the main risks to which banking operations are exposed. On the other hand,, the "second pillar" of the supervisory legislation introduced by the New Basel capital accord requires banks to consider all risks they are exposed to when assessing their capital adequacy level. In this perspective, the group started the necessary activities to find out additional risks that, in the first analysis, may be traced back to strategic and reputational risk. This initiative will allow the Group to further refine the effectiveness of risk management as regards internal controls, as well as help in preparing ICAAP reports prescribed by the regulations of the “second pillar” which must be annually provided to the Supervisory Authorities.

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Part F – INFORMATION ON EQUITY SECTION 1 – CONSOLIDATED EQUITY Qualitative information The equity policy adopted by the Credito Valtellinese banking group is based on the following three approaches:

1. full respect of the requirements dictated by supervisory regulations (regulatory approach); 2. adequate supervision of the risks connected to the banking activity (management approach); 3. support for corporate growth projects (strategic approach).

Each approach indicated corresponds to the appropriate definition of equity, specific objectives and specific corporate functions. Under the regulatory profile, the configuration of equity used is that defined by the regulatory provisions for banking groups. Continuous compliance with minimum capital requirements, regularly monitored and adopted as a restriction during planning, represents an essential condition of corporate activities. The need to avail of an equity buffer compared to the minimum capital requirements and the objective of achieving the highest capital adequacy standards both at national and international level led the corporate bodies to establish as a strategic objective a total capital ratio of 10%. Under the risk management profile, which represents one of the fundamental functions of banking activities, equity is considered to be the leading defence against possible unexpected losses arising from the various risks to which banks are exposed (credit, market and operating). In light of this, the optimum capital size is the one that by allowing to absorb unexpected losses estimated with a particular confidence interval, guarantees business continuity over a specific time horizon. From the business point of view, equity is considered as the strategic productive factor that allows the bank to preserve its stability. Under this profile, evaluation of the capital adequacy refers to the financing of assets that generate long-term returns (property, plant and equipment, investments in associates and companies subject to joint control, goodwill), to strategic reorganisation transactions, to relaunching of activities and investment requirements and, finally, to Group rating and reputation. The actual availability of adequate equity, considered as a scarce and costly resource, is linked to the creation of value as the precondition for the expected return. In line with its cooperative bank status meaning paying attention to the development and growth of local economies in the areas in which the bank operates, the Group implements its own equity policy mainly through:

- The gradual increase in size and territorial network; - The issue of financial instruments (ordinary shares and convertible bonds) that are not particularly

complex; - The issue of instruments that are easily negotiable by having them listed on regulated markets; - The regular return of risk capital by distributing a hefty portion of the profits earned.

As regards the equity development policy, attention is drawn to the fact that in 2007 the first stage of the equity strengthening operation resolved by the Extraordinary Shareholders’ resolution of 10 February 2007 was completed. The operation aims at guaranteeing the achievement, under the necessary economic, equity and financial balance conditions, of the objectives set in the Strategic Plan. Please also note that still in 2007 the last tranche of the “Credito Valtellinese 2.80% 2004/2007” bond was converted.

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B. Quantitative information

The net consolidated shareholders’ equity comprises:

31/12/2007 31/12/2006

item 140. Valuation reserves 73,444 123,929

item 150. Redeemable shares - -

Item 160 - Equity instruments - 708

item 170. Reserves 118,084 93,432

item 180. Share premium reserve 738,631 323,023

item 190. Share capital 562,061 272,914

Item 200. Treasury shares(-) -1,338 -761

Item 220. Net income (loss) for the period (+/-) 85,773 68,614

Total 1,576,655 881,859

SECTION 2 - EQUITY AND CAPITAL RATIOS 2.1 Scope of application of the regulations In accordance with the provisions of the supervisory instructions on the calculation of the capital for supervisory purposes at 31 December 2007, the composition and size of the capital for supervisory purposes differ from those of shareholders' equity. The main reasons for said differences are briefly summarised as follows: - as opposed to shareholders’ equity, capital for supervisory purposes does not include the portion of

profits to be distributed as dividends; - Capital for supervisory purposes includes also minority interests, properly allocated between Tier 1 and

Tier 2 capital; - Goodwill - which includes the “positive differences on shareholders’ equity” incorporated in the book

value of investments in banks, financial and insurance companies subject to dominant influence and valued at equity – and the other intangible assets must be deducted from Tier 1 capital;

- Tier 2 capital can include subordinated loans provided that the requisites prescribed by prudential rules are complied with;

- Net capital gains on securities classified under “financial assets available for sale”, recorded in item 140 “Valuation reserves” may be included as part of Tier 2 capital, but only for 50% of the amount, for the application of prudential filters;

- Investments in banks and financial companies of 10% or more of the capital of the investee must be deducted as follows: 50% of the amount from Tier 1 capital and the remaining 50% from Tier 2 capital, as per the book value after deducting positive differences on shareholders’ equity;

- also investments in insurance companies of 20% or more of the capital if the investee, acquired before 20 July 2006, must be deducted from the aggregate value of Tier 1 and Tier 2 capital.

There are no restrictions or impediments to the transfer of equity elements among Group companies.

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2.2 Capital for supervisory purposes Qualitative information 1. Tier 1 capital Tier 1 capital, before the elements described in paragraph 2.1 above, totals EUR 1,480.6 million. A comparison with the figure from the previous year shows that the aggregate increased by EUR 742.7 million (+100.6%). This change is attributable to:

- the conversion of the third and final tranche of the “Credito Valtellinese 2.8% 2004-2007” convertible bond in April;

- the share capital increase, against payment, made by the Parent Bank in the 21 May – 22 June 2007 period.

No innovative equity instrument is comprised in Tier 1 capital. 2. Tier 2 capital Tier 2 capital (gross), after applying prudential filters, amounts to EUR 551.3 million, of which EUR 444.8 million are represented by subordinated liabilities which may be included in Tier 2 capital. A comparison with the figure from the previous year shows that Tier 2 capital increased by EUR 24 million (+4.1%). The increase is attributable to the issue of new subordinated liabilities, compensated by the theoretical amortisation of pre-existing loans, prescribed by legal regulations, which means that they may only be partly calculated in Tier 2 capital. More specifically, below is the list of subordinated liabilities issued by Credito Valtellinese and its subsidiaries:

- "Credito Valtellinese 2003/2013 EMTN subordinato" of EUR 150 million. The issue, indexed to 3-month Euribor, may be recalled by the issuer starting from April 2008;

- "Credito Valtellinese 2005/2015 EMTN subordinato" of EUR 150 million. The issue, indexed to 3-month Euribor, may be recalled by the issuer starting from March 2010;

- "Credito Valtellinese 2003/2009 EMTN subordinato" of EUR 70 million. The issue is indexed to 6-moth Euribor;

- "Credito Valtellinese 2006/2011 EMTN subordinato" of EUR 60 million. The issue is indexed to 6-moth Euribor.

- "Credito Valtellinese 2007/2012 EMTN subordinato" of EUR 70 million. The issue is indexed to 6-moth Euribor.

As prescribed by the law, the subordinated liabilities referred to above are included in Tier 2 capital up to 50% of the value of Tier 1 capital. No hybrid capitalization instruments are included in Tier 2 capital. 3. Tier 3 capital Credito Valtellinese and its subsidiaries did not issue financial instruments that may be included in Tier 3 capital and which may be admitted as market risk hedges.

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B. Quantitative information

31/12/2007 31/12/2006

A. Tier 1 capital before the application of prudential filters 1,480,595 737,905

B. Tier 1 capital - prudential filters: B.1 Positive IAS/IFRS prudential filters (+) - -

B.2 Negative IAS/IFRS prudential filters (-) - -

C. Tier 1 capital before any deductions allowed (A+B) 1,480,595 737,905

D. Elements to be deducted from Tier 1 capital 75,922 -

E. Total Tier 1 capital (C-D) 1,404,673 737,905

F. Tier 2 capital before the application of prudential filters 557,071 531,513

G. Tier 2 capital - prudential filters: G.1 Positive IAS/IFRS prudential filters (+) - -

G.2 Negative IAS/IFRS prudential filters (-) -5,790 -4,259

H. Tier 2 capital before any deductions allowed (F+G) 551,281 527,254

I. Elements to be deducted from Tier 2 capital 75,922 -

L. Total Tier 2 capital (H-I) 475,359 527,254

M. Items to be deducted from total Tier 1 and Tier 2 capital 3,151 130,234

N. Capital for supervisory purposes (E+L-M) 1,876,881 1,134,925

O. Tier 3 capital - -

P. Capital for supervisory purposes including TIER 3 (N+O) 1,876,881 1,134,925

At 31 December 2006 the capital for supervisory purposes was calculated in accordance with the regulations in force at that date, therefore it excludes the amendments introduced through Circular no. 155 of 18 December 1991 “Instructions for the preparation of supervisory reports on regulatory capital and prudential filters” issued on 5 February 2008. 2.3 Capital adequacy Qualitative information In terms of capital adequacy, the capital of Credito Valtellinese banking group for supervisory purposes is far higher prescribed by legal regulations. At 31 December 2007, the ratio Tier 1 capital to risk-weighed assets was around 10.28%, compared to 6.27% at the end of 2006. The ratio Capital for supervisory purposes to risk-weighed assets reached 13.73% (9.65% at the end of 2006). The improvement of prudential coefficients compared to the previous financial year shows that the Group was able to increase its capital by more than the trend experienced by the risk-weighed assets which, on the other hand, registered a rather marked increase (+16.1%).

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B. Quantitative information

31/12/2007 31/12/2006 31/12/2007 31/12/2006

Categories/Values Non-weighed amounts Weighed amounts/ requirements

A. RISK ASSETS A.1 CREDIT RISK 16,145,402 14,117,776 13,547,319 11,646,245

STANDARD METHODOLOGY CASH ASSETS 1. Exposures (other than equity securities and other subordinated assets) towards (or secured by): 1.1 Governments and Central Banks 712,873 1,012,990 - -

1.2 Public Entities 97,967 37,962 19,593 7,592

1.3 Banks 459,386 161,551 91,877 31,863

1.4 Other parties (other than mortgage loans on residential and non-residential properties) 10,781,964 9,372,383 10,781,964 9,372,293

2. Mortgages on residential properties 1,265,019 1,105,928 632,509 552,964

3. Mortgages on non-residential properties 738,433 641,727 369,217 320,864

4. Shares, investments in associates and companies subject to joint control and subordinated assets 75,746 54,560 76,302 55,116

5. Other cash assets 721,428 715,174 465,246 461,289

OFF-BALANCE SHEET ASSETS 1. Guarantees and commitments with (or secured by): 1.1 Governments and Central Banks 16,537 12,979 - -

1.2 Public Entities 5,423 7,278 1,084 1,456

1.3 Banks 197,164 186,227 36,072 33,808

1.4 Other parties 1,073,455 809,017 1,073,455 809,000

2. Derivatives with (or secured by): 2.1 Governments and Central Banks - - - -

2.2 Public Entities - - - -

2.3 Banks 7 - - -

2.4 Other parties - - - -

B. SUPERVISORY CAPITAL REQUIREMENTS B.1 CREDIT RISK 1,083,785 931,700

B.2 MARKET RISK X X 9,496 9,637

1. STANDARD METHODOLOGY X X including: + position risk on debt securities X X 5,692 5,478

+ position risk on equity securities X X 3,136 3,650

+ exchange risk X X 3 -

+ other risks X X 665 509

2. INTERNAL MODELS X X including: + position risk on debt securities X X - -

+ position risk on equity securities X X - -

+ exchange risk X X - -

B.3 OTHER PRUDENT REQUIREMENTS FOR SUPERVISORY PURPOSES X X - -

B.4 TOTAL PRUDENT REQUIREMENTS (B1+B2+B3) X X 1,093,281 941,337

C. RISK ASSETS AND CAPITAL RATIOS

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C.1 Risk weighted assets X X 13,666,012 11,766,708

C.2 Tier 1/Risk-weighted assets (Tier 1 capital ratio) X X 10.28% 6.27% C.3 Capital for supervisory purposes/Risk-weighted assets (Total capital ratio) X X 13.73% 9.65%

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PART G - BUSINESS COMBINATIONS INVOLVING BUSINESSES UNDERTAKINGS OR UNITS

SECTION 1 – OPERATIONS CARRIED OUT DURING THE YEAR

In 2007 no business combinations were carried out with entities outside the banking group.

SECTION 2 – TRANSACTIONS CARRIED OUT AFTER THE BALANCE SHEET DATE

On 21 February 2008 the contracts for the sale/purchase of 35 Intesa Sanpaolo branches, with effect as of 25 February 2008, were signed; these branches were sold in accordance with the regulations issued by the Antitrust Authority following the merger of Banca Intesa and Sanpaolo IMI, which were allocated to the territorial banks of the Credito Valtellinese Group as follows:

• 12 branches, in the province of Pavia, acquired by Credito Artigiano S.p.A.; • 23 branches, in the provinces of Turin (19) and Alessandria (4), acquired by Credito Piemontese

S.p.A. The price of the business unit, temporarily set at EUR 394.93 million and already paid to the counterparty, will be adjusted if necessary, after 90 days of the signing of the final contract according to the contractual terms, if a significant difference should arise between total direct deposits estimated by ISP at the end of 2007 and actual direct deposits at the effective date of the contract. The sale consideration coincides with the goodwill of the business unit, equal to 16.2% of estimated direct deposits, a figure which is basically in line with the values of similar transactions recently carried out on the Italian banking market. The main data at 30 June 2007 relating to the branches purchased (in millions of EUR) are shown below: in millions of EUR Amount TOTAL DIRECT DEPOSITS 2,290LOANS TO CUSTOMERS 551CUSTOMERS 66,000EMPLOYEES 224

243

PART H – TRANSACTIONS WITH RELATED PARTIES

1. INFORMATION ON DIRECTORS’ AND EXECUTIVES’ REMUNERATION

The following table summarises the remuneration paid to directors and managers with strategic responsibilities of the Parent company, also paid by the subsidiaries. REMUNERATION PAID 2007 a) short-term benefits in favour of employees (*) 5,429

b) Post-employment benefits 157

Total 5,586

(*) The amount indicated includes payments to directors for EUR 3,055 thousand. In 2007 other payments were made to members of the Board of Statutory Auditors for a total of EUR 474 thousand.

2 INFORMATION ON TRANSACTIONS WITH RELATED PARTIES

For the purpose of providing this information, transactions with related parties identified as such within each company included in the consolidation area have been aggregated. In accordance with IAS 24, related parties are: - subsidiaries, companies in which the entity directly or indirectly exercises control, as defined by IAS 27; - associated companies, companies in which the Parent bank directly or indirectly exercises significant

influence, as defined by IAS 28; - companies subject to joint control, companies on which the Parent bank directly or indirectly exercises

joint control, as defined by IAS 31; - directors with strategic responsibilities and supervisory authorities, namely Directors, Statutory auditors,

the General Manager and the Vice General Managers of the entity and its parent company; - other related parties, which include:

a) immediate family members – partners, children, the partner’s children and dependents of the individual or partner - of Directors, Statutory auditors, the General Manager and the Vice General Managers of the entity and its parent company;

b) subsidiaries, subject to joint control or subject to significant influence by Directors, Statutory auditors, the General Manager and the Vice General Managers of the entity and its parent company, as well as their immediate family members, as defined above;

c) pension funds established by companies of the Group.

244

TRANSACTIONS WITH RELATED PARTIES ASSOCIATED COMPANIES

COMPANIES SUBJECT TO JOINT CONTROL

EXECUTIVES AND CONTROL BODIES

OTHER RELATED PARTIES

% INCIDENCE ON THE BALANCE SHEET ITEM

Due from banks 7.557 159 - - 1,0%Loans to customers 10.096 312 1.525 111.233 0,9%TOTAL 17.653 471 1.525 111.233 Due to banks 115.982 - - - 13,7%Due to customers 40 9.232 5.676 66.169 0,8%Securities issued - - 82 6.512 0,2%TOTAL 116.023 9.232 5.759 72.681 Guarantees given 5.000 - 7 23.960 2,4%TOTAL 5.000 - 7 23.960

TRANSACTIONS WITH RELATED PARTIES ASSOCIATED COMPANIES

COMPANIES SUBJECT TO JOINT CONTROL

EXECUTIVES AND CONTROL BODIES

OTHER RELATED PARTIES

% INCIDENCE ON THE BALANCE SHEET ITEM

Interest margin 1.172- 75- 1- 3.092 0,4%Net fee and commission income 253- 2.680 108 660 1,7%Other income - - - - - Administrative expenses 9- 5.585- 9.597- - 3,7%Other expenses/income - 158 - - 0,3%TOTAL 1.435- 2.823- 9.490- 3.752

Dealings and relations with the other Credito Valtellinese Group companies are established within the sphere of a consolidated “network company” organisational model, on the basis of which each member is focused exclusively on the creation of its core business, within a business context which permits an effective and efficient handling of the Group’s overall resources. All the dealings entered into with the Group companies mainly concern correspondent transactions for services rendered, deposit and financing services within the sphere of ordinary inter-bank operations. Other contractual dealings entered into with specialised finance companies and service companies regard assistance and consulting services and specialised services supporting banking operations. The economic effects of inter–bank transactions are regulated on the basis of primary market conditions, while other transactions are regulated on the basis of the specific contractual terms which - maintaining the principal objective of optimising the synergies and economies of scale and purpose at the Group level - refer to parameters that are objective and constant over time, marked by essential transparency and equity. The quantification of fees for services provided is defined and formalised according to tested parameters that take account of the effective utilisation by each user company. Dealings with related parties other than companies belonging to the Credito Valtellinese Group are part of normal banking activities and are generally regulated at market conditions for the specific operations, aligned to the most favourable measure that may have been agreed for employees. Bank dealings with groups headed by Directors of the company or by the parent company Credito Valtellinese and other companies of the Credito Valtellinese Group are resolved in compliance with the provisions of art. 136 of the Consolidated Bank Act and settled at normal market conditions established for the specific operations. The effects of transactions with related parties as defined above on the financial and operating situation and on the income statement for the year ended on 31 December 2007, as well as the weight of these transactions on the corresponding balance sheet items in percentage terms, are represented in the summary tables below. The effects of transactions concluded with Group companies have not been included as their line-by-line consolidation requires the netting of intragroup balances and transactions.

245

PART I – SHARE-BASED PAYMENTS No share-based payments were made.

246

Guide to consultation

This section of the financial statements includes the following documents:

Statement by the delegated administrative body and the manager in charge of drafting corporate financial documents This document is prepared in accordance with Art. 81-ter of the Issuers’ Regulation adopted by CONSOB by resolution no. 11971 of 14 May 1999 and subsequent amendments and additions, implementing Art.154-bis, paragraph 5, of Legislative Decree no. 58 of 24 February 1998, “Consolidated Act on Financial Intermediation pursuant to articles 8 and 21 of Law no. 52 of 6 February (“TUF”). The sample statement form is shown in Annex 3C-ter of the aforesaid CONSOB Regulation.

Auditors’ Report Through this document the external auditing company expresses its opinion on the consolidated financial statements pursuant to article 156 of the TUF. The report is signed by the auditor in charge of the audit, who must be a shareholder or a director of the auditing company enrolled in the register of auditors held by the Ministry of Justice.

247

OTHER DOCUMENTS

248

Consolidated Financial Statements disclosure pursuant to Art. 81 –ter of CONSOB Regulation no. 11971 of 14 May 1999, as amended 1. The undersigned Giovanni De Censi, as the Chairman of the Board of Directors and Enzo Rocca, as the Manager in charge of preparing the corporate financial documents of Credito Valtellinese S.c., also taking account of art. 154-bis, paragraphs 3 and 4, of Legislative Decree no. 58 of 24 February 1998, certify:

- the adequacy, in relation to the business characteristics and - the effective application, Of the administrative and accounting procedures adopted for the preparation of the consolidated financial statements in 2007.

2. The evaluation of the adequacy of administrative and accounting procedures adopted for the preparation of the consolidated financial statements at 31 December 2007 is based on a Model defined by Credito Valtellinese S.c. to be in line with the ”Internal Control – Integrated Framework” and the ”Cobit”, which represent reference standards for internal control which are generally accepted at international level. 3. We also certify that the consolidated financial statements at 31 December 2007:

a) agree with the accounting records; b) have been prepared in accordance with the IFRS endorsed by the European Union as well as the

provisions issued to implement art. 9 of Legislative Decree no. 38/2005, and as they are, provide a true and fair view of the financial and economic situation of the issuer and of all the companies included in the consolidation area.

Sondrio, 18 March 2008 The Chairman of the Board of Directors The Manager in charge of preparing

corporate financial documents

Giovanni De Censi Enzo Rocca

249

250

255

REPORT AND FINANCIAL STATEMENTS OF CREDITO VALTELLINESE

256

257

HIGHLIGHTS AND FINANCIAL STATEMENT RATIOS

BALANCE SHEET FIGURES 31/12/2007 31/12/2006 % change %

(in thousands of EUR)

Loans to customers 5,459,677 4,685,653 16.52%

Other financial assets and liabilities: 72,136 123,531 -41.60%

Investments in associates and companies subject to joint control 732,146 696,860 5.06%

Total assets 7,924,317 6,999,352 13.22%

Direct deposits from customers 5,470,648 4,798,657 14.00%

Indirect deposits from customers 4,886,132 4,681,602 4.37%

including:

- Managed savings 2,079,102 2,176,578 -4.48%

Total deposits 10,356,780 9,480,259 9.25%

Shareholders’ equity 1,549,240 870,459 77.98%

BALANCE SHEET RATIOS 31/12/2007 31/12/2006Indirect deposits from customers / Total deposits 47.2% 49.4%

Managed savings / Indirect deposits from customers 42.6% 46.5%

Direct deposits from customers / Total liabilities 69.0% 68.6%

Customer loans / Direct deposits from customers 99.8% 97.6%

Customer loans / Total assets 68.9% 66.9%

LENDING RISK 31/12/2007 31/12/2006 % change %

Net doubtful loans (in thousands of EUR) 22.655 24.881 -8,95%

Other net doubtful loans (in thousands of EUR) 77.122 71.538 7,81%

Net doubtful loans / Loans to customers 0,41% 0,54%

Other net doubtful loans / Loans to customers 1,42% 1,54%

Hedging of doubtful loans 65,13% 67,99%

Hedging of other doubtful loans 7,17% 4,96%

OTHER INFORMATION 31/12/2007 31/12/2006 % change % Number of employees 822 783 4,98%

Number of branches 112 106 5,66%

Banc@perta line users 31,233 28,442 9,81%

258

INCOME STATEMENT FIGURES 2007 2006 % change %

(in thousands of EUR)

Interest margin 157,829 120,601 30.87%

Operating income 246,949 208,130 18.65%

Operating costs -121,106 -117,287 3.26%

Net operating margin 125,843 90,843 38.53%

Income (loss) before tax from continuing operations 95,890 68,218 40.56%

Income (loss) after tax from continuing operations 63,603 45,700 39.18%

Net income (loss) 63,603 48,121 32.17%

259

Guide to consultation This report accompanies the financial statements of Credito Valtellinese S.c. as at 31 December 2007 and aims to provide an outline of the management performance as a whole and in the various sectors in which it operates, and also of the main risks and uncertainties that it faces. The document has been drawn up in accordance with the provisions of Article 3 of Legislative Decree no. 87 dated 27 January 1992, and with the instructions issued by Bank of Italy with Circular no. 262 dated 22 December 2005, “Bank Financial Statements: schedules and guidelines”. (par. 2.7.1). The report also includes further information requested by other laws and regulations, even if not referred to in the aforesaid provisions.

260

BOARD OF DIRECTORS’ REPORT ON OPERATIONS

261

262

CENTENARY OF THE PARENT BANK As stated in the Chairman’s letter, 12 July 2008 marks the centenary of the Parent Bank Credito Valtellinese, established in 1908 with a view to “extending the benefits of lending to farmers, landowners, business and professional people, workers and labourers in general (…), to contributing to the development of small ownership and small business through mutuality (…) and to promoting Catholic and social institutions that work to improve the moral, intellectual and economic conditions of the less privileged classes”. Hence it appears fitting and proper to mention the centenary at the beginning of this report which accompanies the financial statements of the one hundredth year of the Bank’s activity; activity which for a century has been performed in keeping with the values of cooperation and solidarity, the cornerstones of the Credito Valtellinese’s origins as a community bank and which have always defined its identity and guided its actions. The celebrations linked to the centenary include a full calendar of events – cultural, artistic, sporting, publishing and social – scheduled from the second half of 2007 onwards in all the areas in which the Bank operates. These events are distinguished by an ad hoc logo, developed on the basis of the Bank’s current brand. The main appointment will be the “Centenary Day” – 12 July 2008 – for which a series of events have been scheduled, the most important of which is a commemorative assembly, providing a special occasion to mark the importance of the community bank matrix that distinguishes the Parent Bank. At this point it is important to underline that the growth results achieved by Banca Piccolo Credito Valtellinese in its one hundred years of history are the direct consequence of the values that are genetically ingrained in the everyday operations of its employees. Hence even the satisfying performances posted in terms of income and equity in 2007 – of which further details will be provided hereunder – are the fruit of Creval’s vision and its system of values, providing tangible proof of their validity and correctness.

263

MANAGEMENT PERFORMANCE DURING THE YEAR – ANALYSIS OF THE MAIN BALANCE SHEET AGGREGATES

RECLASSIFIED BALANCE SHEET (IN THOUSANDS OF EUR)

ASSETS 31/12/2007 31/12/2006 %

change %

Cash and cash equivalents 60,025 51,030 17.63%

Financial assets held for trading 14,686 88,465 -83.40%

Financial assets available for sale 60,236 40,080 50.29%

Due from banks 1,233,620 1,142,280 8.00%

Loans to customers 5,459,677 4,685,653 16.52%

Investments in associates and companies subject to joint control 732,146 696,860 5.06%

Property, plant and equipment and intangible assets (1) 184,441 181,680 1.52%

Other asset items (2) 179,486 113,304 58.41%

Total assets 7,924,317 6,999,352 13.22%

(1) Includes the items 110 “Property, plant and equipment” and 120 “Intangible assets”. (2) Includes the items 130 "Tax assets" and 150 "Other assets".

LIABILITIES 31/12/2007

31/12/2006

% change

% Due to banks 536,430 1,036,033 -48.22%

Direct deposits from customers (1) 5,470,648 4,798,657 14.00%

Financial liabilities held for trading 2,785 5,014 -44.46%

Other liability items 263,941 198,640 32.87%

Provisions for specific purpose (2) 101,273 90,549 11.84%

Shareholders’ equity (3) 1,549,240 870,459 77.98%

Total liabilities and shareholders’ equity 7,924,317 6,999,352 13.22%

(1) Includes the items 20 “Due to customers" and 30 “Securities issued". (2) Includes the items 80 "Tax liabilities ", 110 "Employee termination indemnities" and 120 "Provisions for risks and charges ". (3) Includes the items 130 "Valuation reserves ", 150 "Equity instruments ", 160 "Reserves", 170

"Share premium reserve ", 180 "Share capital", 190 "Treasury shares” and 200 "Net income (loss) for the period ".

264

DEPOSITS Direct deposits As at 31 December 2007 direct deposits from customers18 total EUR 5,470.6 million, up by 14% compared to the EUR 4,798.7 million of the previous year. A breakdown of the components shows an increase in amounts due to customers, equal to EUR 2,790.9 million, which record year-on-year growth of 4.7%, while securities issued, equal to EUR 2,547.5 million, and have posted a stronger increase, with a year-on-year percentage growth of 26.9%. In terms of breakdown by technical form, deposit repurchase agreements total EUR 625 million (+31%), while current accounts, slightly down on the previous year, stand at EUR 2,287.5 million.

Indirect deposits As at 31 December 2007 indirect deposits stand at EUR 4,886.1 million, recording an increase of 4.4% compared to the EUR 4,681.6 million of last year. Managed savings, made up of mutual investment funds, customer portfolio management and insurance savings, total EUR 2,079.1 million, and post a 4.5% decrease reflecting the customers’ more cautious approach to their investment decisions with a tendency to favour highly liquid products. Administered savings, consisting of securities that the customers deposit at the Bank, have reached EUR 2,807 million, posting an increase of 12.1% on the previous year end figure. It should be noted that administered savings make up 42.6% and managed savings 57.4% of the total aggregate of indirect deposits.

Indirect deposits (in millions of EUR)

4.682 4.8864.145

1.000

2.000

3.000

4.000

5.000

2005 2006 2007

EUR

/mill

ion

s

18 This figure comprises the items 20 "Due to Customers" and 30 "Securities issued".

Direct deposits (in millions of EUR)

4.7995.471

4.097

1.000

2.000

3.000

4.000

5.000

6.000

2005 2006 2007

EUR

/mill

ion

s

+14%

+4,4%

265

Total deposits Total deposits from customers, equal to the sum of direct and indirect deposits, reached EUR 10,356.8 million, up by 9.3% compared to the EUR 9,480.3 million recorded at the end of December 2006.

Total deposits (in millions of EUR)

9.480 10.3578.242

2.000

4.000

6.000

8.000

10.000

12.000

2005 2006 2007

EUR

/mill

ion

s

+9,3%

266

LOANS Lending At the end of December 2007, loans to customers reached EUR 5,459.7 million, up by 16.5% compared to the EUR 4,685.7 million of year end 2006.

Customer loans (in millions of EUR)

4.6865.460

3.913

1.000

2.000

3.000

4.000

5.000

6.000

2005 2006 2007

EUR

/mill

ion

s

A breakdown of the loans portfolio by technical form shows considerable growth in mortgages, up by 15% to reach EUR 1,655.3 million at year end, and an increase in the short term component represented by current accounts which have risen by 22.1% compared the previous year, standing at EUR 2,189.0 million.

Technical form (EUR/1,000) 31/12/2007 31/12/2006 % change

Current accounts 2,189,046 1,792,887 22.1%Repurchase agreements 0 225 -100.0%Mortgages 1,655,305 1,439,110 15.0%Credit cards, personal loans and salary-backed loans 60,464 53,052 14.0%Financial leases 481,721 446,798 7.8%Other transactions 971,573 855,367 13.6%Securities 1,811 1,808 0.2%Impaired assets 99,757 96,406 3.5%Total 5,459,677 4,685,653 16.5%

Financing operations were specifically aimed at retail customers (households, small and medium-sized enterprises, trades), which are the primary customers of Credito Valtellinese in the areas in which it operates. A breakdown of loans by business segment and goods type, according to the classification of Bank of Italy, demonstrates that lending is mainly focused on companies manufacturing goods or providing services (non-financial businesses and personal businesses), to which the majority of total loans to customers are disbursed. The economic categories with the highest representation are services (50.8%), followed by construction, with a percentage of 11.1%. Nonetheless, loans disbursed to consumer households and to non-profit organisations also account for an important portion, representing over 15% of total loans to customers. This segmentation clearly demonstrates the Bank’s vocation towards retail customers and the real economy.

+16,5%

267

Loans by sector

Sectors – economic categories 2007 2006 Financial businesses 0.74% 0.81%Non-financial businesses and personal businesses 83.68% 83.83%

Other services for sale 33.61% 30.64%Commerce 17.15% 18.53%

Construction 11.12% 10.15%Textiles, footwear, clothing 4.66% 5.59%

Metal products excluding machines 4.85% 4.98%Other groups 28.61% 30.10%

Consumer households and non-profit organisations 15.01% 14.92%Foreign operators and other operators 0.57% 0.45%Total 100% 100%

metal products excluding machines

4.85%

textile, footwear, clothing 4.66%

other groups 28.61%

construction 11.12%

commerce 17.15%

other services 3361%

financial companies

0.74%

consumer households

15.01%

non-financial businesses

and personal

businesses83.68%

foreign operators and other operators

0.57%

268

Loans by economic category Loan quality Net doubtful loans to customers total EUR 22.7 million, down compared to the 24.9 million of the previous year. The net doubtful loans to net loans to customers ratio is equal to 0.4%, recording a decrease compared to the year end 2006 figure. IN THIS REGARD, ATTENTION IS DRAWN TO THE TRANSACTION TO ASSIGN NON-PERFORMING LOANS TO FINANZIARIA SAN GIACOMO S.P.A., A COMPANY OF THE CREDITO VALTELLINESE GROUP SPECIALISING IN THE MANAGEMENT OF PROBLEMS LOANS, EXECUTED IN NOVEMBER 2007 BY CREDITO VALTELLINESE FOR A TOTAL AMOUNT EQUAL TO EUR 11.7 MILLION. The total net non-performing loans to net loans ratio, which stands at 1.8% in 2007, also fell, posting a decrease of 2.1% compared to year end 2006. Impaired loans other than doubtful loans (substandard loans, restructured and past due/overdue loans), net of value adjustments, totalled EUR 77.1 million at year end 2007, and account for 1.4% of net loans to customers. This figure is down on the figure reported in the previous year. .

Gross exposure

Value adjustmen

ts

Net exposure

Gross exposure

Value adjustments

Net exposure (in millions of EUR)

as at 31/12/2007 as at 31/12/2006

A. Impaired loans 148,376 -48,600 99,776 153,010 -56,591 96,419 Doubtful loans 64,968 -42,313 22,655 77,740 -52,859 24,881 Substandard loans 54,776 -5,656 49,120 34,338 -2,888 31,450 Restructured exposures 4,268 -132 4,136 - - - Past-due exposures 24,344 -498 23,846 40,917 -843 40,074 Country risks 20 -1 19 15 -1 14B. Performing loans 5,387,981 -28,080 5,359,901 4,559,160 -24,538 4,589,234Total 5,536,357 -76,680 5,459,677 4,712,170 -81,129 4,685,653 FINANCIAL ASSETS AND LIABILITIES

Financial assets and liabilities held for trading The management of securities held for trading and cash and cash equivalents has been assigned, through specific mandate, to Bancaperta, a specialised company of the Credito Valtellinese Group. In exercising this mandate, the company works closely with the Bank’s General Management, which is entrusted with global supervision of operational aspects and with taking specific decisions within the framework of the instructions issued by the Board of Directors. Periodic reporting ensures constant monitoring of performance, risk profile, results and development strategies of financial asset management. At year end, the financial assets held for trading, mainly consisting of debt securities, total EUR 14.7 million, compared to the EUR 88.5 million of the previous year. During the year the quotas of SICAV bonds held in the portfolio were unfrozen, in accordance with the instructions issued by the Board of Directors. The table below provides a breakdown of financial assets and liabilities held for trading. Financial assets/liabilities held for trading (EUR/1.000) 31/12/2007 31/12/2006 % change

Bonds and other debt securities 11,404 12,156 -6.2%Equity securities and UCI quotas - 67,330 -100.0%Trading securities 11,404 79,486 -85.7%Net value of financial derivatives 497 3,965 -87.5%Assets and liabilities held for trading 11,901 83,451 -85.7%

269

270

Financial assets available for sale Financial assets available for sale total EUR 60.2 million, compared to the 40.1 million of the end of December 2006. The increase is mainly due to the acquisition of 3.66% of the share capital of Banca Tercas – Cassa di Risparmio della provincia di Teramo S.p.A.. The net inter-bank position The net inter-bank position features a positive balance of EUR 697.2 million, compared to the positive balance of EUR 106.2 million recorded at the end of the previous year. Investments in associates and companies subject to joint control This item classifies investments held in companies subject to control – including joint control – or subject to considerable influence. The table below provides a breakdown of the Bank’s investments as at 31 December 2007.

Company name % ownership Book value

as at 31/12/2007

Increases/ decreases

Book value as at 31/12/2006

Credito Artigiano S.p.A. 65.71% 294,837 95 294,742Credito Siciliano S.p.A. 40.26% 115,036 771 114,265Credito Piemontese S.p.A. 99.78% 19,358 96 19,262Bancaperta S.p.A. 63.44% 63,921 - 63,921Mediocreval S.p.A. 37.45% 42,056 8,272 33,784Banca dell'Artigianato e dell'Industria S.p.A. 39.31% 36,632 23 36,609Bankadati Servizi Informatici S.p.A. 80.00% 2,636 570 2,066Stelline Servizi Immobiliari S.p.A. 80.00% 10,066 - 10,066Deltas S.p.A. 50.00% 129 - 129Crypto S.p.A. - - -485 485Creset S.p.A. 100.00% 3,100 -1,600 4,700Rajna Immobiliare S.r.l. 50.00% 265 - 265Banca della Ciociaria S.p.A. 37.96% 27,494 27,494 - Global Assistance S.p.A. 40.00% 2,066 - 2,066Banca di Cividale S.p.A. 25.00% 89,102 - 89,102Istituto Centrale delle Banche Popolari Italiane S.p.A.

22.50% 25,398 - 25,398

Politec Soc.Coop. del Polo dell’Innovazione della Valtellina p.A.

20.52%

50 50 -

Total investments 732,146 35,286 696,860 The main changes relate to investments in Mediocreval and Banca della Ciociaria as a result of the transactions described in the report on Group operations. Notice is also given of the merger of Crypto into Bankadati Servizi Informatici, executed on 30 April 2007, and the write-down of the investment held in Creset. Shareholders’ equity and Earning per share (EPS) At year end 2007 the Bank’s shareholders’ equity is equal to EUR 1,549.2 million, compared to the EUR 870.5 million of the previous year (+78%). The increase has been mainly caused by the capital increase transaction implemented in June 2007, of which details will be provided hereunder. Capital for supervisory purposes As at 31 December 2007, the capital for supervisory purposes, which is broken down in detail in Part F of the Notes to the Financial Statements, together with other Equity information – totals EUR 1,638.5 million, compared to EUR 1,006.3 million of the previous year, calculated according to supervisory regulations in force as at 31 December 2006. The increase is essentially linked to the aforementioned increase in the Bank’s share capital.

271

It is reported that with the 12th update of Circular no. 155 dated 18 December 1991 “Instructions for preparing reports on capital for supervisory purposes and on prudential ratios” issued on 5 February 2008, new individual and consolidated prudential reporting schedules have been set up, associated with assimilation of EU directives on the matter of capital adequacy (Basel II). As far as the information on the capital for supervisory purposes is concerned, entry into effect of the new reporting schedules has been set as 31 December 2007. With regard to said date the capital for supervisory purposes has already been determined according to the new procedures in the financial statements as at 31 December 2007 and appropriate information has also been provided in the financial statements (Part F – Information on Shareholders’ Equity: table on capital for supervisory purposes). The extent of capital for supervisory purposes more than ensures compliance with the capital requirements of current regulations, and offers adequate support for plans to increase the size of the bank. EARNING PER SHARE (EPS) THE TABLE BELOW SHOWS TRENDS IN THE BASE EPS, CALCULATED AS THE RATIO BETWEEN NET INCOME – AFTER DEDUCTION OF THE SUM ALLOCATED TO THE CHARITY FUND – AND THE NUMBER OF WEIGHTED AVERAGE SHARES OUTSTANDING IN THE YEAR. IN 2007 THE BANK’S EARNING PER SHARE STOOD AT EUR 0.47.

Earning per share (EPS) 2007 2006 Attributable income (in thousand of EUR) 61,303 46,221Weighted average number of ordinary shares 130,347,319 87,226,387Basic earnings per share 0.47 0.53 Property In compliance with the provisions of Article 10 of Law 72/1983 a statement of the monetary revaluations performed is attached to the financial statements.

272

MANAGEMENT PERFORMANCE DURING THE YEAR – ANALYSIS OF THE MAIN INCOME STATEMENT AGGREGATES

RECLASSIFIED INCOME STATEMENT (IN THOUSANDS OF EUR)

INCOME STATEMENT 2007 2006 %

change %

Interest margin 157,829 120,601 30.87%

Net fee and commission income 53,403 52,944 0.87%

Dividend and similar income 29,499 24,611 19.86%

Profit (loss) on trading, hedging and disposals/repurchases 2,303 6,258 -63.19%

Other operating expenses/income (3) 3,915 3,716 5.36%

Operating income 246,949 208,130 18.65%

Personnel expenses -59,506 -58,577 1.59%

Other administrative expenses (1) -53,855 -50,838 5.93%

Net adjustments to property, plant and equipment and intangible assets (2) -7,745 -7,872 -1.61%

Operating costs -121,106 -117,287 3.26%

Net operating margin 125,843 90,843 38.53%

Net adjustments for impairment of loans and other financial assets -25,399 -21,063 20.59%

Net provisions for risks and charges -3,095 -1,600 93.44%

Profit (loss) on disposal of investments and investments in associates and companies subject to joint control -1,459 38 -3939.47%

Income (loss) before tax from continuing operations 95,890 68,218 40.56%

Taxes on income from continuing operations: -32,287 -22,518 43.38%

Income (loss) after tax from continuing operations 63,603 45,700 39.18%

Income from discontinued operations - 2,421 -100.00%

Net income (loss) for the year 63,603 48,121 32.17%

(1) Other administrative expenses include recoveries of taxes and other recoveries recognised in item 190

"Other operating expenses/income" (EUR 12,490 thousand in 2007 and EUR 11,434 thousand in 2006); (2) Net adjustments to property, plant and equipment and intangible assets include the item 170 "Net

adjustments to property, plant and equipment " and the depreciation of costs incurred for improvements to third party assets included in the item 190 "Other operating expenses/income " (EUR 998 thousand in 2007 and EUR 927 thousand in 2006).

(3) Other income and charges correspond to item 190 "Other operating expenses/income" net of the above reclassifications.

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INCOME STATEMENT FIGURES Operating income The constant, balanced growth in volumes intermediated, together with the widening of the differential between lending and borrowing rates, brought the interest margin to EUR 157.8 million, posting an increase of 30.9% compared to EUR 120.6 million of the previous year. Interest income reached EUR 348.7 million (+37.1%), while interest expense stands at EUR 190.8 million (+42.6%). Net fee and commission income stands at EUR 53.4 million, recording a slight increase on the EUR 52.9 million reported in 2006. Dividends, mainly collected from Group companies, stand at EUR 29.5 million, up by 19.9% compared to the figure relating to 2006. Profit (loss) on trading, hedging, disposals and repurchases is equal to EUR 2.3 million, down by 63.2% compared to the EUR 6.3 million of last year, chiefly due to full divestment of the trading portfolio made up of SICAV bond units during the year. Other operating expenses/income stands at EUR 3.9 million, up by 5.4% compared to the previous year. Hence operating income is equal to EUR 246.9 million, up by 18.7% compared to the EUR 208.1 million of 2006.

Operating income (in millions of EUR)

247208

0

50

100

150

200

250

300

2006 2007

EUR

/mill

ion

s

Net operating margin In 2007, operating costs, made up of personnel expenses, other administrative expenses and net value adjustments to property, plant and equipment and intangible assets, stand at EUR 121.1 million, recording a modest increase compared to 2006 (+3.3%), thanks to a strict cost control policy despite the greater expenses attributable to the considerable expansion of the territorial network. A breakdown shows that personnel expenses have risen from EUR 58.6 million to EUR 59.5 million (+1.6%), other administrative expenses are equal to EUR 53.9 million, up by 5.9% compared to the 2006 figure, while net value adjustments to property, plant and equipment and intangible assets have instead decreased (-1.6%). The cost / income ratio – ratio between operating expenses and operating income – therefore stands at 49%, down considerably on the 56.4% reported in 2006. As a result of the above, the net operating margin stands at EUR 125.8 million, compared to the EUR 90.8 million of the previous year, posting an increase of 38.5%.

+18,7%

274

Net operating margin (in millions of EUR)

126

91

20

40

60

80

100

120

140

2006 2007

EUR

/mill

ion

s

Net income (loss) for the year Net adjustments for impairment of loans and other financial assets, mainly referring to the customer loans portfolio, total EUR 25.4 million, compared to the EUR 21 million of the previous year. Net provisions for risks and charges, equal to EUR 3.1 million, and profit (loss) from disposals of investments and investments in associates and companies subject to joint control, negative by EUR 1.5 million, bring the income (loss) before tax from continuing operations to EUR 95.9 million, up by 40.6% compared to the EUR 68.2 million reported in 2006. Tax charges for the year, equal to EUR 32.3 million (+43.4% compared to the 2006 figure), also include the extraordinary effects ensuing from amendment to the IRES and IRAP rates, introduced by the 2008 Finance Bill, which led to an increase in expenses of EUR 2.2 million. Hence net income (loss) stands at EUR 63.6 million, up by 32.2% compared to the 48.1 million reported in 2006.

Net income (loss) for the year (in millions of EUR)

63,648,1

0

10

20

30

40

50

60

70

2006 2007

EUR

/mill

ion

s

+32,2%

+38,5%

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MANAGEMENT AND INSTITUTIONAL ASPECTS INCREASE OF THE SHARE CAPITAL OF CREDITO VALTELLINESE AND INSTITUTIONAL ASPECTS An important aspect of the activity of Credito Valtellinese during 2007 was the implementation of the capital strengthening programme, approved by the Bank’s Extraordinary Shareholders’ Meeting on 10 February 2007. The purpose of the programme was to support, in accordance with the guidelines set forth in the 2007 – 2010 Strategic Plan, the growth plans for the internal lines, the progressive widening of current strategic partnerships, and to ensure an adequate level of free capital to allow the Bank to take advantage of any acquisition opportunities. The programme consisted in the following phases:

- free increase of the par value of outstanding shares from EUR 3.00 to EUR 3.50 – with effect from 21 May 2007 in accordance with Board resolution passed on 16 May – for a total value of approximately EUR 53.6 million;

- capital increase against payment, launched on 21 May, with offer under option to shareholders of 53,529,588 ordinary shares. At the end of the option period (22 June 2007) 53,416,567 shares had been subscribed, equal to 99.79% of those offered, matched to 21,352,421 2008 warrants and 21,352,421 2009 warrants provided free of charge.

The 226,042 rights that were not exercised in the offer period were offered on the stock exchange through UniCredit Markets & Investment Banking (HVB - Milan Branch), in the meetings held on 2, 3, 4, 5 and 6 July 2007. With full subscription of the aforesaid unexercised option rights, the share capital transaction was concluded with full subscription of the 53,529,588 ordinary shares, for a countervalue of EUR 535,295,880, matched to 21,397,572 2008 warrants and 21,397,572 2009 warrants provided free of charge. It is reminded that the regulations governing 2008 and 2009 warrants – warrants that can be exercised in April 2008 and April 2009 - provide that the exercise price is determined by applying a discount of 20% to the official average market price of Credito Valtellinese shares – weighted by the related quantities handled – calculated in the first three months of trading of 2008 and 2009 respectively. It is also stated that, as part of the 2007 capital increase transaction, bonus shares were assigned to shareholders subscribing to shares against payment who will retain the shares until 12 July 2008 – the date marking Credito Valtellinese’s centenary – on the basis of one new free share for each 10 shares subscribed as part of the capital increase against payment. April saw conclusion of the redemption period of the third and final tranche of the “Credito Valtellinese 2,8% 2004-2007 convertible” bond loan, the issue of which was approved by Extraordinary Shareholders’ Meeting on 15 November 2003. The bond holders were entitled to request, instead of redemption of the matured share, conversion of the amount into 55 Credito Valtellinese shares, equal to a conversion value of EUR 7.27 per share, of which EUR 3 as nominal value and approximately EUR 4.27 as share premium. The transaction was concluded with bond holders opting for almost full (99.7%) conversion into shares and the consequent issue of 16,087,885 new ordinary shares and subsequent increase of the Parent Bank’s equity by approximately EUR 117 million. After the Extraordinary Shareholders’ Meeting of 21 April assimilated the amendments to the by-laws to ensure full compliance of the Articles of Association with the Law on protection of savings – with particular regard to the provisions on independent directors, procedures for appointment of the directors and of the board of statutory auditors by list vote and appointment of the chairman of said board – the Board of Directors appointed Enzo Rocca to the office of Executive entrusted with drawing up the company accounts. TERRITORIAL STRUCTURE As at 31 December 2007 Credito Valtellinese’s territorial network is made up of 112 branches. During the year 6 new branches were opened: Dalmine, Clusone, Lovere and Calcinate in the province of Bergamo, Alzate Brianza in the Como area and Verbania on Lake Maggiore.

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Number of branches and related provincial shares calculated on the basis of the number of branches as at 31/12/2007 -Credito Valtellinese also has a branch in Piedmont in Verbania - DISTRIBUTION CHANNELS In addition to the branch network, Credito Valtellinese uses other distribution channels for its banking and financial services, and specifically, ATM, internet banking and POS, which as at 31 December 2007 broke down as follows:

DISTRIBUTION CHANNELS 31/12/2007

31/12/2006 Change %

Number of ATM 155 148 4.7% Number of internet users 31,233 28,442 9.8% Number of POS 4,373 4,339 0.8%

BANK WORKFORCE At year end 2007 the workforce of Credito Valtellinese totalled 938 staff, with an increase of 36 resources compared to 31 December 2006 and an average growth rate (Compound Annual Growth Rate, CAGR) in the 2004-2007 period equal to approximately 4%. During 2007 there were 29 leavers, 1 intragroup transfer and 66 new recruits.

864902

938

828

2004 2005 2006 2007

277

Growth in the Bank workforce from 2004 to 2007

Out of total staff, 632 are supervisors and workers, 285 are Managers and 21 are Executives. The network personnel amounts to approximately 76% of the Bank’s total workforce.

Supervisors and workers

68%

Executives2%

Managers30%

Bank workforce as at 31/12/2007 by contractual category The average age is approximately 40 years old and the percentage of graduates is equal to 32%. The average length of service of employees is just over 14 years.

BANK WORKFORCE 31/12/2007 31/12/2006 AVERAGE AGE 40.1 40.1 AVERAGE LENGTH OF SERVICE

14.2 15.5

PERCENTAGE OF GRADUATES

32% 31%

NETWORK PERSONNEL/TOTAL

76% 76%

Particular focus is constantly placed on human resource training, also by means of advanced distance learning technology. Training needs in terms of quantity and quality are identified through performance assessment, skills monitoring and individual career development plans. During 2007 5,681 training days were provided (+62% on the previous year) – of which 3,451 in the traditional classroom and 2,230 through distance training (lessons in virtual classrooms and use of self-teaching courses) – equal to an average of 6.9 days per employee. EURO MEDIUM TERM NOTES ISSUE PROGRAMME In February, the Parent Company placed on the Euromarket a new variable rate senior bond with a 5 year maturity, for EUR 350 million. This bond, issued within the Euro Medium Term Notes programme of Credito Valtellinese, was listed on the Luxembourg Stock Exchange. The issue was distributed among 55 qualified investors from 12 different countries. Orders mainly came from banks and investment funds which, respectively subscribed 78.5% and 17.5% of the total amount, with 54% of the bond placed abroad and 46% placed in Italy.

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INTERNAL AUDITING SYSTEM The following paragraph focuses on the activities and functions of the organisational structures of the Group and of the Bank that interact to form the complex Internal Auditing System (IAS), within the framework of the wider Internal Auditing System of the Creval Group, described in the report on consolidated operations. To deal with the risks underlying the flow of current operations, the Bank avails of the series of rules, procedures and structures that make up the Group internal auditing system, clearly defined to guarantee process efficiency and effectiveness, protect company assets, safeguard the reliability and integrity of data and verify compliance with internal and external regulations. The system in question is based on various levels of interaction between Company and Group departments, of which the coordinated action contributes to achievement of set targets. In compliance with explicit instructions of the Supervisory Authorities, internal auditing is divided into the following types of controls:

- line controls, aimed at ensuring proper execution of transactions, normally incorporated into the procedures or attributed to the production structures and carried out as part of back office activities;

- risk management controls, assigned to structures other than the production structures, aimed at defining risk measurement methods, verifying compliance with assigned powers and checking consistency of operations within the single areas with the risk-return objectives assigned;

- internal auditing controls, aimed at identifying anomalous trends and breaches of procedures and regulations, as well as evaluating the functionality of the overall internal auditing system, attributed, also through on-site inspections, continuously, periodically or, in exceptional cases, to independent structures outside of the operating units.

Within this framework, the main duty of the Bank’s Inspection Service is to identify any anomalies in conduct or procedures. In terms of corporate hierarchy, the Service reports directly to General Management, and is therefore in a position of total independence from operational departments and on a functional level it reports to the Group Auditing Department set up at Deltas S.p.A. to provide guidelines and coordination of inspection and auditing activity and a global assessment of the auditing methods and mechanisms. In relation to anti-money laundering, in addition to verifying strict compliance with regulations, the Inspection Service constantly works to ensure effective assistance and heightened awareness. The department also manages customer complaints, with specific follow-up action to guarantee appropriate correction of any anomalies detected and contributes to improving customer relations in this area. During the year the decision to assign authority for internal auditing in the “loans” areas, previously entrusted to the Risk Monitoring Service of the Loans Department, to the Inspection Service was approved. Specifically, the Service is now responsible for remote and on-site inspections (ordinary and extraordinary) – upon its own initiative or as ordered – on all the Bank’s peripheral operating units, ascertaining compliance of operational conduct (compliance inspections) in lending activity, as already performed in the “operational risk” area, on the basis of special inspection lists. It is also responsible for guaranteeing compliance with internal regulations or those issued by supervisory bodies on the matter of credit lines and the central credit register. In this way, the Bank intends to pursue the objective of centralising all the internal auditing activities in a single organisational department achieving significant synergies and improvements in the overall functionality and effectiveness of the internal auditing system. Within the Loans Department a “Loans Performance Management Service” has been set up which, no longer dealing with the internal auditing tasks assigned to the previous Risk Monitoring Service, performs systematic monitoring of the segment’s performance, both on an aggregate level and with reference to individual positions, and specifically those featuring anomaly indices. With regard to these positions, the Loans Performance Management Service proposes to the Bank’s Loans Committee their transfer to the “risk code” that more closely complies with the Supervisory provisions and, with regard to substandard loans, submits to Committee resolution the amounts of provisions deemed adequate. Contribution to effective oversight of the loans segment is also provided by:

- the Group Loans Committee and the Group Loans Department, set up within Credito Valtellinese; the Group Loans Department is responsible for strengthening Group credit policies, contributing to

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the creation and maintenance of a Group-wide “risk culture”, and supervising the quality of the assets of the whole Creval Group, defining the policies and criteria necessary to assessment and management of credit risks;

- the Risk Management Department of Deltas, entrusted with performing activities pertaining to: a) definition of credit risk measurement methods; b) development and management of the internal rating model for the Group’s customers; 3) reporting to the territorial banks (Credito Valtellinese, Credito Artigiano, Credito Siciliano, Banca dell’Artigianato e dell’Industria and the newly created Credito Piemontese) on the individual risk position; 4) reporting to the Parent Bank on the consolidated risk position.

The activity performed by the Inspection Service integrates with that of the Financial Auditing Service and the EDP Auditing Service, both based at the Deltas Auditing Department; of these, the first is responsible for controls pertaining to investment services, while the second focuses on Group IT processes, with the purpose of verifying EDP system reliability, compliance with quality procedures in the amendment and implementation of programmes, and the existence of adequate data security systems. During the year, internal controls performed by the Bank’s various auditing departments were performed in accordance with Group Auditing Activity Regulations, adopting techniques defined for this purpose, based on the use of constantly updated special checklists and the increasingly intense use of remote verification methods. Auditing activity performed in 2007 meant that all the risk profiles inherent in ordinary operations were subject to careful examination, which confirmed the correct application of internal and legal regulations and detected no significant anomalies. The periodic assessments performed by the Board of Directors on reports submitted by the individual auditing departments confirm adequacy of the entire auditing system and its capacity to constantly and effectively monitor the key risk areas of the Bank. ANTI-MONEY LAUNDERING: UIC INSPECTION In June the Italian Exchange Office (UIC) commenced an inspection on the procedures for application of the anti-money laundering provisions in Credito Valtellinese. The UIC Inspectors, who concluded their inspection in July, performed very close examination of the procedures for managing input to the single Anti-Money Laundering records, and of the movements in customers’ accounts in order to ascertain compliance with applicable provisions. After this, in September, the Head of the inspection unit delivered the report containing comprehensive observations and highlighting aspects that could be improved and adjusted, which in some cases had already been rectified by the competent Group functions during the inspection. After the observations had been acknowledged and the adjustments made, it emerged that the organisational and procedural approach adopted by the Creval Group to ensure appropriate oversight is on the whole adequate, as it allows compliance with applicable laws. Attention is drawn to the importance of continuing to implement further measures, including those suggested by the inspection unit, to ensure constant and up-to-date compliance with the sector in question. TREASURY SHARES Pursuant to the mandate granted to the Board of Directors by the Shareholders' Meeting, and in compliance with the Articles of Association, in 2007 the Bank purchased 817,692 treasury shares on the market for a countervalue of EUR 8.5 million. In the same period 762,621 Credito Valtellinese shares were sold for EUR 8.1 million. As a result of these purchase and sale transactions, at year end 2007 Credito Valtellinese held 199,717 ordinary shares issued by the Bank, in its portfolio, equal to 0.7% of the total shares as at that date with an overall value of EUR 1,338.034. The aforesaid transactions were executed in compliance with current legislation, as part of normal dealings to encourage share circulation. SECURITY POLICY DOCUMENT The Company’s Board of Directors examined and approved, pursuant to point 19 of Annex B – Technical Regulations Governing Minimum Security Measures – of Legislative Decree no. 196 dated 30 June 2003 (Privacy Code), the 2007 update of the Security Policy Document, drawn up on a Group-wide basis.

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Preparation of the update in question involved a number of the Group’s special purpose companies, which were entrusted with duties in their corresponding sector of activity; specifically Bankadati dealt with logical security, Stelline with physical security and Deltas with training and controls. The document is divided in the four sections outlined below:

• logical security, concerning the pre-established technical and organisational measures to prevent risks and damage to data handled by the Group IT system through the following procedures: Disaster Recovery, User Profiling, Probing, Antivirus, Intrusion Prevention System, URL Filter, Certified Electronic Mail;

• physical security, concerning the strategic oversight of issues pertaining to: completeness and reliability of physical data; protection of the areas and premises in which data is stored and of the accessibility to said data;

• training, concerning the initiatives aimed at instructing operators on the risks to which data may be exposed, the measures available to prevent detrimental events, the profiles of laws governing protection of personal data in relation to the respective activities and consequent responsibilities;

• control, concerning responsibilities for control, within the framework of the group model which provides for performance of centralised functions by the Group Auditing Department, within which the EDP Auditing Service, the Finance Auditing Service and the Group Inspection Service work, and the presence in each territorial bank of the Inspection Service, reporting to General Management.

TRANSACTIONS WITH GROUP COMPANIES AND OTHER RELATED PARTIES The transactions implemented between companies of the Credito Valtellinese banking Group form part of the consolidated organisational model based on a network logic. Accordingly, all intragroup transactions implemented with banking companies mainly concern transactions relating to services rendered, deposits and financing within the scope of ordinary interbanking business. Other contractual dealings entered into with the Group’s specialised finance companies and special purpose companies concern assistance and consulting services and specialised services supporting banking operations. The economic effects of the aforesaid transactions are regulated on the basis of primary market conditions as far as the inter-bank transactions are concerned and on the basis of the specific contractual agreements which, with the main objective of optimising the synergies and economies of scale and purpose at Group level, refer to parameters that are objective and constant over time, distinguished by substantive transparency and fairness. As in other years, last year payments due for services provided were formally quantified according to standard, tested parameters that take account of the actual use made by each member company. Said dealings are managed according to principles of conduct and procedural regulations contained within specific regulations approved by the Board of Directors, entitled the "Code of Conduct for related party, intragroup, unusual and/or atypical transactions". This document provides a clear and approved reference framework that systematically summarises the various provisions governing management of these transactions, formally defining criteria for identifying the transaction and the related procedures for executing the decision-making process. In accordance with Article 2391-bis of the Italian Civil Code, the document defines and occasionally integrates the operating approach and company regulations already prevailing with the aim of ensuring transparency and substantive and procedural correctness in related party transactions. In accordance with these regulations, transactions of greater importance in economic, equity and financial terms performed with related parties are reserved to the exclusive authority of the Board of Directors, and reporting methods are also established for transactions implemented by the Bank’s delegated bodies. The Board of Directors is exclusively responsible for definition of intragroup contractual agreements and approval and possible amendment of the related economic conditions. Furthermore, the overall approach to intragroup transactions is subject to annual review by the Board of Directors, with the aim of verifying the consistency of the criteria which oversee related management – contractual aspects, methods for calculating and reviewing considerations – in relation to the evolution of the operating context. Related party transactions are classed as part of the Bank’s ordinary operations and are governed by standard market conditions, or are aligned with the most favourable conditions applied to Personnel. Detailed information on intragroup and related party transactions, including information on the effects of transactions or existing positions with such counterparties on the balance sheet and on the income statement, accompanied by summary tables of such effects, are contained in Part H of the Notes to the Financial Statements.

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No atypical or unusual transactions, including with Group companies and related parties, were carried out during the year. ANNUAL REPORT ON MUTUAL COOPERATIVE BANKING PURSUANT TO ARTICLE 2545 OF THE ITALIAN CIVIL CODE This section of the Report not only ensures compliance with the obligation set forth in Article 2545 of the Italian Civil Code, but also represents an opportunity to provide Shareholders, through objective and measurable data, with certification that the activity implemented by our Bank complies with the cooperative purpose stated in Article 2 of the Articles of Association and hence provides further proof that the cooperative model is able to fully satisfy – even in the current competitive context – the demands for economic, moral and cultural promotion arising from the Bank’s social base and the reference territory. In 2007 the Board of Directors once again ensured the focus of the Bank’s works gave precedence to the figure of the Shareholder and in this respect actions in the following areas are worthy of particular note:

- services provided to Shareholders at favourable conditions; - profit sharing policy; - social and local community support initiatives; - rules of corporate functioning.

The social base and services offered to Shareholders Some significant figures are highlighted below:

- as at 31 December 2007 the number of Shareholders totals 81,091, up by 0.5% on last year’s figure;

- during 2007 the Board of Directors accepted 9,100 applications for registration as Shareholder, with an average of 827 per Board meeting;

- the breakdown of the corporate body provided below highlights a high degree of loyalty:

Loyalty brackets 2007 % weight

from 0 to 5 years 31,831 39.25%

between 5 and 10 years 15,531 19.15%

between 10 and 15 years 12,372 15.26%

between 15 and 20 years 3,041 3.75%

between 20 and 25 years 6,778 8.36%

between 25 and 30 years 11,500 14.18%

over 30 years 38 0.05%

TOTAL 81,091

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between 5 and 10 years 19.15%

between 10 and 15 years 15.26%

between 15 and 20 years 3.75%

between 20 and 25 years 8.36%

between 25 and 30 years 14.18%

over 30 years 0.05%

from 0 to 5 years 39.25%

Weight of Shareholders loyalty brackets as at 31/12/2007

- a breakdown of the shareholding structure shows a clear prevalence of private subjects, making up

over 90% of the total, confirming the Bank’s retail vocation; - Shareholders are still essentially distributed in Credito Valtellinese’s traditional reference territories.

Approximately 90% of Shareholders reside in the North of Italy, confirming the strong link with the Parent Bank’s territory.

Naturally the figure of Shareholder becomes even more central when the party concerned is also a Customer of the Bank or of other Group banks: this capacity represents a “plus” which emphasises the trust-based link and strengthens the cooperative focus of the commercial initiatives undertaken. Article 19, paragraph 1 of the Articles of Association expressly provides that “The Shareholder who […] has been admitted to the Company and enrolled in the corporate registers may obtain loans – within the limits and according to the procedures established by the Board of Directors – having priority over the non-Shareholder, offering the same guarantees.” In this regard, the year end 2007 figure, which shows the Shareholder – Customers of Credito Valtellinese to represent over 90% of the shareholding structure, proves extremely significant. In line with the principles mentioned above, Credito Valtellinese reserves to its Shareholder – Customers financial and banking products featuring costs that are more contained than standard price lists. Specifically, Shareholders holding current accounts in the Conto Armonia range – which offers an array of clear and transparent “package” current accounts, reserved to the Group’s private customers – are entitled to a discount on the monthly fees which varies from 50% to 100% according to the type of account and to possession of shares of Group Banks. During 2007, a new “Specialsocio” current account was released which is reserved to Shareholders of Credito Valtellinese shares which – with monthly fees equal to EUR 5 for holders of at least 1,000 shares and EUR 15 for those holding less than 1,000 shares – allows all banking transactions to be performed through free or facilitated access to a wide range of products and services. More specifically, the aforesaid fees include the following products and services at facilitated conditions:

- issue of cheque book completely free of charge; - use of all the facilities provided by the “banc@perta” line and by the “Post@inlinea” service (on line

dispatch of statement of account and banking correspondence); - issue of an unlimited number of prepaid cards (cart@perta basic or gold); - subscription of Bancomat – Pagobancomat Internazionale cards with chip technology;

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- subscription of Keyclient Eurocard/Mastercard or Visa credit cards; - facilitated value dates on cheques paid-in; - custody of deposited securities, transfer of securities, standing orders for utility bills and automatic

regular transfers provided free for charge; - 50% discount on transfers performed by internet (electronic) or at the branch; - 50% discount on safe deposit box fees.

With regard to credit line and investment transactions, in compliance with the provisions of the Articles of Association, the Bank has always endeavoured to provide lending services that closely meet the Shareholders’ requirements, at favourable conditions. In this regard, Shareholders holding at least 1,000 shares and a “Specialsoci” account are exclusively entitled to:

- 50% discount on credit screening fees for mortgages; - particularly favourable rates on “Fido Famiglia” and “Fidocontinuo” personal loans; - possibility of requesting disbursement of “Fido Studio Figli”, loans of up to EUR 5,000 provided at a

rate equal to Euribor, without added spread; - 25% discount on fees on Portfolio Management.

Bearing further witness to the special relationship that the Bank has built up over its century of activity with its Shareholder – Customers, it is added that:

- total deposits from Shareholder – Customers of Credito Valtellinese are equal to more than 50% of the Bank’s total deposits;

- loans provided by the Bank to Shareholder – Customers are equal to over 10% of total loans;

Profit-sharing policy Achievement of the cooperative purpose, considered as a tool by which to grant the Shareholder better contractual conditions than the non-Shareholder, does not hinder the corporate policies that aim to increase profitability of the equity investment. From this point of view, Credito Valtellinese has shown its capacity to combine the requirements arising from its cooperative nature with the need to guarantee adequate levels of creation of value through a dividend policy directed towards maximising the yield for shareholders. The profit-sharing policy is governed by Article 55 of the Articles of Association, which states that “Net income, after deduction of the transfer to legal reserve of an amount of no less than that which is established by law, will be allocated in accordance with decision of the Shareholders’ Meeting to distribution of dividend to the Shareholders on the basis of the shares owned and to provision to the charity fund and to the setting up or increase of the extraordinary reserve or of other reserves however they may be entitled.” As mentioned elsewhere in the Directors’ Report, the pay out ratio – portion of income distributed to Shareholders – has reached particularly high levels in the last 5 years, with an average of 75.4%.

CREDITO VALTELLINESE

(EUR/1000) 2003 (*) 2004 (*) 2005 (*) 2006 2007

Net profit 32,066 36,483 41,830 48,121 63,603 Amount of dividends 21,831 26,404 31,387 36,389 54,600 Pay out ratio 68% 72% 75% 76% 86%

(*) Net profit was not recalculated according to the international accounting standards IAS/IFRS.

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Social and local community support initiatives The table below, which summarises the income generated in the years 2003-2007 and the amounts allocated to the charity fund, shows how the share of profit allocated to the Charity Fund to support the charity activities of the Fondazione Gruppo Credito Valtellinese has increased over the years:

Euro / 1.000 2003(*) 2004(*) 2005(*) 2006 2007

Net income 32,066 36,483 41,830 48,121 63,603

Allocation to the charity fund 800 950 1,000 1,900 2,300

Charity fund/net profit ratio 2.5% 2.6% 2.4% 3.9% 3.6%

(*) Net profit was not recalculated according to the international accounting standards IAS/IFRS. In the various areas in which it is operates, Credito Valtellinese, like the other Group Banks, acts in close contact with the economic/social fabric of the local communities and provides a clear and constant reference point for promotion of the reference territory, while its focus on the sector comprising small and medium-sized enterprises and households allows it to anchor its lending activity more closely to the territory which supplies the financial resources. Its commitment to providing a service to the community, which forms the cornerstone of the Articles of Association of the Fondazione Gruppo Credito Valtellinese, is fully consistent with the cooperative matrix on which our Bank is founded. A detailed description of the initiatives promoted by the Fondazione can be found in the Corporate Report.

Rules of corporate functioning Our Bank’s compliance with the cooperative model is confirmed by the provisions of the Articles of Association that govern admission of Shareholders and their participation in corporate life. Specifically, it is emphasised that no “admission fee” is required for effective exercise of the rights to which Shareholders are entitled, nor has any minimum limit to share ownership been established: hence, without prejudice to approval of the Board of Directors (which must provide motivation in the case of refusal), all the administrative rights associated with the capacity of Shareholder are acquired through ownership of just one share and without payment of any membership fee. With regard to application of the cooperative model of corporate democracy, Credito Valtellinese, which in 2001 introduced the list vote for appointment of Directors and Auditors to its Articles of Association, has reformulated the provisions of the Articles of Association through subsequent amendment projects, in order to made the principles and system of governance more suited to the role of direction and coordination of the Group performed by the Parent Bank. Confirmation is hereby provided of the Bank’s strict application of the criteria established by law - the Italian Civil Code and the Consolidated Banking Law – and by the Articles of Association on the matter of procedures for admission of Shareholders to the Bank’s shareholding structure and for control of compliance with the limit to share ownership set forth in Article 30, sub-section of the Consolidated Banking Law, and, lastly the periodic verification of the actual extent of the corporate body, with the cancellation of Shareholders whose share ownership is equal to zero.

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INVESTMENTS IN ASSOCIATES AND COMPANIES SUBJECT TO JOINT CONTROL HELD BY COMPANY MEMBERS The table below provides details of investments in associates and companies subject to joint control held by Directors, Statutory Auditors and General Management of Companies of the Credito Valtellinese banking group, in accordance with the provisions of laws in force.

Surname and name

Associated company

No. of shares held at the

beginning of 2007

No. of shares purchased

shares from conversion of convertible

bonds and/or capital increase

No. of shares

sold

No. of shares held at the end

of 2007

De Censi Giovanni Credito Valtellinese 5,921 2,961 8,882

Credito Artigiano 21,200 21,200

Zuccoli Giuliano Credito Valtellinese 4,156 4,574 4,233 12,963

Credito Artigiano 6,450 4,150 10,600

Vitali Salvatore Credito Valtellinese 1,600 800 1,050 3,450

Credito Artigiano 1,000 1,000

Bartesaghi Renato Credito Valtellinese 26,000 23,230 49,230

Bettini Franco Credito Valtellinese 10,936 8,460 19,396

Credito Artigiano 2,300 2,300

Bresesti Fabio Credito Valtellinese 532 6,500 1,939 8,971

Credito Artigiano - 1,000 1,000

Cogliati Gabriele Credito Valtellinese 20,000 20,000 40,000

Colombo Michele Credito Valtellinese 54,620 45,380 100,000

Credito Artigiano 3,450 3,450

Continella Giovanni Credito Valtellinese 3,123 2,370 5,493

Credito Siciliano 15,198 15,198

Cotelli Mario Credito Valtellinese 10,446 10,076 150 20,372

Credito Artigiano 2,000 2,000

De Santis Paolo Credito Valtellinese - 1,000 500 1,500

Moro Franco Credito Valtellinese 25,869 17,520 10,000 33,389

Credito Artigiano 3,135 3,135

Palma Angelo Credito Valtellinese 13,000 7,000 20,000

Credito Artigiano 25,000 25,000

Pasqua Valter Credito Valtellinese 100 50 150

Credito Artigiano 100 100

Quadrio Maurizio Credito Valtellinese 6,330 4,000 4,895 15,225

Credito Artigiano 2,300 2,300

Ribolla Alberto Credito Valtellinese 5,530 4,470 10,000

Santi Marco Credito Valtellinese 4,454 5,465 9,919

Credito Artigiano 2,000 2,000

Valassi Vico Credito Valtellinese 6,017 3,020 9,037

Campidori Roberto Credito Valtellinese 24,479 18,765 43,244

Credito Artigiano 4,600 4,600

Garavaglia Angelo Credito Valtellinese 5,990 4,282 5,145 4,982 10,435

Credito Artigiano 2,570 2,500 70

Rapella Alfonso Credito Valtellinese 7,677 5,915 13,592

Credito Artigiano 2,300 2,300

Cottica Aldo Credito Valtellinese 2,741 2,040 4,781

Credito Artigiano - 500 500

Villa Gabriele Credito Valtellinese -

Credito Artigiano -

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Fiordi Miro Credito Valtellinese 2,489 1,988 4,477

Credito Artigiano 2,300 2,300

Monti Giovanni Paolo Credito Valtellinese 5,681 5,515 4,778 15,974

Credito Artigiano 1,150 1,150

Sala Franco Credito Valtellinese 25,296 18,280 43,576

Credito Artigiano 2,300 2,300

Rocca Enzo Credito Valtellinese 1,685 1,400 1,155 370 3,870

AUDIT The Bank’s financial statements 2007 have been audited by the independent auditors Reconta Ernst & Young S.p.A. PROPOSALS TO THE SHAREHOLDERS’ MEETING PROPOSAL FOR APPROVAL OF THE FINANCIAL STATEMENTS AND FOR ALLOCATION OF NET INCOME Dear Shareholders, In view of the elements examined thus far and in compliance with the provisions of the law and the Articles of Association, we hereby submit to your approval the financial statements as at 31 December 2007, comprising the Balance Sheet, Income Statement, Statement of Changes in Shareholders' Equity, Cash Flow Statement and Notes to the Financial Statements, together with related attachments, and the Directors' Report on Operations, and we therefore propose that the net income of EUR 63,603,081.33 be allocated as follows: Net income EUR 63,603,081.33 - to legal reserve (10%) EUR 6,360,308.13 - to extraordinary reserve EUR 342,593.44 - to the charity fund EUR 2,300,000.00 - remainder for distribution to Shareholders EUR 54,600,179.76 Hence we propose that Shareholders be assigned a unit dividend of EUR 0.34 for each share held, for an amount equal to EUR 54,600,179.76. APPOINTMENT OF A DIRECTOR The ordinary Shareholders’ Meeting will be called to “appoint a Member of the Board of Directors to replace Franco Bettini who has left office”. The Bank’s Board of Directors, which met on 26 February 2008, passed a resolution, in accordance with the combined provisions of Article 33 and Article 32, final paragraph, of the Articles of Association, to designate Aldo Fumagalli Romario as candidate recommended by the Board to take the office of member of the Board of Directors. PURCHASE AND SALE OF TREASURY SHARES Pursuant to Article 12 of the Articles of Association, the Shareholders’ Meeting is asked to pass a resolution to renew the authorisation granted to the Board of Directors to perform purchase transactions of treasury shares and their subsequent disposal or cancellation, in compliance with prevailing laws (Articles 2357 and thereafter and Article 2529 of the Italian Civil Code; Article 132 of Legislative Decree 58 dated 24 February 1998 and subsequent amendments) and regulations (Article 144-bis, CONSOB Resolution 11971/99 and subsequent amendments). The request for authorisation to perform this type of transaction aims to promote circulation of securities within standard brokerage activities. These transactions will occur in accordance with the procedures and limits set forth below:

without prejudice to the provisions of Article 132, subsection 3 of Legislative Decree 58/98, purchase and sale transactions involving treasury shares – ordinary Credito Valtellinese shares – must be

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performed on regulated markets in accordance with operating methods established in the organisation and management regulations of said markets, which do not allow direct matching of purchase orders with predetermined sales orders;

said transactions may take place, through a number of transactions performed in the period between this Shareholders’ Meeting and the next Shareholders' Meeting called to approve the 2007 financial statements;

the purchase of treasury shares will involve a maximum of 4,000,000 shares (out of the current total of 160,588,764 issued shares) for a maximum countervalue of EUR 50,000,000.00;

the total treasury shares traded per month may not exceed 25% of the average monthly total of shares traded in the previous half-year;

the number of treasury shares held in the portfolio may not however exceed 3% (three percent) of the total shares making up the share capital;

share purchases must be concluded at a price no higher than the maximum official closing price indicated by the Italian Stock Exchange immediately prior to each transaction, and no lower than the minimum par value of the share;

the sale of treasury shares must be executed at a price no lower than the official closing price indicated by the Italian Stock Exchange immediately prior to each sale transaction;

upon purchase of treasury shares a special treasury shares reserve will be established pursuant to Article 2357-ter of the Italian Civil Code;

any cancellation of treasury shares must occur in accordance with the Articles of Association and current law, with use of the treasury shares reserve to cover any difference between par value and the purchase price;

in addition to the reporting obligations specified by prevailing laws, a monthly status report will be issued to the market with regard to the treasury shares purchase programme.

Lastly it is also proposed that the Chairman be granted full powers to implement this resolution and to introduce any related change or integration that may be required or recommended by Supervisory Authorities or the Market Management Company. CONCLUDING NOTES Information on ownership structures

The information on the ownership structure of Credito Valtellinese, prescribed by Article 123 bis of Legislative Decree no. 58 dated 24 February 1998 (Consolidated Financial Law), is contained in a special section of the Report on Corporate Governance drawn up pursuant to Articles 124 bis of the Consolidated Financial Law and 89 bis of CONSOB Regulations 11971/1999 (Issuers’ Regulations), which accompanies this report and can also be found on the company’s website at the address http://www.creval.it/investorRelations/index.html. Significant events occurring after year end After the end of 2007 and until the approval of this report, no significant event occurred that could have a material effect on the Bank’s state of affairs or the report provided hereunder. Business outlook The economic context is showing signs of increased uncertainty with regard to the economic situation and trends in the financial markets. Despite this backdrop, the Board of Directors believes that the Bank’s results may post further improvement, with regard to both financial aggregates and trends in the main profitability indices, in line with the targets set forth in the Creval Group’s 2007-2010 Strategic Plan. Closing remarks Dear Shareholders, We conclude this Report by expressing our deep and sincere appreciation to the Shareholders, customers, local institutions and operators, each of whom contributed to achieving important goals.

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We also express our gratitude and appreciation to the General Management, Senior Managers and to all the Bank’s Collaborators for the constant professionalism and commitment shown, in their respective roles and responsibilities. Lastly we extend our heartfelt thanks to all employees for the competence, dedication and sense of responsibility that was shown at all times. The Board of Directors Sondrio, 18 March 2008

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Guide to consultation The financial statements intend to provide a view of the balance sheet, the income statement, the changes in shareholders’ equity and the cash flows of Credito Valtellinese as at 31 December 2007. The content of the statements is governed by Bank of Italy circular no. 262 dated 22 December 2005 issued pursuant to Article 5 of Legislative Decree no. 87 dated 27 January 1992, taking into account the amendments introduced by Article 9 of Legislative Decree no. 38 dated 28 February 2005, "Exercise of the options provided by Article 5 (EC) regulations no. 1606/2002 on the international accounting standards ". The information required by the international accounting standards has been included, even if not referred to in the aforesaid provisions.

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FINANCIAL STATEMENTS

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BALANCE SHEET (IN EUR)

ASSETS 31/12/2007 31/12/200610 - Cash and cash equivalents: 60,025,279 51,029,781

20 - Financial assets held for trading: 14,685,585 88,464,708

40 - Financial assets available for sale: 60,235,755 40,080,320

60 Due from banks 1,233,619,855 1,142,280,070

70 Loans to customers 5,459,677,483 4,685,653,270

100. Investments in associates and companies subject to joint control 732,145,585 696,860,046

110. Property, plant and equipment 180,496,247 177,735,649

120. Intangible assets 3,944,671 3,944,671

including: - goodwill 3,944,671 3,944,671 130. Tax assets 38,990,383 38,005,804

a) current 20,401,924 20,115,883 b) prepaid 18,588,459 17,889,921 150 Other assets 140,496,104 75,297,806

Total assets 7,924,316,947 6,999,352,125

LIABILITIES AND SHAREHOLDERS’ EQUITY 31/12/2007 31/12/2006 10. Due to banks 536,429,934 1,036,032,767

20. Due to customers 2,923,181,867 2,790,913,108

30. Securities issued 2,547,466,387 2,007,744,094

40. Financial liabilities held for trading 2,785,430 5,013,907

80. Tax liabilities: 44,368,252 36,077,666

a) current 41,817,656 30,496,555 b) deferred 2,550,596 5,581,111 100. Other liabilities 263,939,654 198,639,364

110. Employee termination indemnities 16,584,659 16,319,837

120. Provisions for risks and charges: 40,320,360 38,151,949

a) post employment benefits 30,703,286 31,512,469 b) other provisions 9,617,074 6,639,480 130. Valuation reserves 48,509,259 98,993,907

150. Equity instruments - 707,643

160. Reserves 138,101,958 127,461,341

170 Share premium reserve 738,303,466 323,022,836

180. Share capital 562,060,674 272,913,873

190. Treasury shares (-) -1,338,034 -761,050

200. Net income (loss) for the period 63,603,081 48,120,883

Total liabilities and shareholders’ equity 7,924,316,947 6,999,352,125

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INCOME STATEMENT (IN EUR)

ITEMS 2007 2006 10. Interest income and similar income: 348,675,644 254,394,664

20. Interest expense and similar expense (190,846,731) (133,793,196)

30. Interest margin 157,828,913 120,601,46840. Fee and commission income 67,286,303 65,821,270

50. Fee and commission expense (13,883,384) (12,877,063)

60. Net fee and commission income 53,402,919 52,944,20770. Dividends and similar income: 29,499,343 24,611,303

80. Profit (loss) on trading activities: 2,207,595 4,312,842

90. Fair value adjustments in hedge accounting: - 11,506

100. Profit (loss) from disposal or repurchase of: 95,777 1,932,680

a) loans (292) (93,108) b) financial assets available for sale 10,375 2,176,078 d) financial liabilities 85,694 (150,290) 120. Net interest and other banking income 243,034,547 204,414,006130. Net losses/recoveries on impairment of : (25,399,179) (21,062,717)

a) loans (25,417,090) (20,921,503) b) financial assets available for sale - (425) d) other financial activities 17,911 (140,789) 140. Net income from banking activities 217,635,368 183,351,289150 Administrative expenses: (125,851,497) (120,849,381)

a) personnel expenses (59,505,832) (58,577,225) b) other administrative expenses (66,345,665) (62,272,156) 106. Net provisions for risks and charges (3,094,565) (1,600,424)

170. Net losses/recoveries on property, plant and equipment (6,747,637) (6,944,934)

190. Other operating expenses/income 15,407,224 14,223,404

200. Operating expenses (120,286,475) (115,171,335)210 - Profit (loss) on investments in associates and companies subject to joint control (1,471,922) 16,841

240. Profit (loss) on disposal of investments 12,753 21,244

250. Income (loss) before tax from continuing operations 95,889,724 68,218,039260 - Taxes on income from continuing operations: (32,286,643) (22,517,976)

270. Income (loss) after tax from continuing operations 63,603,081 45,700,063280. Income (loss) after tax from discontinued operations - 2,420,820

290. Net income (loss) 63,603,081 48,120,883

2007 2006

Basic earning per share 0.47 0.53Diluted earning per share 0.42 0.47

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STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (in EUR)

Issue of new shares

Purchase of treasury shares

Allocation of extraordinary

dividends

Change in equity

instruments

Derivatives on treasury

shares Stock options

Share capital:a) ordinary shares 272,913,873 272,913,873 53,529,588 235,617,213 562,060,674 b) other shares

Share premium reserve 323,022,836 323,022,836 415,280,630 738,303,466 Reserves:a) profits 127,461,341 127,461,341 9,832,367 808,250 138,101,958 b) other

Valuation reserves: a) available for sale 8,616,715 8,616,715 3,044,940 11,661,655 b) cash flow hedging c) other (*) 90,377,192 90,377,192 53,529,588- 36,847,604 Equity instruments 707,643 707,643 707,643- Treasury shares 761,050- 761,050- 7,989,980 8,566,964- 1,338,034- Net income for the period 48,120,883 48,120,883 9,832,367- 38,288,516- 63,603,081 63,603,081 Shareholder’s Equity 870,459,433 870,459,433 38,288,516- 3,853,190 658,887,823 8,566,964- 707,643- 63,603,081 1,549,240,404

(*) This item includes reserves allocated under specific revaluation laws. Attached is the statement of owned properties revalued as at the end of the period.

Issue of new shares

Purchase of treasury shares

Allocation of extraordinary

dividends

Change in equity

instruments

Derivatives on treasury

shares Stock options

Share capital:a) ordinary shares 235,405,446 235,405,446 37,508,427 272,913,873 b) other shares -

Share premium reserve 273,357,928 273,357,928 49,664,908 323,022,836 Reserves:a) profits 122,997,553 122,997,553 3,938,769 525,019 127,461,341 b) otherValuation reserves:

a) available for sale 1,403,517 1,403,517 7,213,198 8,616,715 b) cash flow hedging c) other (*) 90,377,192 90,377,192 90,377,192 Equity instruments 1,229,636 1,229,636 521,993- 707,643 Treasury shares 4,459,077 5,220,127- 761,050- Net income for the period 36,326,159 36,326,159 3,938,769- 32,387,390- 48,120,883 48,120,883 Shareholder’s Equity 761,097,431 761,097,431 32,387,390- 7,738,217 91,632,412 5,220,127- 521,993- 48,120,883 870,459,433

(*) This item includes reserves allocated under specific revaluation laws. Attached is the statement of owned properties revalued as at the end of the period.

Transactions on shareholders' equity

Group Equity

Changes for the period

Net income for the period as at

31/12/2007

Group Equity Closing balance as at 31/12/2005

Change to opening balances

Opening balance as at 01/01/2006

Allocation of prior year income Changes for the period

Net income for the period as at

31/12/2006

Shareholders' equity as at 31/12/2007

Change in reserves

Transactions on shareholders' equity

Shareholders' equity as at 31/12/2006 Reserves

Dividends and other allocations

Change in reserves

Closing balance as at 31/12/2006

Change to opening balances

Opening balance as at 01/01/2007

Allocation of prior year income

Reserves Dividends and

other allocations

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CASH FLOW STATEMENT – DIRECT METHOD (IN EUR)

2007 2006 A. OPERATING ACTIVITIES 1. Management 83,039,414 37,537,247- interest income received (+) 348,288,853 250,270,636

- interest expense paid (-) -186,154,452 -132,874,604

- dividends and similar income (+) 688,250 534

- net commissions (+/-) 54,558,678 54,224,456

- personnel expenses (-) -59,382,549 -55,713,571

- other costs (-) -57,295,209 -50,789,707

- other revenues (+) 16,288,347 17,732,430

- taxes (-) -33,952,504 -46,734,566

- costs/revenues after tax from discontinued operations (+/-) - 1,421,639

2. Cash flow generated/utilised by financial assets -904,816,290 -915,757,162- financial assets held for trading 72,937,544 54,766,620

- financial assets available for sale -24,223,201 -7,363,989

- loans to customers -795,146,156 -738,815,008

- due from banks: repayable on demand 43,590,585 -92,092,508

- due from banks: other -135,439,868 -169,050,213

- other assets -66,535,194 36,797,936

3. Cash flow generated/utilised by financial liabilities 229,410,711 843,990,310- due to banks: repayable on demand -306,647,066 353,690,100

- due to banks: other -190,886,333 -243,553,982

- due to customers 131,203,787 277,376,368

- securities issued 534,089,603 421,707,696

- financial liabilities held for trading -2,228,477 -733,505

- other liabilities 63,879,197 35,503,633

Cash flow generated/utilised by operating activities -592,366,165 -34,229,605B. INVESTMENT ACTIVITIES 1. Cash flow generated by 31,479,989 25,856,106

- sale of investments in associates and companies subject to joint control 2,614,777 1,230,212

- dividends from investments in associates and companies subject to joint control 28,811,093 24,610,769

- sale of property, plant and equipment 54,119 15,125

2. Cash flow utilised by -42,150,669 -38,342,926- purchase of investments in associates and companies subject to joint control -32,588,316 -28,898,588

- purchase of property, plant and equipment -9,562,353 -9,444,338

Cash flow generated/utilised by investment activities -10,670,680 -12,486,820C. FUNDING ACTIVITIES - issue/purchase of treasury shares 650,320,859 86,412,285

- dividend distribution and other -38,288,516 -32,387,389

Cash flow generated/utilised by funding activities 612,032,343 54,024,896CASH FLOW GENERATED/UTILISED DURING THE PERIOD 8,995,498 7,308,471

Key: (+) generated (-) utilised

RECONCILIATION

Balance sheet items 2007 2006 Cash and cash equivalents at the beginning of the period 51,029,781 43,721,310Cash flow generated/utilised during the period 8,995,498 7,308,471

Cash and cash equivalents at the end of the period 60,025,279 51,029,781

Key: (+) generated (-) utilised

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Guide to consultation The purpose of the notes to the financial statements is to highlight all the complementary information that is required to facilitate comprehension and increase reliability of the financial statements. They form an integral part of the financial statements, together with the balance sheet, income statement, statement of changes in shareholders’ equity and cash flow statement. The content of the notes to the financial statements is governed by Bank of Italy circular no. 262 dated 22 December 2005 issued pursuant to Article 5 of Legislative Decree no. 87 dated 27 January 1992, taking into account the amendments introduced by Article 9 of Legislative Decree no. 38 dated 28 February 2005, "Exercise of the options provided by Article 5 of (EC) regulations no. 1606/2002 on international accounting standards”. The information requested by CONSOB, by the Italian Civil Code and by the international accounting standards is included, even if not referred to in the aforesaid provisions.

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297

NOTES TO THE FINANCIAL STATEMENTS

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PART A – ACCOUNTING POLICIES

A.1 - GENERAL INFORMATION

SECTION 1 - STATEMENT OF COMPLIANCE WITH INTERNATIONAL ACCOUNTING STANDARDS

Pursuant to the Legislative decree no. 38 of 28 February 2005, the financial statements of Credito Valtellinese have been drawn up according to IAS/lFRS accounting standards issued by the International Accounting Standards Board (IASB) and approved by the European Union, which the bank was required to comply with by 31 December 2007, including the related interpretations of the lnternational Financial Reporting Interpretations Committee (lFRIC) included, as set forth by EC Regulation no. 1606 of 19 July 2002. The individual financial statements as at 31 December 2007 have also been prepared in compliance with the instructions issued by the Bank of Italy within the scope of its regulatory function over the technical structure of financial statements of banks and financial institutions as provided by Legislative Decree 38/05: "Instructions for the preparation of the separate and consolidated financial statements of banks and financial companies which are parent companies of banking groups" (Provision of 22 December 2005 - circular no. 262).

SECTION 2 - BASIS OF PREPARATION

The financial statements comprise the Balance Sheet, the Income Statement, the Statement of Changes in the Shareholders' equity, the Cash Flow Statement and these Notes to the financial statements and are accompanied by the Directors’ Report on Operations. The amounts reported in the Financial Statements are expressed in euro, while those in the Notes to the financial statements, as well as in the Directors' report, are in thousands of euro, unless otherwise indicated. The financial statements and the notes to the financial statements show, together with the amounts for the reporting period, also the corresponding figures as at 31 December 2006. In the Balance Sheet and Income Statement, drafted according to Bank of Italy’s regulation, the items equal to zero for the year under review and for the previous year have not been included. In the Income Statement and in Part C of the Notes to the financial statements, costs are reported in brackets, while revenues have no sign. The Statement of Changes in Shareholders’ Equity presents the breakdown and changes occurred in the shareholders’ equity during the year under review and the previous one. The Statement of Cash Flows has been prepared according to the direct method, in which the main gross cash collection and disbursement items are displayed. The cash flows are divided into operating, investment and funding activities. The Notes to the financial statements do not include the sections pertaining to items equal to zero in the 2007 and in the previous one. On 25 February 2008, the Bank of Italy sent banks a clarification regarding the methods for accounting of leasing for property under construction (leasing costruendo). Specifically, it was noted that two types of operational methods may be identified within types of leasing contracts, based on whether the risks inherent in managing the worksite and the construction of the asset are transferred during the phase of construction of the asset to be leased. For the purposes of drawing up the financial statements, it is specified that in the first case (transfer of the risk), the lessors point out the operations on assets under construction and assets awaiting leasing under the item “Loans”. In the second case (risks not transferred), the lessors record the assets under construction and those awaiting leasing under “Assets used in the business”. Thus, leasing for property under construction is recorded in the financial statements based on this interpretation. In line with the above, the comparison period (financial statements as at 31 December 2006) was reclassified pursuant to paragraph 38 of IAS 1, without, however, modifying the net income (loss) or shareholders’ equity.

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SECTION 3 - EVENTS SUBSEQUENT TO FINANCIAL STATEMENT DATE

Following the end of 2007 and the approval of this report, no corporate fact occurred which may have significant influence on the reported financial position and economic results of the Bank. It is important to note that as of today’s date, Credito Valtellinese has already subscribed the share capital increase of Credito Artigiano S.p.A. for its investment, with a total payment of approximately EUR 196 million. In relation to the commitment undertaken to fully subscribe the share capital increase, also in relation to the unsubscribed shares at the end of the period of Offering on the stock exchange pursuant to art. 2441, paragraph 3 of the Italian Civil Code, which concluded on 20 March 2008, the definitive expense for Credito Valtellinese may amount to up to a maximum of approximately EUR 228 million.

SECTION 4 - OTHER ASPECTS

These financial statements are subject to auditing by the independent auditing firm Reconta Ernst & Young S.p.A. The company has exercised the option of national tax consolidation, as regulated by articles 117 and subsequent of the Income Tax Consolidation Act.

A.2 - MAIN ITEMS IN THE FINANCIAL STATEMENTS

This section provides information on the accounting principles adopted for drawing up the Annual Report. Recognition, classification, measurement and derecognition criteria are illustrated for each individual item, including, if relevant, the recognition criteria for the income components 1. Financial assets held for trading The item includes:

- debt and equity intruments purchased primarily in order to obtain profit in the short term; - derivative contracts other than those designated as effective hedging instruments, when their fair

value is positive.

Debt and equity intruments are recorded in the balance sheet at their settlement date, while derivative financial instruments are recorded at their trading date. They are initially recognized at fair value, which is normally the cost of the transaction, not including transaction costs directly attributable to the instrument, and are subsequently recorded at fair value. All related profits and losses, including profits and losses from trading, interest and dividends collected and variations in fair value from changes in market rates, the price of shares and other market variables, are recorded in the income statement. Financial assets or parts thereof are derecognised when the contract rights on cash flows have expired or are transferred without retaining the risks and rewards associated with them. 2. Financial assets available for sale These are non-derivative financial assets indicated as available for sale or not classified as loans, financial assets held to maturity, financial assets held for trading or measured at fair value. They are initially recognized at settlement date, and measured at fair value inclusive of the transaction costs directly attributable to the acquisition. After initial recognition, any changes in fair value are recorded under shareholders’ equity until reversal of the asset, after which they are recorded in the income statement Equity securities whose fair value may not be reliably determined are maintained at cost. At every balance sheet date, these financial assets are assessed for evidence of an impairment loss. Evidence of an impairment originates from one or more events occurring after the initial recognition of the asset, which have an impact on the estimated future cash flows of the financial asset (or group of financial assets) that can be reliably estimated. In the event of an impairment loss of a financial asset available for sale, the entire loss, including the part previously recorded under shareholders’ equity, is recorded in the income statement. Any value recovery, possible only following the removal of the reasons which had caused the impairment, is recognised in the income statement, in the case of credit or debt securities, or to net equity in the case of

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equity securities. The amount of the recovery, may not, in any event, exceed the amortised cost that the financial instrument would have had in the absence of prior adjustments. Interest calculated according to the effective interest rate method must be entered in the income statement. Dividends on shareholders’ equity instruments are recognised in the Income Statement when payment is due. Financial assets or parts thereof are derecognised when the contract rights on cash flows have expired or are transferred without retaining the risks and rewards associated with them. 3. Financial assets held to maturity This item comprises non-derivative financial assets with fixed or determinable payments and fixed maturity, that an entity has the positive intention and ability to hold to maturity. They are initially recognized at settlement date, and measured at fair value inclusive of the transaction costs directly attributable to the acquisition. After initial recognition, they are valued at amortised cost using the effective interest method. At every balance sheet date, these financial assets are assessed for objective evidence of an impairment loss. Evidence of an impairment originates from one or more events occurring after the initial recognition of the asset, which have an impact on the estimated future cash flows of the financial assets (or group of financial assets) that can be reliably estimated. The loss is measured as the difference between the book value and the current value of the future estimated cash flows discounted at the actual original interest rate of the loan. Any value recovery is possible only following the removal of the reasons which had caused the impairment. Value recovery is recognised in the income statement and, in any event, may not exceed the amortised cost which the instrument would have had in the absence of said adjustments. Financial assets or parts thereof are derecognised when the contract rights on cash flows have expired or are transferred without retaining the risks and rewards associated with them. At the balance sheet date, there were not financial assets held to maturity. 4. Loans These are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans are initially recognized at the disbursement date, and debt securities are recognized at their settlement date. They are initially recognised at the amount disbursed or their subscription price, which usually corresponds to their fair value, inclusive of the transaction costs directly attributable to the operation. Following initial recognition, they are valued at amortised cost using the effective interest rate. The effective interest rate is the rate that equates the present value of cash flows expected throughout the life of the instrument (up to its expiry or “expected” expiry or a lesser period if appropriate) to the value at which the asset was recognised. The use of this rate to calculate interest involves the uniform distribution of interest throughout the life of the instrument. The expected flows have been calculated considering all contractual terms of the instrument and including all fees and base points paid or received between parties to the contract, transaction costs and any other premium or discount that is measurable and considered an integral part of the effective interest rate of the transaction. If it is not possible to obtain a reliable estimate of the cash flows or of the expected life of the instrument, the contractual cash flows have been used, determined according to the conditions set for the instrument. The amortised cost has not been calculated for short-term loans, for which the effect of the calculations is considered immaterial. At every balance sheet date, impairment tests are performed in order to assess any impairment losses of such financial assets. Evidence of an impairment originates from one or more events occurring after the initial recognition of the asset, which have an impact on the estimated future cash flows of the financial asset (or group of financial assets) that can be reliably estimated. Instruments which, based on the regulations of the Bank of Italy, have been assigned the status of doubtful, substandard, restructured or past due/over-limit for over 180 days have been subjected to analytical valuation. On the basis of the criteria established by the Bank of Italy, the classification of loans is as follows:

a) doubtful loans: loans in a state of insolvency due to the impossibility by the client to fulfil his debt obligations, to non-compliance with a previously agreed repayment plan, to bankruptcy proceedings or to the presence of prejudicial encumbrances.

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b) substandard loans: positions of debtors in temporary situations of objective difficulty, presumed to be resolved in a reasonable period of time;

c) restructured loans: this category comprises loans that have undergone a change in the contractual conditions, with a consequent loss for the bank, due to the deterioration of the original financial conditions of the debtor;

d) loans past due: expired and/or over-limit positions for 180 days, other than those classified as doubtful, substandard or restructured.

In the analytical valuation, the loss is measured as the difference between the carrying value and the present value of the future estimated cash flows discounted at the effective original interest rate of the loan. The estimate of the cash flows considers the guarantees covering the debt exposure and the probability of their settlement. If the activation of guarantees is unlikely, their present value is considered, otherwise their realisable value, net of any costs incurred for their recovery is considered. Analytical value adjustments regard presumed losses on individual impaired loans. In the event that the reasons underlying said adjustments cease to exist, the recoveries on previously written-down loans are recognised in the income statement. Assets that have been valued individually and for which no loss of value has been recognised, usually all performing loans, are subject to a collective valuation. Collective value adjustments regard presumed losses on groups of loans with similar risk profiles (for example sector risk, country risk, physiological risk) and are calculated on the basis of internal statistical models. In order to carry out a collective valuation of impairment, the financial assets are grouped together on the basis of similar credit risk features, which represent the debtor’s ability to settle all the amounts due according to the conditions of the contract. The risk categories identified constitute the basis for calculation of the historical evidence of impairment. Financial assets or parts thereof are derecognised when the contract rights on cash flows have expired or are transferred without retaining the risks and rewards associated with them. Loan repurchase agreements These are spot purchases of securities negotiated together with a forward sale obligation. As all the risks connected with the possession of the securities still fall on the seller, only a loan is recognized. The differentials between spot and forward prices, including the accrued interest and the proportion of any issue premium, are recognised on an accrual basis in the income statement items for interest. Financial leasing Loans to customers for leased assets are initially recognized at the effective date of the corresponding agreements, i.e. upon formal delivery of the asset. Loans to customers for leased assets are booked at amortised cost, that is the initial value of the investment including direct costs incurred initially and directly attributable commissions, decreased by the capital repayments and adjusted by the amortisation calculated according to the effective interest method by discounting the flow of future estimated payments at the effective interest rate for the expected life of the loan. Similar criteria to that illustrated above are used for value adjustments and recoveries. 5. Financial assets designated at fair value This item comprises financial assets designated at fair value through profit and loss on the basis of an option set forth by IAS 39 (“fair value option”) for specific cases. The Bank did not avail itself of this option. 6. Hedging transactions The bank does not have any hedging transactions in progress. 7. Investments in associates and companies subject to joint control

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This item comprises the values of the equity investments held in subsidiaries, associates, and companies subject to joint control. These are measured at cost at the moment of initial recording and subsequently. This cost includes transaction costs directly attributable to the transaction upon initial recognition. In the event of objective evidence of impairment, the investment is written down, allocating the relative adjustment to the income statement. Should the reasons for the impairment cease to exist following a subsequent event, a recovery is recorded in the income statement. The investment is written off when the contractual rights on cash flows have been transferred, without maintaining the risks and benefits associated with the financial asset. There are no investments held for sale. 8. Property, plant and equipment Property, plant and equipment purchased on the market are recognized as assets when the main risks and rewards ed with the asset are transferred. These assets are initially entered at cost, including all directly attributable expenses. Land is recognised separately, even when purchased together with the building, using a component approach. Subdivision of the value of the land and that of the building is carried out on the basis of independent appraisals and only for self-contained buildings. Property, plant and equipment are subsequently valued at cost, adjusted by the relative depreciation and any losses/recoveries of value. The amortisable value of property, plant and equipment, identified as the difference between the purchase cost and the residual value, is systematically allocated at constant rates over the estimated useful use according to allocation criteria that reflect the technical-economic duration and the residual use of each element. According to this criteria, the useful life of the various categories of property, plant and equipment are as follows:

- for buildings, from 30 to 50 years; - for furniture, furnishings and sundry equipment, from 5 to 8 years; - for office machines and electronic security systems, from 3 to 5 years; - for motor vehicles, from 4 to 5 years.

Land and artistic assets are not subject to depreciation, with the former having an indefinite useful life and the latter normally increasing in value over time. At every balance sheet date, the Bank assesses if there are indications that the property, plant and equipment may have suffered an impairment loss. In case of evidence of a loss, the book value and the recovery value (defined as the greater of fair value and value of use) are compared. Property, plant and equipment are written off when they are sold or when no future economic benefits are expected from its use or disposal. 9. Intangible assets Assets recognised under intangible assets are non-monetary assets, without physical substance, identifiable and able to generate future economic benefits that can be controlled by the company. Intangible assets purchased externally are recognised as assets at purchase price when the main risks and benefits connected with the asset are transferred. Intangible assets generated internally are entered on the basis of the directly attributable costs sustained. All intangible assets recorded in the financial statements other than goodwill have a definite useful life and are consequently amortised in consideration of said life. The residual value of the various assets is assumed to be zero. An intangible asset is derecognised when it is sold or when no future economic benefits are expected from its use or disposal. As at 31 December 2007, intangible assets recorded refer solely to goodwill. Goodwill Goodwill generated from business combinations represents the differential between the purchase cost, including accessory charges incurred, and the fair value at the acquisition date of the assets and liabilities of the acquired company. If positive, the difference is recorded at cost as an asset (goodwill) representing a payment made by the purchaser in expectation of the future economic benefits resulting from assets that cannot be identified individually and recorded separately. If negative, it is recorded directly in the income statement (excess over cost). Goodwill entered among assets must be allocated to the cash-generating units to which it refers. The cash-generating unit to which goodwill has been allocated undergoes an annual assessment required to highlight any loss in value or every time there is an indication that the unit may have suffered an impairment. Any

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difference between the book value and the recovery value, namely the greater between fair value after deducting sale costs and value of use is entered in the income statement. Fair value was determined based on the best information available to reflect the amount that the Bank could obtain, at the balance sheet date, from the disposal of the asset in an arm’s length transaction between knowledgeable, willing parties, following the deduction of disposal costs. In determining this amount, the results of recent transactions for similar assets were considered, carried out within the same business sector. To calculate the value of use, estimated were made of the expected future cash flows which should derive from the asset, discounted at the cost of own capital (determined considering an average market return, a current market risk free rate and the Bank’s beta). Software Software is recognised at cost, net of the corresponding accumulated amortisation and of any impairment loss. The costs connected to the acquisition and development of the software are capitalised when control over it is acquired and when future benefits, exceeding the cost, are likely to arise over more years. 10. Non-current assets and discontinued operations Non-current assets (or disposal group) are classified as held for sale if their carrying amount will be recovered principally through a sale rather than through continual use. In order for this to occur, the asset must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets and its sale must be highly probable. Once classified as held for sale, the asset is valued at the lower of its carrying amount and fair value less costs to sell. As at 31 December 2007, there were no discontinued operations. 11. Current and deferred taxation Current taxes entirely or partially unpaid at the date of the financial statements date are entered in the balance sheet under tax liabilities. If the payment for current taxes for the period underway or for previous periods has exceeded the relative tax liability, the excess must be recorded under assets in the balance sheet. Deferred taxation is accounted for according to the balance sheet method, whereby deferred taxes are recognised by comparing the various book and fiscal values of the items included under “assets” and “liabilities” in the balance sheet. These differences in value between balance sheet items, if recoverable in future years, are defined as timing differences and will generate taxable or deductible amounts in the year of repayment; therefore, they originate, respectively, deferred tax liabilities and pre-paid taxes. Deductible timing differences are those that will generate a future reduction in total taxable income, for which it is necessary to record assets for pre-paid taxes. Assets for pre-paid taxes must be recorded for all the deductible timing differences for which a future taxable income is likely and from which the company will obtain a benefit. Taxable timing differences are also those differences that create deferred tax liabilities, as they generate taxable amounts in the years subsequent to the one in which there were recorded in the income statement. Deferred tax liabilities are recorded for any other taxable timing difference. 12. Provisions for risks and charges Provisions for risks and charges are recorded when the company has a current obligation (legal or implicit) resulting from a past event, for which it is likely that it will be necessary to use resources generating economic benefits in order to meet the obligation, whose amount can be reliably estimated. The amount recorded represents the current value of the amount that a company would reasonably pay in order to extinguish the obligation as at the date of the financial statements. If the impact is irrelevant, the discounting is not carried out. The provisions allocated are reassessed every year and adjusted in order to reflect the best current estimate possible. If it is no longer likely that the resources generating economic benefits will be used to meet the obligation, the provision is written off and the exceeding quota is entered in the income statement. 13. Outstanding amounts and securities issued A financial instrument issued is classified as a liability when, on the basis of the content of the contractual agreement, there is a contractual obligation to deliver cash or other financial asset to another party. Outstanding amounts due to banks and customers and securities issued represent the funding collected on the inter-bank market and from customers also through the placement of bonds and certificates of deposit.

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Transactions with banks are recognised at the moment they are executed, except those relative to remittance of bills and to the placement of securities, which are recognised at settlement. Initially, financial liabilities are measured at fair value, which is normally equal to the amount collected or the issue price, plus the directly attributable transaction costs and are subsequently valued at amortised cost using the effective interest method. The amortised cost has not been calculated for short-term operations, for which the effect of the calculation s is considered immaterial. Financial liabilities or parts of these liabilities are written off when extinguished, i.e. when the obligation has been met, cancelled or has expired. They are also cancelled following the repurchase of the liability on the market. The cancellation is made on the basis of the fair value of the issued component and of the repurchased components at the purchase date. The profit or loss resulting from the transaction, depending on whether the book value of the repurchased component is higher or lower than the purchase price, is recorded in the income statement. The subsequent replacement of the securities is considered as a new issue, to be recorded at the new placement price. Deposit repurchase agreements These are spot sales of securities negotiated with an obligation of forward repurchase. The securities underlying the transaction continue to be recorded in the financial statements as the connected risks have not been transferred, and the associated debt is recognised. The differentials between spot and forward prices, including the accrued interest and the proportion of any issue premium, are recognised on an accrual basis as interest. 14. Financial liabilities held for trading Trading liabilities are represented by trading derivative financial instruments with a negative fair value. 15. Financial liabilities designated at fair value This item comprises financial liabilities designated at fair value through profit and loss on the basis of an option set forth by IAS 39 (“fair value option”) for specific cases. The Bank did not avail itself of this option. 16. Foreign currency transactions Foreign currency transactions are converted into the reporting currency, on initial recognition, applying the exchange rate in effect on the transaction date to the amount in foreign currency. At each subsequent financial statement date:

- the monetary elements are converted at the exchange rate in effect at the balance sheet date; - the non-monetary elements measured at historical cost are converted at the exchange rate in effect

on the date of the transaction; - the non-monetary elements measured at fair value are converted at the exchange rate in effect on

the date when the fair value was determined.

A monetary element is the right to receive, or the obligation to pay, a set amount of money or an amount that can be determined. Conversely, the key characteristic of non-monetary elements is the absence of the right to receive, or the obligation to pay, a set amount of money or an amount that can be determined. The exchange rate differences related to monetary elements are entered into the Income Statement when they arise; those related to non-monetary elements are entered into the shareholders’ equity or in the Income Statement consistently with the recording of profit or loss that include that component. Costs and revenues in foreign currency are shown at the exchange rate prevailing at the time of recognition or, if accruing, at the exchange rate as at the financial statement date. 17. Other information Employee termination indemnities and pensions Employee termination indemnities are classified as benefits subsequent to the termination of employment as set forth in international accounting standard no. 19 with two different types:

- defined contribution plans; - defined benefit plans.

Defined contribution plans envisage the payment by the company of fixed contributions to a distinct entity (a fund). The entity does not have a legal or implicit obligation to pay further contributions if the fund does not have sufficient assets to pay all of the benefits due to employees for their work in the current year and in

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previous years. The company records the employee contributions to be paid into the fund as liabilities, after having deducted any contributions already paid. If on the date of the financial statements in question, the contributions paid in are higher with respect to those due, the surplus must be recorded as an asset to the extent that the advance payment will lead to a reduction in future payments or a refund. Defined benefit plans are plans for benefits subsequent to the termination of employment in which the entity is obliged to pay employees the agreed amount. Following the entry into force of Finance Law 2007, which brought the reform of complementary social security set forth in Legislative Decree no. 252 of 5 December 2005 forward to 1 January 2007, employee termination indemnities accrued from 1 January 2007 must, on the choice of the employee, and according to explicit or tacit means of adhesion, be paid into forms of complementary social security or be held by the company, which will organise to transfer said Employee Termination Indemnities amounts to the Treasury Fund established at INPS. The reform of complementary social security has entailed a change in how employee termination indemnities are recorded in the accounts, as explained below:

i. the employee termination indemnities accrued as at 31 December 2006 continue to be considered a “defined benefit plan”, valued on an actuarial basis according to the projected unit credit method, as envisaged by IAS 19. The liabilities related to the Employee Termination Indemnities are valued on an actuarial basis without the application of the pro-rata of the services rendered, as the services to be valued have already entirely accrued. The profit and the loss resulting from the recalculation of the employee termination indemnities as at 31 December 2007 are recorded in the income statement;

ii. the employee termination indemnities accrued from 1 January 2007 are classified as a “defined contribution plan” regardless of whether the employee opts for complementary social security or payment into the Treasury Fund of INPS. The amount of the indemnities is calculated on the basis of the contributions due from the employee without applying actuarial calculation methods.

Treasury shares Shares issued and repurchased are recorded as a direct reduction of shareholders’ equity. No profit or loss resulting from the purchase, sale, issue or cancellation of said instruments is recorded in the income statement. Any amount paid or received for said instruments is recorded directly under shareholders' equity. A specific reserve is recorded, pursuant to art. 2357 ter of the Italian Civil Code. Determination of the fair value of financial instruments The fair value of financial instruments has been initially determined according to the price recognised on markets defined as active. In this case, the value is represented by the current price (cash, letter or average price) at period end or, if this price is not available, by the price of the most recent transactions. The fair value of financial instruments not listed on active markets has been determined by using the price of recent market transactions, or alternatively the fair value of a financial instrument with similar characteristics, or in the absence of the previous elements, by using valuation methods based mainly on the discounting of cash flows. In the latter case, the cash flows have been discounted using the rates taken from a market curve to which a spread has been applied in order to take into account the credit risk of the counterpart. Guarantees and commitments Guarantees given are entered in the financial statements initially at their fair value, represented by the commission received, and subsequently at the higher between the estimate of the obligation determined according to IAS 37 and the amount initially entered and gradually reduced by the portion related to the year. The overall par value net of the use of guarantees given is highlighted in the notes to the financial statements. Commitments are entered in the financial statements on the basis of the best estimate of the obligation determined according to IAS 37. The overall amount of the commitment assumed is highlighted in the notes accompanying the financial statements. Accounting of revenues Revenues resulting from the third-party use of company goods generating interest, commissions and dividends must be recorded when it is probable that the economic benefits associated with the transaction will flow to the entity and the amount of the revenue can be measured reliably.

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Interest and commissions are recorded in the income statement according to the classification of the financial instrument to which they refer. Dividends are recorded when the shareholders’ right to payment becomes due. Other commissions are recorded on an accrual basis. Use of estimates and assumptions in drawing up the financial statements In drawing up the financial statements, estimates and assumptions were used which may affect the values recorded in the income statement, the balance sheet and illustrated in the notes to the financial statements. Specifically, there is a greater need for subjective assessments by the top management in the following cases:

• Quantification of impairment losses on financial assets, specifically regarding loans; • Determination of the fair value of financial instruments to be used for financial statement disclosure,

and the use of valuation models to determine the fair value of financial instruments which are not listed in active markets;

• Assessment of the consistency of the value of goodwill; • Quantification of provisions for personnel and provisions for risks and charges; • Actuarial and financial assumptions used to determine the liabilities linked to defined benefit plans

for employees; • Estimates and assumptions on the recoverability of deferred tax assets.

To ensure the reasonableness of the estimates and assumptions for recording management operations, these are formulated through subjective valuations using all information available and historical experience.

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PART B – INFORMATION ON THE BALANCE SHEET

ASSETS

SECTION 1 – CASH AND CASH EQUIVALENTS – ITEM 10

1.1 - Cash and cash equivalents: breakdown

31/12/2007 31/12/2

006 a) Cash 59,525 50,508

b) Unrestricted deposits with central banks 500 522

Total 60,025 51,030

Section 2 – Financial assets held for trading – item 20

2.1 - Financial assets held for trading: breakdown by type

31/12/2007 31/12/2006

Items/Amounts Listed Unlisted Listed Unlisted A. Cash assets 1. Debt securities 9,391 2,014 9,942 2,205

1.1 Structured securities - - - -

1.2 Other debt securities 9,391 2,014 9,942 2,205

2. Equity securities - - 1,935 47

3. Quotas of UCI - - - 65,348

4. Loans - - - -

4.1 Repurchase agreements - - - -

4.2 Other - - - -

5. Impaired assets - - - 9

6. Assets sold and not cancelled - - - -

Total A 9,391 2,014 11,877 67,609

B. Derivatives 1. Financial derivatives: - 3,281 - 8,979

1.1 trading - 3,281 - 8,979

1.2 connected with fair value option - - - -

1.3 other - - - -

2. Credit derivatives - - - -

2.1 trading - - - -

2.2 connected with fair value option - - - -

2.3 other - - - -

Total B - 3,281 - 8,979

Total (A+B) 9,391 5,295 11,877 76,588

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2.2 - Financial assets held for trading: breakdown by debtor/issuer

31/12/2007 31/12/2

006 A. Cash assets 1. Debt securities 11,405 12,147 a) Governments and Central Banks 9,164 9,644 b) Other public entities 1,380 1,533 c) Banks 801 903 d) Other issuers 60 67 2. Equity securities - 1,982 a) Banks - - b) Other issuers: - 1,982 - insurance companies - - - financial businesses - - - non-financial businesses - 1,982 - other - - 3. Quotas of UCI - 65,348 4. Loans - - a) Governments and Central Banks - - b) Other public entities - - c) Banks - - d) Other - - 5. Impaired assets - 9 a) Governments and Central Banks - - b) Other public entities - - c) Banks - - d) Other - 9 6. Assets sold and not cancelled - - a) Governments and Central Banks - - b) Other public entities - - c) Banks - - d) Other issuers - - Total A 11,405 79,486

B. Derivatives a) Banks 1,979 8,153 b) Customers 1,302 826 Total B 3,281 8,979

Total (A+B) 14,686 88,465

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2.3 - Financial assets held for trading: derivatives

Type of derivative/Underlying asset Interest rate Currencies and gold

Equity securiti

es Loans Other 31/12/2007 31/12/2006

A) Listed Derivatives 1) Financial derivatives: - with exchange of capital - - - - - - -

- options purchased - - - - - - -

- other derivatives - - - - - - -

- without exchange of capital - - - - - - -

- options purchased - - - - - - -

- other derivatives - - - - - - -

2) Credit derivatives: - with exchange of capital - - - - - - -

- without exchange of capital - - - - - - -

Total A - - - - - - -

B) Unlisted Derivatives 1) Financial derivatives: - with exchange of capital 18 1,529 1 - - 1,548 1,240

- options purchased - - - - - - -

- other derivatives 18 1,529 1 - - 1,548 1,240

- without exchange of capital 1,267 - 466 - - 1,733 7,739

- options purchased - - 466 - - 466 2,057

- other derivatives 1,267 - - - - 1,267 5,682

2) Credit derivatives: - with exchange of capital - - - - - - -

- without exchange of capital - - - - - - -

Total B 1,285 1,529 467 - - 3,281 8,979

Total (A+B) 1,285 1,529 467 - - 3,281 8,979

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2.4 - Cash financial assets held for trading (other than “sold and not cancelled” and “impaired”): annual changes

2007

Change/Underlying asset Debt securities

Equity securities Quotas of UCI Loans Total

A. Opening balance 12,147 1,982 65,348 - 79,477

B. Increases 364,501 4,513 462 - 369,476

B.1 Purchases 363,773 4,059 2 - 367,834

B.2 Positive fair value changes 5 - - - 5

B.3 Other changes 723 454 460 - 1,637

C. Decreases -365,243 -6,495 -65,810 - -437,548

C.1 Sales -361,809 -6,495 -65,805 - -434,109

C.2 Redemptions -3,340 - - - -3,340

C.3 Negative fair value changes -82 - - - -82

C.4 Other changes -12 - -5 - -17

D. Closing balance 11,405 - - - 11,405

Section 4 – Financial assets available for sale – item 40

4.1 - Financial assets available for sale: breakdown by type

31/12/2007

31/12/2006

Items/Amounts Listed Unlisted Listed Unlisted

1. Debt securities - - - -

1.1 structured securities - - - -

1.2 other debt securities - - - -

2. Equity securities 26,834 33,402 23,990 16,089

2.1 designated at fair value 26,834 - 23,990 -

2.2 measured at cost - 33,402 - 16,089

3. Quotas of UCI - - - -

4. Loans - - - -

5. Impaired assets - - - 1

6. Assets sold and not cancelled - - - -

Total 26,834 33,402 23,990 16,090

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4.2 - Financial assets available for sale: breakdown by debtor/issuer

Items/Amounts 31/12/2007 31/12/2006 1. Debt securities - -

a) Governments and Central Banks - -

b) Other public entities - -

c) Banks - -

d) Other issuers - -

2. Equity securities 60,236 40,079

a) Banks 25,167 8,182

b) Other issuers: 35,069 31,897

- insurance companies 2,930 3,725

- financial businesses 5,223 5,003

- non-financial businesses 26,916 23,169

- other - -

3. Quotas of UCI - -

4. Loans - -

a) Governments and Central Banks - -

b) Other public entities - -

c) Banks - -

d) Other - -

5. Impaired assets - 1

a) Governments and Central Banks - -

b) Other public entities - -

c) Banks - -

d) Other - 1

6. Assets sold and not cancelled - -

a) Governments and Central Banks - -

b) Other public entities - -

c) Banks - -

d) Other - -

Total 60,236 40,080

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4.5 - Financial assets available for sale (other than “sold and not cancelled” and “impaired”): annual changes

2007

Debt securities

Equity securities Quotas of UCI Loans Total

A. Opening balance - 40,079 - - 40,079

B. Increases - 27,258 - - 27,258

B.1 Purchases - 24,404 - - 24,404

B.2 Positive fair value changes - 2,844 - - 2,844

B.3 Recoveries - - - - -

- recorded in the income statement - X - - -

- recorded under shareholders’ equity - - - - -

B.4 Transfers from other portfolios - - - - -

B.5 Other changes - 10 - - 10

C. Decreases - -7,101 - - -7,101

C.1 Sales - -189 - - -189

C.2 Redemptions - - - - -

C.3 Negative fair value changes - - - - -

C.4 Write-downs for impairment - - - - -

- recorded in the income statement - - - - -

- recorded under shareholders’ equity - - - - -

C.5 Transfers to other portfolios - - - - -

C.6 Other changes - -6,912 - - -6,912

D. Closing balance - 60,236 - - 60,236

Purchases related to the investment in Tercas – Cassa di risparmio della provincia di Teramo S.p.A.

SECTION 6 – DUE FROM BANKS – ITEM 60

6.1 - Due from banks: breakdown by type

313

31/12/2007 31/12/2006 Type of transaction/Amounts A. Deposits with Central Banks - -

1. Restricted deposits - -

2. Compulsory reserve - -

3. Repurchase agreements - -

4. Other - -

B. Due from banks 1,233,620 1,142,280

1. Current accounts and unrestricted deposits 61,570 105,160

2. Restricted deposits 219,606 269,353

3. Other loans: 325,688 486,885

3.1 repurchase agreements 242,985 482,828

3.2 financial lease - -

3.3 other 82,703 4,057

4. Debt securities 295,195 126,918

4.1 structured securities - -

4.2 other debt securities 295,195 126,918

5. Impaired assets - -

6. Assets sold and not cancelled 331,561 153,964

Total (book value) 1,233,620 1,142,280

Total (fair value) 1,234,128 1,141,425

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SECTION 7 – LOANS TO CUSTOMERS – ITEM 70

7.1 - Loans to customers: breakdown by type

31/12/2007 31/12/2006Type of transaction/Amounts 1. Current accounts 2,189,046 1,792,887

2. Repurchase agreements - 225

3. Mortgages 1,655,305 1,439,110

4. Credit cards, personal loans and salary-backed loans 60,464 53,052

5. Financial leases 481,721 446,798

6. Factoring - -

7. Other transactions 971,573 855,367

8. Debt securities 1,811 1,808

8.1 structured securities - -

8.2 other debt securities 1,811 1,808

9. Impaired assets 99,757 96,406

10. Assets sold and not cancelled - -

Total (book value) 5,459,677 4,685,653

Total (fair value) 5,553,051 4,738,955

The item 7 “Other transactions” refers mainly to syndicated loans for EUR 15,362 thousand, forward cash for EUR 125,957 thousand, loans for advances on bills for EUR 155,423 thousand, foreign currency loans and advances for EUR 56,109 thousand, and sundry facilities for EUR 476,287 thousand.

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7.2 - Loans to customers: breakdown by debtor/issuer

31/12/2007 31/12/2006 Type of transaction/Amounts - - 1. Debt securities - 1,811 - 1,808

a) Governments - - - -

b) Other public entities - - - -

c) Other issuers - 1,811 - 1,808

- non-financial businesses - 1,811 - 1,808

- financial businesses - - - -

- insurance companies - - - -

- other - - - -

2. Loans to - 5,358,109 - 4,587,440

a) Governments - 4,088 - 4,376

b) Other public entities - 2,322 - 7,814

d) Other: - 5,351,699 - 4,575,250

- non-financial businesses - 4,500,735 - 3,873,304

- financial businesses - 46,731 - 37,245

- insurance companies - - - -

- other - 804,233 - 664,701

3. Impaired assets - 99,757 - 96,405

a) Governments - - - -

b) Other public entities - - - -

d) Other: - 99,757 - 96,405

- non-financial businesses - 81,064 - 76,097

- financial businesses - 5 - 135

- insurance companies - - - -

- other - 18,688 - 20,173

4. Assets sold and not cancelled - - - -

a) Governments - - - -

b) Other public entities - - - -

d) Other: - - - -

- non-financial businesses - - - -

- financial businesses - - - -

- insurance companies - - - -

- other - - - -

Total - 5,459,677 - 4,685,653

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7.4 - Financial leases

31/12/2007 Financial leases to customers: reconciliation Gross investment at the balance sheet date 484,866

Time value accrued -13

Current value of minimum payments at the balance sheet date 484,853

Loan write-down reserve referred to minimum payments 3,132

Residual life of gross investment: - up to 1 year 90,636

- between 1 year and 5 years 230,119

- beyond 5 years 164,111

Residual life of current value of minimum payments: - up to 1 year 90,582

- between 1 year and 5 years 230,125

- beyond 5 years 164,146

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SECTION 10 – INVESTMENTS IN ASSOCIATES AND COMPANIES SUBJECT TO JOINT CONTROL - ITEM 100

10.1 – Investments in subsidiaries and companies subject to joint control or significant influence: information on the investment share

Name Registered office % investment % voting rights

A. Companies controlled exclusively

Credito Artigiano S.p.A. Milan 65.71 Credito Siciliano S.p.A. Palermo 40.26 Credito Piemontese S.p.A. Turin 99.78 Bancaperta S.p.A. Sondrio 63.44 Mediocreval S.p.A. Sondrio 37.45 Banca dell'Artigianato e dell'Industria S.p.A. Brescia 39.31 Bankadati Servizi Informatici S.p.A. Sondrio 80.00 Stelline Servizi Immobiliari S.p.A. Sondrio 80.00 Deltas S.p.A. Sondrio 50.00 Creset S.p.A. Sondrio 100.00 Companies subject to joint control Banca della Ciociaria S.p.A. Frosinone 37.96 Rajna Immobiliare S.r.l. Sondrio 50.00 Companies subject to significant influence

Global Assistance S.p.A. Milan 40.00 Banca di Cividale S.p.A. Cividale del Friuli (UD) 25.00 Istituto Centrale delle Banche Popolari Italiane S.p.A. Milan 22.50 Politec Soc.Coop. del Polo dell’Innovazione della Valtellina p.A. Sondrio 20.52

The percentage of available votes is not indicated, as it corresponds to the percentage investment.

318

10.2 – Investments in subsidiaries and companies subject to joint control or significant influence: accounting information

Name Total Total Net profit

Shareholders’ Book Fair

Assets revenues (loss) equity value value

A. Companies controlled exclusively Credito Artigiano S.p.A. 7,152,700 437,118 41,915 463,811 294,837 X Credito Siciliano S.p.A. 3,088,582 230,039 9,679 198,699 115,036 X Credito Piemontese S.p.A. 19,499 779 58 18,469 19,358 X Bancaperta S.p.A. 3,263,569 179,503 11,986 124,750 63,921 X Mediocreval S.p.A. 454,705 24,733 1,182 96,732 42,056 X Banca dell'Artigianato e dell'Industria S.p.A. 979,231 53,873 344 78,420 36,632 X Bankadati Servizi Informatici S.p.A. 17,759 54,135 287 5,250 2,636 X Stelline Servizi Immobiliari S.p.A. 26,252 11,198 50 13,502 10,066 X Deltas S.p.A. 9,315 28,159 250 1,412 129 X Creset S.p.A. 82,325 6,716 -120 2,527 3,100 X B. Companies subject to joint control Banca della Ciociaria S.p.A. 343,159 19,923 347 46,637 27,494 X Rajna Immobiliare S.r.l. 2,197 152 36 543 265 X C. Companies subject to significant influence Global Assistance S.p.A. 8,254 3,231 712 3,486 2,066

Banca di Cividale S.p.A. 2,473,799 166,543 11,250 247,242 89,102

Istituto Centrale delle Banche Popolari Italiane S.p.A. 4,268,833 252,185 20,107 256,874 25,398

Politec Soc.Coop. del Polo dell’Innovazione della Valtellina p.A. 358 99 - 245 50

The shareholders’ equity and net income (loss) for the period are taken from 2007 financial statements approved by the respective Shareholders’ Meetings, or, if these are not available, from the draft financial statements approved by the respective boards of directors.

319

10.3 – Investments in associates and companies subject to joint control: annual changes

2007 2006 A. Opening balance 696,860 672,818

B. Increases 39,628 29,898

B.1 Purchases 32,588 28,882

B.2 Recoveries - -

B.3 Revaluations - -

B.4 Other changes 7,040 1,016

C. Decreases -4,342 -5,856

C.1 Sales -2,742 -5,856

C.2 Value adjustments -1,600 -

C.3 Other changes - -

D. Closing balance 732,146 696,860

E. Total revaluations - -

F. Total adjustments 1,600 -

Purchases of investments in associates and companies subject to joint control include 1,677,427 shares of Banca della Ciociaria S.p.A. for a total amount of EUR 20.5 million.

10.4 – Commitments referred to Investments in subsidiary companies

With reference to the list of investments in associates and companies subject to joint control in table 10.1 above, there are no commitments referred to investments in subsidiary companies.

10.5 – Commitments referred to Investments in companies subject to joint control

With reference to the list of investments in associates and companies subject to joint control in table 10.1 above, there are no commitments referred to investments in companies subject to joint control.

10.6 – Commitments referred to Investments in companies subject to significant influence

With reference to the list of investments in associates and companies subject to joint control in table 10.1 above, there are commitments referred to investments in companies subject to significant influence for EUR 161,985 thousand.

320

SECTION 11 – PROPERTY, PLANT AND EQUIPMENT – ITEM 110

11.1 – Property, plant and equipment: breakdown of assets measured at cost

31/12/2007 31/12/2006 Asset/Amounts A. Assets used in the business 1.1 owned 172,280 163,389

a) land 27,100 25,527

b) buildings 134,891 127,808

c) furniture 8,047 7,856

d) electronic systems - -

e) other 2,242 2,198

1.2 acquired through a finance lease - -

a) land - -

b) buildings - -

c) furniture - -

d) electronic systems - -

e) other - -

Total A 172,280 163,389

B. Investment properties 2.1 owned 8,216 14,347

a) land 2,340 3,914

b) buildings 5,876 10,433

c) furniture - -

2.2 acquired through a finance lease - -

a) land - -

b) buildings - -

c) furniture - -

Total B 8,216 14,347

Total (A+B) 180,496 177,736

321

11.3 – Assets used in the business: annual changes

2007

Land Buildings Furniture

Electronic systems Other Total

A. Opening balance, gross 25,527 166,889 21,921 - 21,649 235,986

A.1 Total net value reductions - 39,081 14,065 - 19,451 72,597

A.2 Opening balance, net 25,527 127,808 7,856 - 2,198 163,389

B. Increases 1,573 12,412 1,217 - 1,055 16,257

B.1 Purchases - - 1,217 - 1,055 2,272

B.2 Capitalised improvement expenditures - 8,037 - - - 8,037

B.3 Recoveries - - - - - -

B.4 Positive fair value changes recorded under: - - - - - -

a) shareholders’ equity - - - - - -

b) income statement - - - - - -

B.5 Positive exchange rate differences - - - - - -

B.6 Transfers from investment properties - - - - - -

B.7 Other changes 1,573 4,375 - - - 5,948

C. Decreases - -5,329 -1,026 - -1,011 -7,366

C.1 Sales - - -1 - -55 -56

C.2 Depreciation - -4,584 -1,025 - -956 -6,565

C.3 Value adjustments from impairment recorded under: - - - - - -

a) shareholders’ equity - - - - - -

b) income statement - - - - - -

C.4 Negative fair value changes recorded under: - - - - - -

a) shareholders’ equity - - - - - -

b) income statement - - - - - -

C.5 Negative exchange rate differences - - - - - -

C.6 Transfers to: - - - - - -

a) property, plant and equipment held for investment - - - - - -

b) discontinued operations - - - - - -

C.7 Other changes - -745 - - - -745

D. Closing balance, net 27,100 134,891 8,047 - 2,242 172,280

D.1 Total net value adjustments - 43,664 15,091 - 20,407 79,162

D.2 Closing balance, gross 27,100 178,555 23,138 - 22,649 251,442

E. Valuation at cost - - - - - -

322

11.4 - Investment properties: annual changes

31/12/2007 Land Buildings A. Opening balance, gross 3,914 11,063

A.1 Total net value reductions - 630

A.2 Opening balance, net 3,914 10,433

B. Increases - 1

B.1 Purchases - -

B.2 Capitalised improvement expenditures - 1

B.3 Positive fair value changes - -

B.4 Recoveries - -

B.5 Positive exchange rate differences - -

B.6 Transfers from functional property - -

B.7 Other changes - -

C. Decreases -1,573 -4,558

C.1 Sales - -

C.2 Depreciation - -183

C.3 Negative fair value changes - -

C.4 Losses on impairment - -

C.5 Negative exchange rate differences - -

C.6 Transfers to other asset portfolios a) functional property - -

b) non-current assets and discontinued operations - -

C.7 Other changes -1,573 -4,375

D. Closing balance, net 2,341 5,876

D.1 Total net value adjustments - 813

D.2 Closing balance, gross 2,341 6,689

E. Valuation at fair value 2,338 6,592

All property, plant and equipment are valued at cost, adjusted by the relative depreciation and any losses/recoveries of value.

323

SECTION 12 – INTANGIBLE ASSETS – ITEM 120

12.1 – Intangible assets: breakdown by type

31/12/2007 31/12/2006

Asset/Amounts Limited life Limited life Limited

life Limited life

A.1 Goodwill X 3,945 X 3,945

A.2 Other intangible assets - - - -

A.2.1 Assets measured at cost: - - - -

a) internally generated intangible assets - - - -

b) other assets - - - -

A.2.2 Assets designated at fair value: - - - -

a) internally generated intangible assets - - - -

b) other assets - - - -

Total - 3,945 - 3,945

324

12.2 – Intangible assets: annual changes

2007

Goodwill

Other intangible assets

generated internally

Other intang.

assets: other

Total

Lim Unlim Lim Unlim A. Opening balance 3,945 - - - - 3,945

A.1 Total net value reductions - - - - - -

A.2 Opening balance, net 3,945 - - - - 3,945

B. Increases - - - - - -

B.1 Purchases - - - - - -

B.2 Increases in internal intangible assets X - - - - -

B.3 Recoveries X - - - - -

B.4 Positive fair value changes - to shareholders’ equity X - - - - -

- to the income statement X - - - - -

B.5 Positive exchange rate differences - - - - - -

B.6 Other changes - - - - - -

C. Decreases - - - - - -

C.1 Sales - - - - - -

C.2 Value adjustments - Amortisation X - - - - -

- Write-downs + shareholders’ equity X - - - - -

+ income statement - - - - - -

C.3 Negative fair value changes - to shareholders’ equity X - - - - -

- to the income statement - - - - - -

C.4 Transfers to non-current assets held for disposal - - - - - -

C.5 Negative exchange rate differences - - - - - -

C.6 Other changes - - - - - -

D. Closing balance, net 3,945 - - - - 3,945

D.1 Total net value reductions - - - - - -

E. Closing balance, gross 3,945 - - - - 3,945

F. Valuation at cost - - - - - -

Key - Lim: limited life Unlim: unlimited life

Goodwill refers to purchases of company branches carried out in years prior to 2007.

325

SECTION 13 – TAX ASSETS AND LIABILITIES – ITEM 130 UNDER ASSETS AND ITEM 80 UNDER LIABILITIES

13.1 – Pre-paid tax assets: breakdown

31/12/2007 31/12/2006IRES Entertaining expenses 94 76

Provisions for claims by bankruptcy liquidators 1,671 1,412

Loans write-down surplus 5,223 5,177

Non-deductible amortisation 1,559 1,281

Other 9,576 9,608

Total 18,123 17,554

IRAP Entertaining expenses 17 12

Non-deductible amortisation 273 204

Other 175 120

Total 465 336

With reference to IRES, the item “Other” includes pre-paid taxes recorded on the internal Pension Fund for EUR 6 million, and on Provisions for personnel for EUR 1.6 million.

13.2 – Deferred tax liabilities: breakdown

31/12/2007 31/12/2006IRES

Capital gains - 173

Goodwill 669 740

Valuation of AFS portfolio 163 474

Employee Termination Indemnity Fund - discounting 360 899

Other 1,097 2,766

Total 2,289 5,052

IRAP Goodwill 103 118

Other 159 411

Total 262 529

With reference to IRES, the item “Other” includes deferred taxes recorded on deductible amortisation for EUR 0.9 million.

326

13.3 – Changes in pre-paid taxes (as a balancing entry in the income statement)

2007 2006 1. Opening balance 17,890 23,437

2. Increases 5,576 9,726

2.1 Pre-paid taxes recorded during the year 5,576 9,726

a) elative to previous periods - -

b) due to changes in accounting criteria - -

c) recoveries - -

d) other 5,576 9,726

2.2 New taxes or increases in tax rates - -

2.3 Other increases - -

3. Decreases -5,822 -15,273

3.1 Pre-paid taxes cancelled during the year -3,333 -15,273

a) reversals -3,333 -15,273

b) write-downs of unrecoverable amounts - -

c) due to changes in accounting criteria - -

3.2 Reduction in tax rates -2,489 -

3.3 Other decreases - -

4. Final balance 17,644 17,890

13.4 - Changes in deferred taxes (as a balancing entry in the income statement)

2007 2006 1. Opening balance 5,107 12,332

2. Increases 224 1,112

2.1 Deferred taxes recorded during the year 224 1,112

a) relative to previous periods - -

b) due to changes in accounting criteria - -

c) other 224 1,112

2.2 New taxes or increases in tax rates - -

2.3 Other increases - -

3. Decreases -2,943 -8,337

3.1 Deferred taxes cancelled during the year -1,740 -8,337

a) reversals -1,740 -8,337

b) due to changes in accounting criteria - -

c) other - -

3.2 Reduction in tax rates -1,203 -

3.3 Other decreases - -

4. Final balance 2,388 5,107

327

13.5 – Changes in pre-paid taxes (as a balancing entry to shareholders’ equity)

2007 2006 1. Opening balance - -

2. Increases 944 -

2.1 Pre-paid taxes recorded during the year 944 -

a) relative to previous periods - -

b) due to changes in accounting criteria - -

c) other 944 -

2.2 New taxes or increases in tax rates - -

2.3 Other increases - -

3. Decreases - -

3.1 Pre-paid taxes cancelled during the year - -

a) reversals - -

b) write-downs of unrecoverable amounts - -

c) due to changes in accounting criteria - -

3.2 Reduction in tax rates - -

3.3 Other decreases - -

4. Final balance 944 -

13.6 – changes in deferred taxes (as a balancing entry to shareholders’ equity)

2007 2006 1. Opening balance 474 111

2. Increases 40 363

2.1 Deferred taxes recorded during the year 40 363

a) relative to previous periods - -

b) due to changes in accounting criteria - -

c) other 40 363

2.2 New taxes or increases in tax rates - -

2.3 Other increases - -

3. Decreases -351 -

3.1 Deferred taxes cancelled during the year - -

a) reversals - -

b) due to changes in accounting criteria - -

c) other - -

3.2 Reduction in tax rates -351 -

3.3 Other decreases - -

4. Final balance 163 474

328

SECTION 15 – OTHER ASSETS – ITEM 150

15.1 Other assets: breakdown

31/12/2007 31/12/2006 Amounts due from the tax authorities for withholdings on interest paid to customers and other amounts due 19,256 18,177

Cheques drawn on the bank to be settled 11,905 32,697

Counterparts for securities and coupon payments to be received - 14

Sundry items to be charged to customers and banks 92,998 6,594

Costs and advances pending financial allocation 2,161 1,963

Refurbishment of third-party buildings 2,186 2,289

Accruals other than those capitalised 77 70

Sundry and residual items 11,913 13,494

Total 140,496 75,298

329

LIABILITIES

SECTION 1 – DUE TO BANKS – ITEM 10

1.1 - Due to banks: breakdown by type

Type of transaction/Amounts 31/12/2007 31/12/2006 1. Due to central banks - -

2. Due to banks 536,430 1,036,033

2.1 Current accounts and unrestricted deposits 255,133 561,860

2.2 Restricted deposits 250,180 353,020

2.3 Loans 138 119,010

2.3.1 financial lease - -

2.3.2 other 138 119,010

2.4 Payables for commitments to repurchase own equity instruments - -

2.5 Liabilities for assets sold and not cancelled from the balance sheet - -

2.5.1 funding repurchase agreements - -

2.5.2 other - -

2.6 Other payables 30,979 2,143

Total 536,430 1,036,033

Fair value 536,070 1,035,996

330

SECTION 2 – DUE TO CUSTOMERS – ITEM 20

2.1 - Due to customers: breakdown by type

Type of transaction/Amounts 31/12/2007 31/12/2006 1. Current accounts and unrestricted deposits 2,287,466 2,300,919

2. Restricted deposits 3,648 6,115

3. Public funds administered - -

4. Loans 291,703 369,861

4.1 financial leases - -

4.2 other 291,703 369,861

5 Payables for commitments to repurchase own equity instruments - -

6. Liabilities for assets sold and not cancelled from the balance sheet 333,317 106,501

6.1 funding repurchase agreements 333,317 106,501

6.2 other - -

7. Other payables 7,048 7,517

Total 2,923,182 2,790,913

Fair value 2,922,685 2,790,440

The item 4.2 “Loans – other” includes deposit repurchase agreements for EUR 288,375 thousand, compared to EUR 369,861 thousand as at 31 December 2006.

331

SECTION 3 – SECURITIES ISSUED – ITEM 30

3.1 - Securities issued: breakdown by type

Type of security/Amounts 31/12/2007

31/12/2006

BV FV BV FV A. Listed securities 1,589,008 1,576,461 1,353,989 1,356,307

1. Bonds 1,589,008 1,576,461 1,353,989 1,356,307

1.1 structured - - 119,539 119,292

1.2 other 1,589,008 1,576,461 1,234,450 1,237,015

2. Other securities - - - -

2.1 structured - - - -

2.2 other - - - -

B. Unlisted securities 958,458 953,126 653,755 649,687

1. Bonds 914,997 909,665 588,712 584,640

1.1 structured 1,019 982 26,359 26,975

1.2 other 913,978 908,683 562,353 557,665

2. Other securities 43,461 43,461 65,043 65,047

2.1 structured - - - -

2.2 other 43,461 43,461 65,043 65,047

Total 2,547,466 2,529,587 2,007,744 2,005,994

Key: BV = book value FV = fair value

3.2 – Analysis of item 30 "Securities issued" subordinated securities

The above bonds include the subordinated bond issues “Credito Valtellinese 2003/2013 EMTN” and “Credito Valtellinese 2005/2015 EMTN” for a total book value of EUR 301,480 thousand as at 31 December 2007 (EUR 300,394 thousand as at 31 December 2006).

332

SECTION 4 – FINANCIAL LIABILITIES HELD FOR TRADING – ITEM 40

4.1.- Financial liabilities held for trading: breakdown by type

Type of security/Amounts 31/12/2007 31/12/2006 NV FV FV* NV FV FV* L UL L UL A. Cash liabilities 1. Due to banks - - - - - - - -

2. Due to customers - - - - - - - -

3. Debt securities - - - X - - - X 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 - - - - - - - -

B. Derivatives 1. Financial derivatives X - 2,785 X X - 5,014 X 1.1 Trading X - 2,785 X X - 5,014 X 1.2 Connected with the fair value option X - - X X - - X

1.3 Other X - - X X - - X 2. Credit derivatives X - - X X - - X 2.1 Trading X - - X X - - X 2.2 Connected with the fair value option X - - X X - - X

2.3 Other X - - X X - - X Total B X - 2,785 X X - 5,014 X Total (A+B) X - 2,785 X X - 5,014 X

Key: FV= fair value FV* = fair value calculated by excluding the variations in value due to changes in creditworthiness with respect to the issue date NV= nominal or notional value L= listed UL= unlisted

333

4.4.- Financial liabilities held for trading: derivatives

Types of derivatives/Underlying assets

Interest rates

Currencies and gold

Equity securiti

es Loans Other 31/12/2007 31/12/2006

A) Listed Derivatives 1) Financial derivatives: - with exchange of capital - - - - - - -

- options issued - - - - - - -

- other derivatives - - - - - - -

- without exchange of capital - - - - - - -

- options issued - - - - - - -

- other derivatives - - - - - - -

2) Credit derivatives:

- with exchange of capital - - - - - - -

- without exchange of capital - - - - - - -

Total A - - - - - - -

B) Unlisted Derivatives 1) Financial derivatives: - with exchange of capital 3 1,399 - - - 1,402 984

- options issued - - - - - - -

- other derivatives 3 1,399 - - - 1,402 984

- without exchange of capital 917 - 466 - - 1,382 4,030

- options issued - - 466 - - 466 2,057

- other derivatives 917 - - - - 917 1,973

2) Credit derivatives: - with exchange of capital - - - - - - -

- without exchange of capital - - - - - - -

Total B 920 1,399 466 - - 2,785 5,014

Total (A+B) 920 1,399 466 - - 2,785 5,014

SECTION 8 – TAX LIABILITIES – ITEM 80

See section 13 under assets.

334

SECTION 10 – OTHER LIABILITIES – ITEM 100

10.1 Other liabilities: breakdown

31/12/2007 31/12/2006Amounts due to the tax authorities for indirect taxes - 83

Amounts due to social security and welfare institutions 2,420 2,925

Amounts due to public entities on behalf of third parties 12,532 9,378

Sundry items to be credited to customers and banks 42,649 50,098

Amounts available to customers 18,013 12,622

Amounts payable to employees 6,527 4,270

Value date differences on portfolio transactions 132,144 69,820

Items in transit between branches 19 133

Guarantees given 214 232

Accruals other than those capitalised 1,572 811

Payables related to the supply of goods and services 11,846 10,108

Sundry and residual items 36,004 38,159

Total 263,940 198,639

SECTION 11 – EMPLOYEE TERMINATION INDEMNITIES – ITEM 110

11.1 – Employee termination indemnities: annual changes

2007 2006 A. Opening balance 16,320 17,654

B. Increases 3,640 1,239

B.1 Provision for the year 3,640 1,239

B.2 Other increases - -

C. Decreases -3,375 -2,573

C.1 Indemnities paid -801 -595

C.2 Other decreases -2,574 -1,978

D. Closing balance 16,585 16,320

The item C.2 “Other decreases” includes the amounts transferred to the Group Pension Fund and the Treasury Fund of INPS.

11.2 – Other information

Employee termination indemnities may be included among the defined benefit plans not directly financed. The current value of the employee termination indemnities (Defined Benefit obligation) amounts at year end to EUR 16,585 thousand, compared to EUR 16.320 thousand at the end of 2006. This amount has been calculated through an actuarial method called the Projected Unit Credit Method and using the following actuarial hypotheses:

- personnel turnover rate of 3%; - discounting rate of 4.5%; - inflation rate of 2%.

The reform of complementary social security, pursuant to Legislative Decree no. 252/05 entailed a change in the methods for recording employee termination indemnities, as specified in the Notes to the Financial Statements (Part A.2 – Main Items in the Financial Statements). This change resulted in an increase in the Fund (curtailment), recorded in the income statement, amounting to EUR 372 thousand.

335

The amount of the employee termination indemnities determined pursuant to art. 2120 of the Italian Civil Code totals EUR 18,838 thousand.

SECTION 12 – PROVISIONS FOR RISKS AND CHARGES – ITEM 120

12.1 - Provisions for risks and charges: breakdown

Items/Amounts 31/12/2007 31/12/2006 1. Company pension funds 30,703 31,512

2. Other provisions for risks and charges 9,617 6,640

2.1 legal disputes 7,000 5,433

2.2 personnel expenses 327 -

2.3 other 2,290 1,207

Total 40,320 38,152

12.2 - Provisions for risks and charges: annual changes

2007 Items/Amounts Pensions Other funds A. Opening balance 31,512 6,640

B. Increases 1,262 3,421

B.1 Provision for the year 1,262 3,421

C. Decreases -2,071 -444

C.1 Uses during the year -2,071 -444

D. Closing balance 30,703 9,617

12.3 - Defined benefit company pension funds

12.3.1 – Description of pension funds

The defined benefit company pension fund, which does not feature autonomous and separate management, consists of a provision for the commitment undertaken by Credito Valtellinese towards its retired employees. Since 31 December 2003 there have been no new entries. The amount allocated represents the estimated actuarial debt, which amounted to EUR 30,703 thousand as at 31 December 2007. The actuarial amount is calculated at every year end, with the collaboration of an actuary.

12.3.2 – Changes in pension funds during the period

The actual value of defined benefit liability was equal to EUR 31,512 thousand as at 31 December 2006. During the period under review a total of EUR 2,071 thousand in benefits was disbursed, interest expense matured amounted to EUR 1,418 thousand and the actuarial profits calculated amounted to EUR 156 thousand.

12.3.3 - Changes during the year in pension plan assets and other information

336

The obligation outstanding as at 31 December 2007 derives from pension plans not directly financed.

12.3.5 Description of the main actuarial hypotheses

The current value of the mathematical reserve of the retired employees is equal to the current actuarial value of the pension that they will be paid in the future, considering the possibility of reversibility. The value of the assets mathematical reserve is equal to the current actuarial value of the future benefits, net of the product of the current actuarial value of the future benefits and the set percent contribution. The technical criteria used are as follows:

- interest rate of 4.5%; - rate of increase in benefits of 1.5%; - demographic base IPS55.

12.3.6 – Comparative information

The estimated actuarial debt amounts to EUR 30,703 thousand as at 31 December 2007, compared to EUR 31,512 thousand at the end of 2006 and EUR 26,783 thousand at the end of 2005.

12.4 - Provisions for risks and charges – other provisions

Other provisions are broken down into: - legal disputes, whose provisions are created for the purpose of facing bankruptcy liquidations (EUR 6,155 thousand), provisions for securities in default (430 thousand), other lawsuit linked to banking activities (EUR 415 thousand); - personnel expenses, whose provisions are determined based on actuarial valuations, relating to long-service bonuses disbursed to employees (EUR 327 thousand); - other provisions mainly relating to charges expected disputes ongoing at the balance sheet date (EUR 1,139 thousand) and contractual commitments (EUR 1,100 thousand).

SECTION 14 - COMPANY EQUITY – ITEMS 130, 150, 160, 170, 180, 190 AND 200

14.1 - Company equity: breakdown

Items/Amounts 31/12/2007 31/12/2006 1. Capital 562,061 272,914

2. Share premium reserve 738,303 323,023

3. Reserves 138,102 127,460

4. (Treasury shares) -1,338 -761

5. Valuation reserves 48,509 98,994

6. Equity instruments - 708

7. Net income (loss) for the period 63,603 48,121

Total 1,549,240 870,459

14.2 - "Share capital" and "treasury shares": breakdown

The conversion of the third and final tranche of the bond loan “Credito Valtellinese 2.8% 2004/2007 convertible” in April, resulted in the issue of 16,087,885 new ordinary shares, with a par value of EUR 3, and a consequent increase in share capital of EUR 48,264 million; In execution of the share capital increase resolved by the Extraordinary Shareholders’ Meeting of 10 February 2007, in May , a free share capital increase of EUR 0.5 in the unit par value of outstanding shares was carried out, using reserves for EUR 53,530 thousand. In June, 53,416,567 new shares were issued, with par value of EUR 3.5, linked to the exercise of the option rights upon termination of the offer period (21 May - 22 June 2007), while in July,

337

113,021 shares were issued in relation to the unexercised rights. Thus, at the end of the year, the share capital – fully subscribed and paid-in – amounted to EUR 562,061 thousand, comprised of 160,588,764 shares with a par value of EUR 3.5. The statement of changes in shareholders’ equity illustrates the effects of all operations involving capital and reserves.

14.3 – Share capital – number of shares: annual changes

2007 Items/Types Ordinary Other A. Shares at the beginning of the year - fully paid-up 90,971,291 -

- not fully paid-up - -

A.1 Treasury shares (-) -64,646 -

A.2 Shares issued: opening balance 90,906,645 -

B. Increases 70,380,094 -

B.1 New issues 69,617,473 -

- against payment: 69,617,473 -

- business combinations - -

- conversion of bonds 16,087,885 -

- exercising of warrants - -

- other 53,529,588 -

- free: - -

- on behalf of employees - -

- on behalf of directors - -

- other - -

B.2 Sale of treasury shares 762,621 -

B.3 Other changes - -

C. Decreases -817,692 -

C.1 Cancellation - -

C.2 Purchase of treasury shares -817,692 -

C.3 Disposals of companies - -

C0.4 Other changes - -

D. Shares issued: final balance 160,469,047 -

D.1 Treasury shares (+) 119,717 -

D.2 Shares outstanding at the end of the year 160,588,764 -

- fully paid-up 160,588,764 -

- not fully paid-up - -

14.5 – Profit reserves: other information

The item “Profit reserves” includes the Legal Reserve (allocated pursuant to the laws in force), the statutory reserve (allocated pursuant to an option provided by the articles of association, which derives its funds from the profits exceeding the legal reserve and dividend distribution), and other reserves.

338

14.6 - Valuation reserves: breakdown

Items/Amounts 31/12/2007 31/12/2006 1. Financial assets available for sale: 11,662 8,617

2. Property, plant and equipment - -

3. Intangible assets - -

4. Hedging of foreign investments - -

5. Cash flow hedging - -

6. Exchange rate differences - -

7. Non-current assets and discontinued operations - -

8. Special revaluation laws 36,848 90,377

Total 48,509 98,994

14.7 - Valuation reserves: annual changes

2007

Financial

assets available for

sale

Property, plant

and equipme

nt

Intangible assets

Hedging of foreign

investments

Cash flow hedging

Exchange rate

differences

Non-current assets held for disposal

Special revaluatio

n laws

A. Opening balance 8,617 - - - - - - 90,377

B. Increases B.1 Increases in fair value 3,045 - - - - - - X B.2 Other changes - - - - - - - -

C. Decreases C.1 Decreases in fair value - - - - - - - X C.2 Other changes - - - - - - - -53,529

D. Closing balance 11,662 - - - - - - 36,848

14.8 – Valuation reserves for financial assets available for sale: breakdown

Asset/Amounts 31/12/2007 31/12/2006 Positive reserve Negative reserve Positive reserve Negative reserve 1. Debt securities - - - -

2. Equity securities 11,662 - 8,617 -

3. Quotas of UCI - - - -

4. Loans - - - -

Total 11,662 - 8,617 -

339

14.9 – Valuation reserves for financial assets available for sale: annual changes

2007

Debt securities

Equity securities Quotas of UCI Loans

1. Opening balance - 8,617 - -

2. Positive changes - 3,045 - -

2.1 Increases in fair value - 3,045 - -

2.2 Transfer of negative reserves to the income statement: - from impairment - - - -

- on disposal - - - -

2.3 Other changes - - - -

3. Negative changes - - - -

3.1 Decreases in fair value - - - -

3.2 Adjustments from impairment - - - -

3.3 Transfer of positive reserves to the income statement: - - - -

3.4 Other changes - - - -

4. Closing balance - 11,662 - -

14.10 - Equity instruments: breakdown and annual changes

As at 31 December 2007, there were no equity instruments.

OTHER INFORMATION

340

1. – Guarantees given and commitments

Transactions 31/12/2007 31/12/2006 1) Financial guarantees a) Banks - -

b) Customers 72,103 65,773

2) Commercial guarantees a) Banks 15,337 17,491

b) Customers 473,099 437,341

3) Irrevocable commitments to grant finance a) Banks i) certain to be called on 336 5,708

ii) not certain to be called on 7,630 26,010

b) Customers i) certain to be called on 59,045 7,653

ii) not certain to be called on 126,167 121,254

4) Commitments underlying credit derivatives: sales of protection - -

5) Assets lodged to guarantee third-party obligations - -

6) Other commitments 222,731 222,689

Total 976,448 903,919

2 – Assets lodged to guarantee the Bank’s liabilities and commitments

Portfolios 31/12/2007 31/12/2006 1. Financial assets held for trading: 7,005 7,005

2. Financial assets designated at fair value - -

3. Financial assets available for sale: - -

4. Financial assets held to maturity - -

5. Due from banks 331,562 153,367

6. Loans to customers - -

7. Property, plant and equipment - -

3 - Information on operating leases

In terms of operating leases, the Bank acts solely as a lessee. The main operating lease stipulated and which cannot be cancelled are those with the counterparty Overlease S.r.l. for the leasing of vehicles, with the following minimum future payments: - within one year EUR 216 thousand; - from one year to five years EUR 306 thousand; - no payments over five years. For all of these contracts, minimum costs payable for a total of EUR 224 thousand were recorded during 2007, with some additional costs of between EUR 42 and EUR 160 per 1,000 Km envisaged for some of the contracts if the maximum mileage is exceeded.

4 - Management and trading on behalf of third parties

Type of service 31/12/2007 31/12/2006

341

1. Trading of financial instruments on behalf of third parties

a) Purchases 1. settled - -

2. not settled - -

b) Sales 1. settled - -

2. not settled - -

2. Asset management

a) individual 1,503,655 1,572,301

b) collective - -

3. Custody and administration of securities

a) third-party securities held on deposit: related to the functions of custodian bank (excluding asset management)

1. securities issued by the reporting bank - -

2. other securities - -

b) other third-party securities held on deposit (excluding asset management): other

1. securities issued by the reporting bank 1,047,909 816,201

2. other securities 1,678,493 1,815,066

c) third-party securities deposited with third parties 2,629,523 2,613,757

d) portfolio securities deposited with third parties 886,770 580,173

4. Other transactions 529,960 554,696

The amount under item 4 “Other transactions” refers to the notional value of the insurance premiums collected as at 31 December 2007 equal to EUR 484,296 thousand, compared to EUR 493,860 thousand as at 31 December 2006, and to Bancaperta S.p.A. financial products of the Private Banking sector – which are proposed to customers through the sales network of the Bank, and which had a market value of EUR 45,664 thousand in 2007 (EUR 60,836 thousand in 2006).

342

PART C – INFORMATION ON THE INCOME STATEMENT

SECTION 1 – INTEREST – ITEMS 10 AND 20

1.1 Interest income and similar revenues: breakdown

Items/Technical forms Performing

financial assets

Impaired

financial assets

Other intang. 2007 2006 %

Change

Debt securities Loans

1. Financial assets held for trading: 644 - - - 644 524 23.14%

2. Financial assets designated at fair value - - - - - - -

3. Financial assets available for sale - - - - - - -

4. Financial assets held to maturity - - - - - - -

5. Due from banks 6,486 28,849 - - 35,335 33,663 4.97%

6. Loans to customers 21 297,823 754 - 298,598 217,151 37.51%

7. Hedging derivatives X X X - - 110 -100.00%

8. Financial assets sold and not cancelled 13,882 - - - 13,882 2,655 422.86%

9. Other assets X X X 217 217 292 -25.68%

Total 21,033 326,672 754 217 348,676 254,395 37.06%

1.2 - Interest income and similar income: differentials relative to hedging transactions

Items/Sectors 2007 2006 Change %

A. Positive differentials relative to following transactions: -

A.1 Assets fair value hedging - - -

A.2 Liabilities fair value hedging - 185 -100.00%

A.3 Interest rate risk macro-hedging - - -

A.4 Assets cash flow hedging - - -

A.5 Liabilities cash flow hedging - - -

A.6 Cash flow macro-hedging - - -

Total positive differentials (A) - 185 -100.00%

B. Negative differentials relative to following transactions: -

B.1 Assets fair value hedging - - -

B.2 Liabilities fair value hedging - (75) -100.00%

B.3 Interest rate risk macro-hedging - - -

B.4 Asset cash flow hedging - - -

B.5 Liabilities cash flow hedging - - -

B.6 Cash flow macro-hedging - - -

Total negative differentials (B) - (75) -100.00%

C. Balance (A-B) - 110 -100.00%

343

1.3 - Interest income and similar income: other information

1.3.1 - Interest income on financial assets in foreign currency

2007 2006 Change %

Interest on foreign currency assets 12,453 9,051 37.59%

1.3.2 - Interest income on financial lease transactions

2007 2006 % Change

Interest on financial lease transactions 25,040 17,933 39.63%

1.4 - interest expense and similar expenses: breakdown

Items/Technical forms Payables Securities Other liabilities 2007 2006 %

Change

1. Due to banks (21,784) X - (21,784) (31,689) -31.26%

2. Due to customers (69,706) X - (69,706) (42,190) 65.22%

3. Securities issued X (98,417) - (98,417) (57,903) 69.97%

4. Trading liabilities - - - - - -

5. Financial liabilities designated at fair value - - - - - -

6. Financial liabilities for assets sold and not cancelled (940) - - (940) (2,011) -53.26%

7. Other liabilities X X - - - -

8. Hedging derivatives: X X - - - -

Total (92,430) (98,417) - (190,847) (133,793) 42.64%

1.6 - interest expense and similar expenses: other information

1.6.1 - Interest expense on foreign currency liabilities

2007 2006 % Change

Interest on foreign currency liabilities (3,867) (3,188) 21.30%

344

SECTION 2 – FEES AND COMMISSIONS – ITEMS 40 AND 50

2.1 - Fee and commission income: breakdown

Type of service/Sector 2007 2006 % Change

a) guarantees given 2,854 2,617 9.06%

b) credit derivatives - - -

c) management, dealing and consulting services: 28,866 29,559 -2.34%

1. trading of financial instruments 3 2 50.00%

2. currency dealing 1,859 1,697 9.55%

3. asset management 15,149 15,626 -3.05%

3.1 individual 15,149 15,626 -3.05%

3.2 collective - - -

4. custody and administration of securities 426 444 -4.05%

5. custodian bank - - -

6. placement of securities 4,288 5,185 -17.30%

7. order collection 3,329 2,643 25.96%

8. consultancy services - - -

9. distribution of services to third parties 3,812 3,962 -3.79%

9.1. asset management 309 370 -16.49%

9.1.1 individual 309 370 -16.49%

9.1.2 collective - - -

9.2 insurance products 3,503 3,592 -2.48%

9.3 other products - - -

d) collection and payment services 13,905 13,725 1.31%

e) servicing services for securitisation transactions - - -

f) factoring transaction services - - -

g) tax collection services - - -

h) other services 21,661 19,920 8.74%

Total 67,286 65,821 2.23%

Fee and commission income reported in the item “h) other services” mainly refer to current account and deposit fees for EUR 12,720 thousand, and fees on loan transactions for EUR 7,656 thousand.

2.2 - Fee and commission income: distribution channels of products and services

Channels/Amounts 2007 2006 % Chang

345

e a) at Bank branches: 23,249 24,773 -6.15%

1. asset management 15,149 15,626 -3.05%

2. placement of securities 4,288 5,185 -17.30%

3. third-party products and services 3,812 3,962 -3.79%

b) outside bank branches: - - -

1. asset management - - -

2. placement of securities - - -

3. third-party products and services - - -

c) other distribution channels: - - -

1. asset management - - -

2. placement of securities - - -

3. third-party products and services - - -

2.3 - Fee and commission expense: breakdown

Services/Sectors 2007 2006 % Change

a) guarantees received (30) (57) -47.37%

b) credit derivatives - - -

c) management and dealing services (7,827) (7,857) -0.38%

1. trading of financial instruments - - -

2. currency dealing (55) (54) 1.85%

3. asset management: (813) (978) -16.87%

3.1 own portfolio (24) (207) -88.41%

3.2 third party portfolio (789) (771) 2.33%

4. custody and administration of securities (6,959) (6,308) 10.32%

5. placement of financial instruments - (517) -100.00%

6. offer outside banking premises of financial instruments, products and services - - -

d) collection and payment services (4,749) (4,238) 12.06%

e) other services (1,277) (725) 76.14%

Total (13,883) (12,877) 7.81%

346

SECTION 3 – DIVIDENDS AND SIMILAR INCOME – ITEM 70

3.1 - Dividends and similar income: breakdown

2007

2006

% Change

Items/Income Dividends

Profit from

quotas of UCI

Dividends

Profit from

quotas of UCI

Dividends

Profit from

quotas of UCI

A. Financial assets held for trading - - 1 - -100.00% -

B. Financial assets available for sale 883 - 927 - -4.75% -

C. Financial assets designated at fair value - - - - - -

D. Investments in associates and companies subject to joint control 28,616 X 23,684 X 20.82% X

Total 29,499 - 24,612 - 19.86% -

SECTION 4 – PROFIT (LOSS) ON TRADING ACTIVITIES – ITEM 80

4.1 - Profit (loss) on trading activities: breakdown

Transactions/Income components Capital gains (A)

Profit on trading (B)

Capital losses (C)

Losses on trading (D)

Net profit (loss)

[(A+B)-(C+D)]

1. Financial assets held for trading 5 1,634 (82) (34) 1,523

1.1 Debt securities 5 720 (82) (29) 614

1.2 Equity securities - 454 - - 454

1.3 Quotas of UCI - 460 - (5) 455

1.4 Loans - - - - -

1.5 Other - - - - -

2. Trading liabilities - - - - -

2.1 Debt securities - - - - -

2.2 Payables - - - - -

2.3 Other - - - - -

3. Other financial assets and liabilities: exchange rate differences X X X X 692

4. Derivatives 2,247 4,105 (1,997) (4,270) (7)

4.1 Financial derivatives: - On debt securities and interest rates 1,781 4,105 (1,531) (4,270) 85

- On equity securities and stock market indices 466 - (466) - -

- On currencies and gold X X X X (92)

- Other - - - - -

4.2 Credit derivatives - - - - -

Total 2,252 5,739 (2,079) (4,304) 2.208

347

SECTION 5 – FAIR VALUE ADJUSTMENTS IN HEDGE ACCOUNTING – ITEM 90

5.1 – Fair value adjustments in hedge accounting: breakdown

Income components/Amounts 2007 2006 % Change

A. Income from: A.1 Fair value hedges - - -

A.2 Financial assets with fair value hedges - - -

A.3 Financial liabilities with fair value hedges - 94 -100.00%

A.4 Financial derivatives for cash flow hedges - - -

A.5 Assets and liabilities denominated in foreign currencies - - -

Total income from hedging activities (A) - 94 -100.00%

B. Charges from: B.1 Fair value hedges - (82) -100.00%

B.2 Financial assets with fair value hedges - - -

B.3 Financial liabilities with fair value hedges - - -

B.4 Financial derivatives for cash flow hedges - - -

B.5 Assets and liabilities denominated in foreign currencies - - -

Total charges from hedging activities (B) - (82) -100.00%

C. Fair value adjustments in hedge accounting (A-B) - 12 -100.00%

SECTION 6 - PROFIT (LOSS) FROM DISPOSALS/REPURCHASES - ITEM 100

6.1 – Profit (loss) from disposals/repurchases: breakdown

2007 2006 % Change

Items/Income components Profit Loss Net

profit (loss)

Profit Loss Net

profit (loss)

Profit Loss Net profit (loss)

Financial assets 1. Due from banks - - - - - - - - -

2. Loans to customers - - - - (93) (93) - -100.00% -100.00%

3. Financial assets available for sale

3.1 Debt securities - - - - - - - - -

3.2 Equity securities 10 - 10 2,176 - 2,176 -99.54% - -99.54%

3.3 Quotas of UCI - - - - - - - - -

3.4 Loans - - - - - - - - -

4. Financial assets held to maturity - - - - - - - - -

Total assets 10 - 10 2,176 (93) 2,083 -99.54% -100.00% -99.52%

Financial liabilities 1. Due to banks - - - - - - - - -

2. Due to customers - - - - - - - - -

3. Securities issued 86 - 86 14 (164) (150) 514.29% -100.00% -157.33%

Total liabilities 86 - 86 14 (164) (150) 514.29% -100.00% -157.33%

348

SECTION 8 – NET ADJUSTMENTS TO/RECOVERIES ON IMPAIRMENT – ITEM 130

8.1 - Net adjustments to/recoveries on impairment of loans: breakdown

Adjustments Recoveries 2007 2006 Transactions/Income components Specific Portfolio Specific Portfolio

Cancellation Other A B A B A. Due from banks - - - - - - - - 1

B. Loans to customers (3,596) (23,784) (6,081) 1,782 5,552 34

0 370 (25,417) (20,923)

C. Total (3,596) (23,784) (6,081) 1,782 5,552 34

0 370 (25,417) (20,922)

Key A = from interest B = other recoveries

Transactions/Income components 2007 2006 % Change A. Due from banks - 1 -100.00%

B. Loans to customers (25,417) (20,923) 21.48%

C. Total (25,417) (20,922) 21.48%

8.4 - Net adjustments to/recoveries on impairment of other financial activities: breakdown

Adjustments Recoveries 2007 2006Transactions/Income components Specific Portfolio Specific Portfolio Cancellation Other A B A B A. Guarantees given - (49) (9) - 53 - 23 18 (141)

B. Credit derivatives - - - - - - - - -

C. Commitments to grant finance - - - - - - - - -

D. Other activities - - - - - - - - -

E. Total - (49) (9) - 53 - 23 18 (141)

Key A = from interest B = other recoveries

Transactions/Income components 2007 2006 % Change

A. Guarantees given 18 (141) -112.77%

B. Credit derivatives - - -

C. Commitments to grant finance - - -

D. Other activities - - -

E. Total 18 (141) -112.77%

SECTION 9 – ADMINISTRATIVE EXPENSES - ITEM 150

9.1 - Personnel expenses: breakdown

349

Type of expense/Amounts 2007 2006 %

Change

1) Employees (56,608) (56,336) 0.48%

a) wages and salaries (32,974) (31,556) 4.49%

b) social security charges (10,262) (10,484) -2.12%

c) termination indemnity (692) (182) 280.22%

d) pension expenses - - -

e) provision to employee termination indemnities (3,069) (737) 316.42%

f) provision to the pension fund and similar commitments -

- defined contribution - - -

- defined benefit (1,262) (6,797) -81.43%

g) payments to external supplementary pension funds: -

- defined contribution (1,704) (1,475) 15.53%

- defined benefit - - -

h) costs from equity payments - - -

i) other employee benefits (6,645) (5,105) 30.17%

2) Other personnel (330) (227) 45.37%

3) Directors (2,568) (2,014) 27.51%

Total (59,506) (58,577) 1.59%

The individual items relative to employees include the portion of costs relative to seconded staff from other companies.

9.2 – Average number of employees by category

2007 2006 Employees: 804 763

a) executives 10 8

b) total middle managers 247 232

- 3rd and 4th level 131 122

c) other employees 547 523

Other staff 16 20

Total 820 783

9.3 - Defined benefit company pension funds: total costs

The total costs for 2007 amount to EUR 1,262, equal to the interest expense of EUR 1,418 thousand, net of the actuarial profit of EUR 156 thousand.

9.5 - Other administrative expenses: breakdown

2007 2006 %

350

Change Fees for professional and consultancy services (1,803) (1,607) 12.20%

Statutory Auditors’ fees (354) (273) 29.67%

Insurance premiums (1,569) (1,633) -3.92%

Advertising (2,901) (2,299) 26.19%

Postage, telegraph and telephone (2,685) (2,361) 13.72%

Maintenance and repairs (1,107) (1,013) 9.28%

Data processing services (12,893) (11,922) 8.14%

Electricity, heating and shared property service charges (2,116) (2,306) -8.24%

Charges for miscellaneous services provided by third parties (1,670) (1,573) 6.17%

Cleaning expenses (1,346) (1,401) -3.93%

Transport and travel (407) (324) 25.62%

Security and transport of valuables (1,848) (1,728) 6.94%

Membership fees (633) (522) 21.26%

Independent auditors’ fees (368) (376) -2.13%

Commercial information and searches (1,199) (1,010) 18.71%

Subscriptions to newspapers, magazines and publications (187) (193) -3.11%

Rents payable (2,479) (2,309) 7.36%

Entertaining expenses (853) (712) 19.80%

Taxes and dues (11,525) (10,734) 7.37%

Contractual charges for treasury services (1,268) (1,216) 4.28%

Miscellaneous items (17,135) (16,760) 2.41%

Total (66,346) (62,272) 6.54%

SECTION 10 – NET PROVISIONS FOR RISKS AND CHARGES – ITEM 160

10.1 - Net provisions for risks and charges: breakdown

Items 2007 2006 %

Change

Provision for legal disputes and claims from liquidators (1,995) (1,205) 65.56%

Provision for sundry risks and charges (1,100) (395) 178.48%

Total (3,095) (1,600) 93.44%

SECTION 11 – NET ADJUSTMENTS TO/RECOVERIES ON PROPERTY, PLANT AND EQUIPMENT – ITEM 170

11.1 - Net adjustments to property, plant and equipment: breakdown

2007

Assets/Income components Amortisation (a)

Losses on impairment (b) Recoveries (c)

Net profit (loss)

(a+b+c)

351

A. Property, plant and equipment A.1 Owned - Used in the business (6,565) - - (6,565)

- For investment (183) - - (183)

A.2 Acquired through a financial lease

- Used in the business - - - -

- For investment - - - -

Total (6,748) - - (6,748)

SECTION 13 - OTHER OPERATING INCOME AND EXPENSES - ITEM 190

13.1 - Other operating expenses: breakdown

2007 2006 % Change

Depreciation of leasehold improvements (998) (927) 7.66%

Other charges (495) (788) -37.18%

Total (1,493) (1,715) -12.94%

352

13.2 - Other operating income: breakdown

2007 2006 % Change

Rentals receivable 643 634 1.42%

Rentals receivable from group companies 1,185 1,169 1.37%

Income from other services 182 173 5.20%

Recovery of indirect taxes 10,587 9,787 8.17%

Recovery of expenses on services to group companies 414 400 3.50%

Recovery of insurance policy payments 1,007 1,055 -4.55%

Recovery of legal and notary fees 896 592 51.35%

Other income 1,986 2,129 -6.72%

Total 16,900 15,939 6.03%

SECTION 14 – PROFIT (LOSS) ON INVESTMENTS IN ASSOCIATES AND COMPANIES SUBJECT TO JOINT CONTROL - ITEM 210

14.1 - Profit (loss) on investments in associates and companies subject to joint control breakdown

Income components/Amounts 2007 2006 % Change

A. Income 128 17 652.94%

1. Revaluations - - -

2. Profit from disposals 128 17 652.94%

3. Recoveries - - -

4. Other positive changes - - -

B. Charges (1,600) - -

1. Write-downs - - -

2. Losses on impairment (1,600) - -

3. Loss from disposals - - -

4. Other positive changes - - -

Net profit (loss) (1,472) 17 -8,758.82%

Adjustments to impairment refer to the investment in Creset S.p.A.

353

SECTION 17 - PROFIT (LOSS) ON DISPOSAL OF INVESTMENTS - ITEM 240

17.1 - Profit (loss) on disposal of investments: breakdown

Income components/Amounts 2007 2006 % Change

A. Property - Profit from disposals - - -

- Loss from disposals - - -

B. Other assets - Profit from disposals 42 21 100.00%

- Loss from disposals (29) - -

Net profit (loss) 13 21 -38.10%

SECTION 18 – TAXES ON INCOME FROM CONTINUING OPERATIONS - ITEM 260

18.1 - Taxes on income from continuing operations: breakdown

Income components/Amounts 2007 2006 % Change

1. Current taxes (-) (34,759) (24,196) 43.66%

2. Changes in current taxes of prior periods (+/-) - - -

3. Reduction in current taxes for the year (+) - - -

4. Change in pre-paid taxes (+/-) (247) (5,547) -95.55%

5. Change in deferred taxes (+/-) 2,719 7,225 -62.37%

6. Income taxes for the year (-) (-1 +/-2 +3 +/-4 +/-5) (32,287) (22,518) 43.38%

18.2 – Reconciliation between theoretical tax expense and actual tax expense - IRES

2007 Income (loss) before tax from continuing operations 95,890

Income (loss) from groups of discontinued operations (before tax) -

Taxable income 95,890

Theoretical tax expense - IRES (31,644)

Effect of non-deductible negative components of income (3,421)

Effect of non-taxable positive components of income 10,798

Actual tax expense - IRES (24,266)

- from continuing operations (24,266)

- from groups of discontinued operations -

354

18.2 – Reconciliation between theoretical tax expense and actual tax expense - IRAP

2007 Income (loss) before tax from continuing operations 95,890

Profit (loss) from groups of discontinued operations -

Taxable income 95,890

Theoretical tax expense - IRAP (5,034)

Effect of non-deductible negative components of income (4,933)

Effect of non-taxable positive components of income 1,947

Actual tax expense - IRAP (8,020)

- from continuing operations (8,020)

- from groups of discontinued operations -

355

SECTION 19 - INCOME (LOSS) FROM GROUPS OF DISCONTINUED OPERATIONS (AFTER TAX) – ITEM 280

19.1 - Income (loss) from groups of discontinued operations (after tax): breakdown

Income components/Amounts 31/12/2007 31/12/2006 % Change Group of assets/liabilities 1. Income - 1,513 -100.00%

2. Charges - (87) -100.00%

3. Result of the valuation of the group of assets and associated liabilities - - -

4. Profit (loss) on disposal - 999 -100.00%

5. Taxes and dues - (4) -100.00%

Profit (loss) - 2,421 -100.00%

19.2 – Breakdown of income taxes related to groups of assets/liabilities associated with discontinued operations

31/12/2007 31/12/2006 % Change

1. Current taxation (-) - (4) -100.00%

2. Change in pre-paid taxes (+/-) - - -

3. Change in deferred taxes (-/+) - - -

4. Income taxes for the year (-1+/-2 +/-3) - (4) -100.00%

356

SECTION 21 – EARNINGS PER SHARE

The basic earnings per share and diluted earnings per share are calculated according to the methods described in IAS 33 – Earnings per share. The basic earnings per share are defined as the profit or loss attributable to ordinary equity holders (subtracting the quotas destined to the charity fund) divided by the weighted average number of ordinary shares outstanding during the period. The diluted earnings per share are calculated taking into account also the dilutive effects of the conversion of the potential ordinary shares, defined as financial instruments that attribute to the holder the right to obtain ordinary shares. As a result, for the purposes of the calculation, the numerator and denominator of the ratio are adjusted to take into account the effects of additional shares which would be outstanding in case of conversion of all the potential ordinary shares with dilutive effects. The following table displays the basic earnings per share.

2007 2006

Profit attributable 61,303 46,221

Weighted average number of ordinary shares 130,347,319 87,226,387

Basic earnings per share 0.47 0.53 The diluted earnings per share take into account also the potential ordinary shares resulting from the share capital increase implemented during the year, refers to warrants issued (warrants maturing on 30 April 2008 and 30 April 2009) and the bonus share owed to subscribers of the share capital increase (one new share shall be assigned for each 10 shares subscribed and held uninterruptedly until 12 July 2008). The following table displays the diluted earnings per share.

2007 2006

Adjusted attributable profit 61,303 48,869

Weighted average number of ordinary shares 147,521,227 103,362,287

Diluted earnings per share 0.42 0.47

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PART D – SEGMENT REPORTING

The segment reporting is provided in the consolidated financial statements. You are therefore referred to Part D of the notes to the consolidated financial statements.

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PART E – INFORMATION ON RISKS AND HEDGING POLICIES

SECTION 1 – CREDIT RISK

The clear identification of risks to which the Bank is potentially exposed constitutes the essential prerequisite for a knowledgeable assumption of said risks and their effective management, making use of the appropriate mitigation and transfer tools and techniques. Careful risk management, based on criteria of prudence and implemented within a specific organisational sphere, aims to limit the volatility of expected results. In line with its focus on retail banking, the Bank is mainly exposed to credit risk. The set of internal rules, operating procedures and control structures to oversee company risks is structured according to a model that integrates control methods at various levels, all converging with the objectives of ensuring efficiency and effectiveness of operating processes, safeguarding integrity of corporate assets, protecting from losses, ensuring reliability and integrity of information and verifying proper execution of activities with respect to the internal and external regulations. The controls are subdivided according to the following types:

- line controls, aimed at ensuring proper execution of transactions, normally incorporated into the procedures or attributed to the productive structures and carried out as part of back office activities;

- controls on risk management, assigned to structures other than productive, aimed at defining risk measurement methods, verifying respect of assigned powers and control of the consistency of operations within the single areas with the risk-return objectives assigned;

- internal auditing controls, aimed at identifying anomalous trends and violations of procedures and regulations, as well as evaluation of the functions of the overall internal control systems, attributed, also through on-site inspections, continuously, periodically or, in exceptional cases, to independent structures outside of the operating units.

The entire internal control system is subject to periodic review by the Board of Directors and the Internal Control Committee, in order to constantly adjust to the development of strategies and operating processes and the assessment of corporate risk.

QUALITATIVE INFORMATION

1. General aspects

The Bank’s attention to the development in the area in which it operates continues to be a distinctive element of its lending activities, with specific attention to sectors such as tourism and real estate, which ensure a stable foundation for a considerable improvement in the local production fabric. The aggregate of reference is represented by households and small and medium enterprises, which are the recipients of most of the loans.

2. Credit risk management policies

2.1 Organisational aspects

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The organisational structure of the credit area is distributed over the sales network with hierarchically ascending powers and competences towards central structures in order to take advantage of the local knowledge while maintaining more and more specialist competences within the central structures. Every loan proposal is formulated by bodies within the territorial network, which shall complete the related decision-making procedure. Applications for larger credit lines, differentiated also on the basis of the risk, are automatically forwarded to central structures, which decide on the relative cases. In this perspective, all the cases of credit lines which are dealt with by the Board of Directors, in addition to any particularly important topic relating to lending issues, are systematically and obligatorily monitored by the Group Loans Department of Mediocreval, and submitted to the Group Credit Committee for a non-binding opinion. As a result of the new mission assigned to Mediocreval, it was considered suitable to transfer the Group’s Loan Department which from 1 January 2008, operates within the Parent Company, which carries out, pursuant to supervisory regulations, the functions of management, coordination and control of compliance with legal regulations regarding capital adequacy, risk management and internal control of the entire Group. This new Department was assigned the task of managing asset quality for the entire Group, defining policies and criteria required for credit risk assessment and management. This organisational change is also linked to the new composition of the Group Credit Committee, which has the duty of enabling Credito Valtellinese, as Parent Company, to supervise the lending activities of its subsidiary Banks, carrying out checks and imparting directives in order to optimise the assumption of credit risk. In relation to the role assigned to Parent Companies of banking groups by current regulations in force, the execution of resolution adopted by the Board of Directors, which set forth new loans or changes in outstanding loans for amounts exceeding present limits must obtain an assessment of compatibility from the Executive Committee of Credito Valtellinese. The Board of Directors, the only body that has the power to grant powers of attorney, is regularly informed, during its meetings, on the exercising of delegated powers and the performance of the most significant loans (including anomalously performing loans and doubtful loans). The Board of Directors of Credito Valtellinese, as a body of the Parent Company, also extends it analysis to positions within the entire Group. Performance anomalies are recorded using advanced web-based systems, which are versatile and easy to use. Particularly serious omissions can lead to normal operations being halted until these are clearly outlined, the relevant bodies have been notified and the competent bodies have authorised them. The Risk Control Department within the Loans Department manages at-risk loans (included in the categories of “watchlist”, “substandard” and “restructured” loans), ensuring that these cases are adequately monitored. In order to guarantee the highest level of objectivity in the assessment, the Loans Department reports to the General Management of the Bank autonomously and independently from the Sales Department. Several significant changes have occurred which, since 1 January 2008, have also involved the Bank, where the inspection activities, previously assigned to the Risk Control Department within the Loans Department, have now been assigned to the Inspection Service of the individual Banks. Following these changes, Loan Performance Management Department (the new title of the Risk Control Department), burdened by the previously assigned duties regarding general lines, may provide better, direct assistance to the network in managing irregular positions, while the Inspection Service, which is not involved in management activities, may directly report to the General Management and Board of Statutory Auditors (with the possibility of uniting the inspections on operational risk and those on credit risk). These two departments will be the preferential contacts, and will follow the directives of the Auditing Department and the new Loans Department of the Group, whose collaboration will ensure coordination between the various operational units, and operational harmony of the Group.

2.2 Management, measuring and control systems

The factors that enable to evaluate and manage credit risk include all the traditional quantitative (income component, analysis of financial statements and internal performance data) and qualitative elements, such as the in-depth knowledge of the customer, the competitive context in which it operates and, above all for the corporate segment, assessing the effectiveness of the management. All these evaluation elements are

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complemented by all the modern databases available to credit operators such as risk centres and the scoring of performance analyses. High levels of loan fragmentation contribute to keeping the portfolio risk under control. Indeed, at the end of the year, there were no credit exposures qualifiable as large risks according to supervisory regulations. In May 2007, the new corporate rating model entered into force. Business customers, defined as the group of counterparties of any legal form which carry out the production and/or sale of goods and services, are divided into two segments:

- corporate, which includes companies with turnover greater than EUR 5 million or credit lines greater than EUR 250,000. This segment comprises a limited number of counterparties which, however, absorb a significant portion of loans;

- small business, which includes companies with turnover of up to EUR 5 million and credit lines up to EUR 250,000. This segment comprises a high number of counterparties with loans of small amounts.

The model used to assign ratings entails systems focused on the automatic component, and includes objective qualitative elements, excluding directional deviations or overrides. The model is organised according to a module-based scheme or partial approach. There are five modules: quantitative analysis of financial statement indicators; performance of the relationship between the company and the Banking Group; company situation within the banking system; assessments of macro-economic trends inherent in the company’s branch of business and qualitative analysis of the company. Each module is autonomous in respect to the others, and gives rise to a partial valuation score. Depending on the scores obtained in the various areas of assessment, the company is assigned to a ratings class. There are 9 ratings classes for performing counterparties, and one class for counterparties in default. The assignment of a rating is linked to the loan disbursement process, and becomes active in the phase of granting and reviewing loan applications. Ratings are revised on a monthly basis. As the backtesting carried out on the model demonstrated a significant correlation between the credit worthiness classes and the historic frequency of default, the model is considered suitable for management use in the various phases of the lending process. Performance scoring systems have also been in use for some time, through which it is possible to highlight particularly serious positions and implement simplified procedures to review the credit line of those companies that have passed the strict selection procedures. The entire credit process is constantly subject to attention and careful inspections. It is noted that once again this year, the Bank obtained positive results in the inspection for quality certification of the "Lending arrangement, issue and management” process, which it has held since 1995. Certification involves constant and stringent verification of all credit operations, the preparation of documents (Quality Manual and Operating Instructions), suitably examined and approved by the Top Management and distributed to the various departments of the company, as well as the constant updating of controls carried out internally by the Loans Department and the Inspection Service (reporting to the General Management). The purpose of this process is to ensure the utmost precision in assessing risk, maintaining a slim, efficient assessment and management process. The PattiChiari ABI initiative regarding the average response times for loan applications to small and medium enterprises, has demonstrated, from the first quarterly publications, the efficiency of the decision-making process used, in which the Bank continues to occupy the top places in the national ranking.

2.3 Credit risk mitigation techniques

The acquisition of guarantees undergoes a rigorous procedure, which envisages that the employee in charge of the collection can be unambiguously identified and that the formal and substantial validity of the guarantee is assessed, including also the verification of legal capacity required for the assignment. In case of interpretation difficulties, the Group Legal Service becomes involved and provides further verifications or recommendations in order to ensure the necessary legal effectiveness. The control is further reinforced at central level, where the security or the contracts are kept, and periodically sample-checked by the Inspection Service.

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In case of pledges, the procedure envisages the valuation of only predetermined elements which can be easily liquidated. In case of mortgages, the assessment of the assets involves the intervention of experts external to the Bank, who may be employed by Group companies but have no involvement whatsoever with the creditworthiness evaluation process. This procedure is not required in special cases of mortgages of a small amount. The collection of personal guarantees is often preceded by checks carried out at the competent Property Registry, with the purpose of ascertaining the effective ownership of the property by the guarantor, always taking well into account the possibility of a swift and unexpected decrease in value of the asset considered. In any case, the guarantees are always considered as an additional element to the credit line case and do not represent its unique basis.

2.4 Impaired financial assets

For impaired loans, understood as substandard or doubtful loans, the Bank uses technical-organisational procedures and standardised methods which will be illustrated below. The positions included in the substandard class are identified by the Risk Control Department based on a serious of analyses of internal performance indicators (specific attention is placed on the positions in default greater than 90-180 days), the returning flows from risk centres, sector data and financial statement data of the single loan recipients, as well as any adverse entries and/or registrations against the same. The assignment of substandard status to single positions is resolved by the Credit Committee, usually upon proposal by the Risk Control Department. On making the resolution, the Committee also determines the amount of allocations to effect. In the same way, the return to ordinary status, and thus, removal of substandard status is resolved by the Bank’s Credit Committee. Regarding positions classified as substandard, like those classified as “watchlist”, all decision-making rights granted to individual bodies are suspended, and any subsequent granting of credit remains the exclusive jurisdiction of corporate bodies. Substandard positions are systematically monitored by the Risk Control Department, also using a series of controls available on the web, which provide constant support to the single branches in terms of the methods for managing relationships and the measures to be taken to attempt to return the positions to performing status. In order to support the branches and guarantee the correct application of the Supervisory Regulations , since 2006, a web-based procedure is active for “objective substandard loans”, meaning those regarding instalment payments which reach a specific degree of non-payment. The procedure highlights the anomaly in the computerised agenda of the company departments involved. If the irregularity is not suitably resolved during the half-year, the notification is progressively sent from the branches to the area manager, until it reaches the Risk Control Department for the correct assignment of substandard status. Moving on to examine the management of doubtful loans, it is important to note that within the Group, Finanziaria San Giacomo has been assigned to monitor said activity. In compliance with the project for rationalisation of Group activities in the lending sector, almost all impaired loans belonging to Group Banks were transferred to said company, as well as the management of non-transferred impaired loans. The centralising this specialist activity within a single company favoured the transfer of the best operational methods among the various operating units throughout the country, and resulted in a significant improvement in the overall management of problem loans. A Disputes Committee operates within Finanziaria San Giacomo, with the task of managing, within the limits of delegated powers, its own cases and expressing an obligatory, but non-binding, opinion on cases under the responsibility of the Board of Directors, as well as those assigned under management.

As regards the amount of allocations to be made on single doubtful positions, a formal Group policy is in place, approved by the Board of Directors, indicating, for the various types of doubtful loans classified based on the status of single procedures, the criteria to be followed in determining “doubtful” status . Decisions regarding single allocations, as well as any variations, are undertaken by the Loans Committee upon proposal of the competent parties within Finanzaria San Giacomo. In order to further improve the management of doubtful loans, a web-based procedure (W2PEC) has been developed, which provides constant monitoring of the status of single positions to be recovered. Specifically, the status of doubtful loans can be monitored by mapping said loans based on a high number of selection

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criteria (amount brackets, status of the procedures, manager, arranger, unit of origin, attorney in charge, etc.).

Control over impaired loans using the above methods brought the ratio of net doubtful loans to loans down to 0.41%, quite a low level and a further decrease compared to the 0.54% of the previous year.

QUANTITATIVE INFORMATION

A. QUALITY OF CREDIT

A.1 IMPAIRED AND PERFORMING POSITIONS: AMOUNTS, VALUE ADJUSTMENTS, TRENDS, ECONOMIC AND TERRITORIAL DISTRIBUTION

A.1.1 - Distribution of financial assets by portfolio and credit quality (book values)

Portfolio/Quality Doubtful

loans Substandard

loans Restructured

positions Past-due

positions Country

risk Other

intang. Total

1. Financial assets held for

trading: - - - - 29 14,657 14,686

2. Financial assets

available

for sale - - - - - 60,236 60,236

3. Financial assets

held to maturity - - - - - - -

4. Due from banks - - - - - 1,233,620 1,233,620

5. Loans to customers 22,655 49,120 4,136 23,847 19 5,359,900 5,459,677

6. Financial assets

designated

at fair value - - - - - - -

7. Financial assets held

for discontinued

operations - - - - - - -

8. Hedging derivatives: - - - - - - -

Total at 31/12/2007 22,655 49,120 4,136 23,847 48 6,668,413 6,768,219

Total at 31/12/2006 24,891 31,452 - 40,072 72 5,859,991 5,956,478

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A.1.2 - Distribution of financial assets by portfolio and credit quality (gross and net values)

Impaired assets Other intang. Total

Portfolio/Quality Gross

exposure

Portfolio adjustmen

ts

Portfolio adjustmen

ts

Net exposure

Gross exposure

Portfolio adjustmen

ts Net exposure

(net exposure)

1. Financial assets held For trading - - - - X X 14,686 14,686

2. Financial assets available for sale - - - - 60,236 - 60,236 60,236

3. Financial assets held to maturity - - - - - - - -

4. Due from banks - - - - 1,233,620 - 1,233,620 1,233,620

5. Loans to customers 148,356 -48,585 -13 99,758 5,388,000 -28,081 5,359,919 5,459,677

6. Financial assets designated at fair value - - - - X X - -

7. Financial assets held for sale - - - - - - - -

8. Hedging derivatives: - - - - X X - -

Total at 31/12/2007 148,356 -48,585 -13 99,758 6,681,856 -28,081 6,668,461 6,768,219

Total at 31/12/2006 153,003 -56,588 - 96,415 5,796,214 -24,607 5,860,063 5,956,478

A.1.3 - Cash and off-balance sheet exposures to banks: gross and net values

31/12/2007

Type of exposure/Amount Gross exposure

Specific portfolio adjustments

Value and portfolio adjustments Net exposure

A, CASH EXPOSURES a) Doubtful loans - - - -

b) Substandard loans - - - -

c) Restructured loans - - - -

d) Past-due positions - - - -

e) Country risk - X - -

f) Other assets 1,259,588 X - 1,259,588

TOTAL A 1,259,588 - - 1,259,588

B. OFF-BALANCE SHEET EXPOSURES a) Impaired - - - -

b) Other 187,269 X -1 187,268

TOTAL B 187,269 - -1 187,268

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A.1.6 - Cash and off-balance sheet exposures to customers: gross and net values

31/12/2007

Type of exposure/Amount Gross Exposure

Specific Value Adjustments

Value and portfolio adjustments Net exposure

A, CASH EXPOSURES a) Doubtful loans 64,968 -42,313 - 22,655

b) Substandard loans 54,776 -5,651 -5 49,120

c) Restructured loans 4,268 -126 -6 4,136

d) Past-due positions 24,344 -496 -1 23,847

e) Country risk 49 X -1 48

f) Other assets 5,433,624 X -28,081 5,405,543

TOTAL A 5,582,029 -48,585 -28,094 5,505,350

B. OFF-BALANCE SHEET EXPOSURES a) Impaired 1,610 -205 - 1,405

b) Other 791,065 X -8 791,057

TOTAL B 792,675 -205 -8 792,462

A.1.7 - Cash exposures to customers: trends for impaired positions and positions subject to gross country risk

2007

Causes/Categories Doubtful loans Substandard loans

Restructured positions

Past-due positions

Country risk

A. Opening gross value 77,750 34,338 - 40,916 72

- including: positions sold and not cancelled - - - - -

B. Increases 42,983 56,426 4,268 26,480 19

B.1 transfers from performing loans 15,882 49,233 3,854 21,896 4

B.2 transfers from other categories of impaired loans 23,384 5,291 - - -

B.3 other increases 3,717 1,902 414 4,584 15

C. Decreases -55,765 -35,988 - -43,052 -42

C.1. transfers to performing loans -170 -7,010 - -30,111 -

C.2 write-offs -31,605 - - - -

C.3 collections -12,240 -9,131 - -4,113 -4

C.4 gains on disposals -11,738 - - - -

C.5 transfers from other categories of impaired loans - -19,847 - -8,828 -

C.6 other decreases -12 - - - -38

D. Closing gross value 64,968 54,776 4,268 24,344 49

- including: positions sold and not cancelled - - - - -

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A.1.8 - Cash exposures to customers: trend in total value adjustments

2007

Causes/Categories Doubtful loans Substandard loans

Restructured positions

Past-due positions

Country risk

A. Opening total adjustments 52,859 2,886 - 843 1

- including: positions sold and not cancelled - - - - -

B. Increases 26,672 4,901 132 505 1

B.1 value adjustments 25,208 4,771 126 421 1

B.2 transfers from other categories of impaired loans 1,396 94 - - -

B.3 other increases 68 36 6 84 -

C. Decreases -37,218 -2,131 - -851 -1

C.1 recoveries from valuations -4,587 -94 - -37 -1

C.2 recoveries from collections -2,011 -626 - -574 -

C.3 write-offs -30,620 -44 - -46 -

C.4 transfers from other categories of impaired loans - -1,326 - -164 -

C.5 other decreases - -41 - -30 -

D. Closing total adjustments 42,313 5,656 132 497 1

- including: positions sold and not cancelled - - - - -

A.2 – CLASSIFICATION OF EXPOSURES BASED ON INTERNAL AND EXTERNAL RATINGS

A.2.1 - Distribution of cash and off-balance sheet exposures by external rating class (book values)

In consideration that the portfolio of loans to customers of the Bank is comprised predominantly of loans to small and medium-sized companies, family-owned and artisan business, professionals and private individuals, the distribution of cash and off-balance sheet exposures for external ratings classes is not significant. Thus, the table below highlights exclusively the distribution of cash and off-balance sheet exposures to banks by external rating class.

External rating class No rating Total

Exposures AAA/ AA-

A+/A-

BBB+/ BBB-

BB+/ BB-

B+/B-

Less than B-

A. Cash exposures 80,556 2,890 833,548 - - - 342,594 1,259,588

B. Derivatives - - 335 - - - 1,644 1,979

B.1 Financial derivatives - - 335 - - - 1,644 1,979

B.2 Credit derivatives - - - - - - - -

C. Guarantees given - - 6,869 - - - 8,468 15,337

D. Commitments to grant finance - - 2,353 - - - 167,598 169,951

Total 80,556 2,890 843,105 - - - 520,304 1,446,855

A.3 – DISTRIBUTION OF SECURED LOANS BY TYPE OF GUARANTEE

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A.3.1 – Secured cash exposures to banks and customers

31/12/2007 Value of exposure Collateral (1)

PropertySecuritie

s Other assets Total

1. Secured loans to banks: 1.1 fully secured - - - - -

1.2 partially secured - - - - -

2. Secured loans to customers: 2.1 fully secured 2,541,698 1,883,947 58,381 6,641 1,948,969

2.2 partially secured 294,517 894 38,940 5,011 44,845

31/12/2007

Value of exposure Personal guarantees: Credit derivatives (2) Total

GovernmentsOther

public entitiesBanks Other

parties

1. Secured loans to banks: 1.1 fully secured - - - - - -

1.2 partially secured - - - - - -

2. Exposures to customers: 2.1 fully secured 2,541,698 - - - - -

2.2 partially secured 294,517 - - - - -

31/12/2007 Value of exposure Personal guarantees: Credit commitments (2) Total

GovernmentsOther public

entities Banks Other

Parties

1. Secured loans to banks: 1.1 fully secured - - - - - -

1.2 partially secured - - - - - -

2. Secured loans to customers: 2.1 fully secured 2,541,698 - - 112 1,080,391 1,080,503

2.2 partially secured 294,517 - 218 1,034 184,336 185,588

31/12/2007

Value of exposure Collateral Personal

guarantees: Credit derivatives

Personal guarantees:

Credit commitments

Total (1) + (2)

1. Secured loans to banks: 1.1 fully secured - - - - -

1.2 partially secured - - - - -

2. Secured loans to customers:

2.1 fully secured 2,541,698 1,948,969 - 1,080,503 3,029,472

2.2 partially secured 294,517 44,845 - 185,588 230,433

A.3.2 - Secured off-balance sheet exposures to banks and customers

31/12/2007

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Value of exposure Collateral Total

Property Securities Other assets 1. Secured loans to banks: 1.1 fully secured 68 - - - -

1.2 partially secured - - - - -

2. Secured loans to customers: 2.1 fully secured 205,188 95,142 16,297 3,725 115,164

2.2 partially secured 31,906 - 15,624 562 16,186

31/12/2007

Value of exposure Personal guarantees: Credit derivatives Total

GovernmentsOther public

entities Banks Other

parties

1. Secured loans to banks: 1.1 fully secured 68 - - - - -

1.2 partially secured - - - - - -

2. Secured loans to customers: 2.1 fully secured 205,188 - - - - -

2.2 partially secured 31,906 - - - - -

31/12/2007

Value of exposure Personal guarantees: Credit commitments Total

Governments Other public entities

Banks Other parties

1. Secured loans to banks: 1.1 fully secured 68 - - - 68 68

1.2 partially secured - - - - - -

2. Secured loans to customers: 2.1 fully secured 205,188 - - 21,398 91,074 112,472

2.2 partially secured 31,906 - - - 9,685 9,685

31/12/2007

Value of exposure Collateral

Personal guarantees:

Credit derivatives

Personal guarantees:

Credit commitments

Total

1. Secured loans to banks: 1.1 fully secured 68 - - 68 68

1.2 partially secured - - - 68 -

2. Secured loans to customers: 2.1 fully secured 205,188 115,165 - 112,472 227,637

2.2 partially secured 31,906 16,186 - 9,685 25,871

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A.3.3 – Secured, impaired cash exposures to banks and customers

31/12/2007 Secured exposures to banks: Secured loans to customers:

Over 150%

Between 100% and

150%

Between 50% and

100% Under 50%

Over 150%

Between 100% and

150%

Between 50% and

100% Under 50%

Value of exposure - - - - 152,764 33,916 14,835 6,274

Amount secured - - - - 168,898 47,947 14,835 1,786

GUARANTEES (FAIR VALUE) Collateral A. Property - - - - 159,829 2,748 - -

B. Securities - - - - 627 1,225 283 223

C. Other assets - - - - - 18 1,021 4

Personal guarantees A. Credit derivatives A.1 Governments and Central Banks - - - - - - - -

A.2 Other public entities - - - - - - - -

A.3 Banks - - - - - - - -

A.4 Financial businesses - - - - - - - -

A.5 Insurance companies - - - - - - - -

A.6 Non-financial businesses - - - - - - - -

A.7 Other - - - - - - - -

B. Credit commitments B.1 Governments and Central Banks - - - - - - - -

B.2 Other public entities - - - - - - - -

B.3 Banks - - - - - - - -

B.4 Financial businesses - - - - - - - -

B.5 Insurance companies - - - - - - - -

B.6 Non-financial businesses - - - - - - - -

B.7 Other - - - - 8,442 43,956 13,531 1,559

Total - - - - 168,898 47,947 14,835 1,786

Surplus of fair value of guarantee - - - - - - - -

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A.3.4 – Secured. Impaired off-balance sheet exposures to banks and customers

31/12/2007 Secured exposures to banks: Secured loans to customers:

Over 150%

Between 100% and

150%

Between 50% and

100% Under 50%

Over 150%

Between 100% and

150%

Between 50% and

100% Under 50%

Value of exposure - - - - - 3,078 192 146

Amount secured - - - - - 5,432 192 56

GUARANTEES (FAIR VALUE) Collateral A. Property - - - - - 754 - -

B. Securities - - - - - 16 3 -

C. Other assets - - - - - 331 - -

Personal guarantees A. Credit derivatives A.1 Governments and Central Banks - - - - - - - -

A.2 Other public entities - - - - - - - -

A.3 Banks - - - - - - - -

A.4 Financial businesses - - - - - - - -

A.5 Insurance companies - - - - - - - -

A.6 Non-financial businesses - - - - - - - -

A.7 Other - - - - - - - -

B. Credit commitments B.1 Governments and Central Banks - - - - - - - -

B.2 Other public entities - - - - - - - -

B.3 Banks - - - - - - - -

B.4 Financial businesses - - - - - - - -

B.5 Insurance companies - - - - - - - -

B.6 Non-financial businesses - - - - - - - -

B.7 Other - - - - - 4,331 189 56

Total - - - - - 5,432 192 56

Surplus of fair value of guarantee - - - - - - - -

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B. DISTRIBUTION AND CONCENTRATION OF CREDIT

B.1 – Distribution of cash and off-balance sheet exposures to customers by sector

- Governments and Central Banks - Other public entities

Exposures Exposures/Counterparts

Gross exposure

Specific Value

Adjustments

Portfolio value

adjustments

Net exposure

Gross exposure

Specific Value

Adjustments

Portfolio value

adjustments

Net exposure

A. Cash assets - A.1 Doubtful loans - - - - - - - -

A.2 Substandard loans - - - - - - - -

A.3 Restructured loans - - - - - - - -

A.4 Past-due loans - - - - - - - -

A.5 Other loans 13,253 X - 13,253 3,702 X -1 3,701

TOTAL 13,253 - - 13,253 3,702 - -1 3,701

B. Off-balance sheet exposures

B.1 Doubtful loans - - - - - - - -

B.2 Substandard loans - - - - - - - -

B.3 Other impaired assets - - - - - - - -

B.4 Other loans 48,021 X - 48,021 6,096 X - 6,096

TOTAL 48,021 - - 48,021 6,096 - - 6,096

TOTAL 31/12/2007 61,274 - - 61,274 9,798 - -1 9,797

TOTAL 31/12/2006 14,023 - - 14,023 17,162 - -3 17,159

- Financial businesses - Insurance companies

Exposures Exposures/Counterparts

Gross exposure

Specific Value

Adjustments

Portfolio value

adjustments

Net exposure

Gross exposure

Specific Value

Adjustments

Portfolio value

adjustments

Net exposure

A. Cash assets A Doubtful loans - - - - - - - -

A.2 Substandard loans - - - - - - - -

A.3 Restructured loans - - - - - - - -

A.4 Past-due loans 5 - - 5 - - - -

A.5 Other loans 52,149 X -165 51,984 2,930 X - 2,930

TOTAL 52,154 - -165 51,989 2,930 - - 2,930

B. Off-balance sheet exposures

B.1 Doubtful loans - - - - - - - -

B.2 Substandard loans - - - - - - - -

B.3 Other impaired assets - - - - - - - -

B.4 Other loans 31,803 X - 31,803 - X - -

TOTAL 31,803 - - 31,803 - - - -

TOTAL 31/12/2007 83,957 - -165 83,792 2,930 - - 2,930

TOTAL 31/12/2006 109,691 -558 -19 109,114 3,726 - -2 3,724

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- Non-financial businesses - Other parties

Exposures Exposures/Counterparts

Gross exposure

Specific Value Adjustments

Portfolio value

adjustments

Net exposure

Gross exposure

Specific Value

Adjustments

Portfolio value

adjustments

Net exposure

A. Cash assets A Doubtful loans 57,310 -37,910 - 19,400 7,658 -4,403 - 3,255

A.2 Substandard loans 47,484 -5,243 -5 42,236 7,293 -408 - 6,885

A.3 Restructured loans 4,267 -126 -6 4,135 - - - -

A.4 Past-due loans 15,611 -317 -2 15,292 8,728 -180 - 8,548

A.5 Other loans 4,554,350 X -24,858 4,529,492 807,289 X -3,057 804,232

TOTAL 4,679,022 -43,596 -24,871 4,610,555 830,968 -4,991 -3,057 822,920

B. Off-balance sheet exposures

B.1 Doubtful loans 537 -144 - 393 47 - - 47

B.2 Substandard loans 424 -48 - 376 8 - - 8

B.3 Other impaired assets 526 -13 - 513 70 - - 70

B.4 Other loans 627,001 X - 627,001 78,141 X -8 78,133

TOTAL 628,488 -205 - 628,283 78,266 - -8 78,258

TOTAL 31/12/2007 5,307,510 -43,801 -24,871 5,238,838 909,234 -4,991 -3,065 901,178

TOTAL 31/12/2006 4,624,812 -50,276 -22,022 4,552,514 792,263 -5,962 -2,575 783,726

B.2 – Distribution of loans to non-financial resident businesses

31/12/2007 31/12/2006 a) Other services for sale 1,535,336 1,189,516

d) Commerce, salvage and repairs 783,573 719,381

c) Building and public works 507,855 394,187

d) Metal products excluding machines and means of transport 221,699 193,277

e) Textiles, leather and footwear, apparel 212,933 217,150

f) Other 1,307,156 1,223,176

Total 4,568,552 3,936,688

372

B.3 – Distribution of cash and off-balance sheet exposures to customers by region

Exposure/Geographical area

ITALY

OTHER EUROPEAN

COUNTRIES

AMERICA

Gross

exposure Net

exposure Gross

exposure Net exposure Gross exposure Net exposure

A. Cash assets A.1 Doubtful loans 64,968 22,655 - - - -

A.2 Substandard loans 54,658 49,004 118 116 - -

A.3 Restructured loans 4,268 4,136 - - - -

A.4 Past-due loans 24,330 23,833 12 12 2 2

A.5 Other loans 5,411,849 5,383,846 15,468 15,413 6,352 6,329

TOTAL 5,560,073 5,483,474 15,598 15,541 6,354 6,331

B. Off-balance sheet exposures

B.1 Doubtful loans 583 439 - - - -

B.2 Substandard loans 432 384 - - - -

B.3 Other impaired assets 595 582 - - - -

B.4 Other loans 782,108 782,100 8,957 8,957 - -

TOTAL 783,718 783,505 8,957 8,957 - -

TOTAL 31/12/2007 6,343,791 6,266,979 24,555 24,498 6,354 6,331

TOTAL 31/12/2006 5,475,281 5,394,009 78,772 78,691 7,609 7,547

Exposure/Geographical area ASIA

REST OF THE WORLD

Gross exposure Net exposure Gross exposure Net exposure A. Cash assets A.1 Doubtful loans - - - -

A.2 Substandard loans - - - -

A.3 Restructured loans - - - -

A.4 Past-due loans - - - -

A.5 Other loans - - 4 4

TOTAL - - 4 4

B. Off-balance sheet exposures B.1 Doubtful loans - - - -

B.2 Substandard loans - - - -

B.3 Other impaired assets - - - -

B.4 Other loans - - - -

TOTAL - - - -

Total at 31/12/2007 - - 4 4

Total at 31/12/2006 12 12 - -

373

B.4 – Distribution of cash and off-balance sheet exposures to banks by region

Exposure/Geographical area ITALY

OTHER EUROPEAN

COUNTRIES

AMERICA

Gross exposure

Net exposure

Gross exposure Net exposure

Gross exposure

Net exposure

A. Cash assets A.1 Doubtful loans - - - - - -

A.2 Substandard loans - - - - - -

A.3 Restructured loans - - - - - -

A.4 Past-due loans - - - - - -

A.5 Other loans 1,259,372 1,259,372 216 216 - -

TOTAL 1,259,372 1,259,372 216 216 - -

B. Off-balance sheet exposures B.1 Doubtful loans - - - - - -

B.2 Substandard loans - - - - - -

B.3 Other impaired assets - - - - - -

B.4 Other loans 185,927 185,927 1,243 1,243 - -

TOTAL 185,927 185,927 1,243 1,243 - -

TOTAL 31/12/2007 1,445,299 1,445,299 1,459 1,459 - -

TOTAL 31/12/2006 1,377,977 1,377,977 1,916 1,916 - -

Exposure/Geographical area ASIA

REST OF THE WORLD

Gross exposure Net exposure Gross exposure Net exposure A. Cash assets A.1 Doubtful loans - - - -

A.2 Substandard loans - - - -

A.3 Restructured loans - - - -

A.4 Past-due loans - - - -

A.5 Other loans - - - -

TOTAL - - - -

B. Off-balance sheet exposures B.1 Doubtful loans - - - -

B.2 Substandard loans - - - -

B.3 Other impaired assets - - - -

B.4 Other loans 68 68 31 29

TOTAL 68 68 31 29

Total at 31/12/2007 68 68 31 29

Total at 31/12/2006 245 234 12 11

374

B.5 – Significant exposures

31/12/2007 31/12/2006 % Change a) Amount - - -b) Number - - -

C. SECURITISATION AND ASSET DISPOSAL TRANSACTIONS

Positions deriving from own securitisation transactions

The Bank did not carry out any securitisation transactions. No transactions of this nature existed as of the balance sheet date.

Positions deriving from third party securitisation transactions

At the end of the year, the Bank’s securities portfolio held no securities subject to third party securitisation transactions.

375

C.2 – DISPOSAL TRANSACTIONS

C.2.1. Financial assets sold and not cancelled

31/12/2007 Technical form/Portfolio

Financial assets held for trading Financial assets designated at fair value

A B C- A B C- A. Cash assets - - - - - -

1. Debt securities - - - - - -

2. Equity securities - - - - - -

3. UCI - - - - - -

4. Loans - - - - - -

5. Impaired assets - - - - - -

B. Derivatives - - - X X X TOTAL 31/12/2007 - - - - - -

TOTAL 31/12/2006 - - - - - -

A = financial assets sold fully recorded (book value). B = financial assets sold partially recorded (book value). C = financial assets sold partially recorded (full value).

31/12/2007 Technical form/Portfolio

Financial assets available for sale Financial assets held to maturity

A B C- A B C- A. Cash assets - - - - - -

1. Debt securities - - - - - -

2. Equity securities - - - X X X 3. UCI - - - X X X 4. Loans - - - - - -

5. Impaired assets - - - - - -

B. Derivatives X X X X X X TOTAL 31/12/2007 - - - - - -

TOTAL 31/12/2006 - - - - - -

A = financial assets sold fully recorded (book value). B = financial assets sold partially recorded (book value). C = financial assets sold partially recorded (full value).

376

31/12/2007 31/12/2006 Technical form/Portfolio

Due from banks Loans to customers Total Total

A B C- A B C-

A. Cash assets 331,562 - - - - - 331,562 153,964

1. Debt securities 331,562 - - - - - 331,562 153,964

2. Equity securities X X X X X X - -

3. UCI X X X X X X - -

4. Loans - - - - - - - -

5. Impaired assets - - - - - - - -

B. Derivatives X X X X X X - -

TOTAL 31/12/2007 331,562 - - - - - 331,562 153,964

TOTAL 31/12/2006 153,964 - - - - - 153,964 153,964

A = financial assets sold fully recorded (book value). B = financial assets sold partially recorded (book value). C = financial assets sold partially recorded (full value).

C.2.2- Financial liabilities for assets sold and not cancelled

31/12/2007

Liability/Asset portfolio

Financial assets held for trading

Financial assets

measured at fair value

Financial assets

available for sale

Financial assets held to

maturity

Due from

banks

Loans to customers

Total

1. Due to customers - - - - 333,317 - 333,31

7

a) for assets fully recorded - - - - 333,317 - 333,317

b) for assets partially recorded - - - - - - -

2. Due to banks - - - - - - -

a) for assets fully recorded - - - - - - -

b) for assets partially recorded - - - - - - -

TOTAL 31/12/2007 - - - - 333,317 - 333,31

7

TOTAL 31/12/2006 - - - - 106,501 - 106,50

1

D. CREDIT RISK MEASUREMENT MODELS

Refer to the description under the qualitative information on credit risk.

377

SECTION 2 – MARKET RISKS

In accordance with supervisory legislation, the portfolio of financial instruments subject to capital requirements for market risks is part of the "trading portfolio”.

2.1 INTEREST RATE RISK – SUPERVISORY TRADING PORTFOLIO

QUALITATIVE INFORMATION

A. General aspects

The trading portfolio consists of: - bonds; - shares; - harmonised quotas of UCI;

The bond component of the portfolio consists mainly of floating rate securities; the fixed rate portion (BOT with varying expiries) has a limited duration. The bonds held are issued almost exclusively by the Italian Republic or by banks with ratings of higher than investment grade. The financial instruments present in the portfolio are almost exclusively in EUR.

B. Management processes and measurement methods for interest rate risk

Investment policies are based on criteria which aim to limit market risk in terms of the risk components such entails:

- interest rate risk; - price risk; - exchange rate risk

As a general rule, the Bank does not enter into transactions that entail exposure to commodities risks. Risk hedging tools and techniques are used in the management of the portfolio. Investment and trading activities are carried out in compliance with the guidelines established by the relative corporate governance bodies and are performed within an extensive system of assigned management powers and according to detailed regulations on, among other things, modification of the set stock, type of negotiable assets, the investment market, type of issuer, maturity of the securities and their rating. For daily trading activities, maximum daily loss and overall open position limits are envisaged. Risk is measured on the basis of analytical calculations (establishing the duration of the bond portfolio to calculate exposure to interest rate risk) and statistical techniques (estimating the overall value at risk, net of mitigating factors such as portfolio diversification). The portfolio approach is based on a daily estimation of the Value at Risk (VaR) parameter over a time horizon of 10 days with a confidence interval of 99%. The VaR measures the maximum loss that the trading portfolio may incur based on volatility and historic correlations of the individual risk factors (interest rates, share prices and exchange rates). This model is not used to determine the minimum capital requirement with respect to market risk.

378

QUANTITATIVE INFORMATION

1. Supervisory trading portfolio: distribution by residual duration (by re-pricing date) of cash financial assets and liabilities and financial derivatives

Currency: EUR

Type/Residual duration

On demand

Up to 3 months

From over 3 months up to

6 months

From over 6 months

Up to 1 year

From over

1 yearup to 5

years

From over

5 year up to 10

years

Beyond 10 years

Unspecified Maturity

1. Cash assets 197,930 46,122 8,009 443 703 581 536 -

1.1 Debt securities 118 1,030 7,928 443 703 581 536 -

- with early repayment option

- - - - - - - -

- other 118 1,030 7,928 443 703 581 536 -

1.2 Other assets 197,812 45,092 81 - - - - -

2. Cash liabilities - 153,06

6 44,899 80 - - - -

2.1 Funding repurchase agreements - 153,066 44,899 80 - - - -

2.2 Other liabilities - - - - - - - -

3. Financial derivatives: 124 -3,598 6,417 2,265 -959 - - -

3.1 With underlying security - 4 - - - - - -

- Options - - - - - - - -

+ long positions - - - - - - - -

+ short positions - - - - - - - -

- Other derivatives - 4 - - - - - -

+ long positions - 18 - - - - - -

+ short positions - 14 - - - - - -

3.2 Without underlying security 124 -3,602 6,417 2,265 -959 - - -

- Options - - - - - - - -

+ long positions - - - 466 - - - -

+ short positions - - - 466 - - - -

- Other derivatives 124 -3,602 6,417 2,265 -959 - - -

+ long positions 124 70,116 16,651 10,097 27,809 4,961 - -

+ short positions - 73,718 10,234 7,832 28,768 4,961 - -

379

Other currencies

Type/Residual duration

On demand

Up to 3 months

From over 3 months

Up to 6 months

From over 6 months

Up to 1 year

From 1 year to 5 years

From over 5 years

up to 10 years

Beyond 10 years

Unspecified maturity

1. Cash assets - - 4 - 61 - - -

1.1 Debt securities - - 4 - 61 - - -

- with early repayment option

- - - - - - - -

- other - - 4 - 61 - - -

1.2 Other assets - - - - - - - -

2. Cash liabilities - - - - - - - -

2.1 Funding repurchase agreements - - - - - - - -

2.2 Other liabilities - - - - - - - -

3. Financial derivatives: -123 -459 -1,488 -2,250 564 - - -

3.1 With underlying security - - - - - - - -

- Options - - - - - - - -

+ long positions - - - - - - - -

+ short positions - - - - - - - -

- Other derivatives - - - - - - - -

+ long positions - - - - - - - -

+ short positions - - - - - - - -

3.2 Without underlying security -123 -459 -1,488 -2,250 564 - - -

- Options - - - - - - - -

+ long positions - - - - - - - -

+ short positions - - - - - - - -

- Other derivatives -123 -459 -1,488 -2,250 564 - - -

+ long positions - 40,913 7,361 6,959 946 - - -

+ short positions 123 41,372 8,849 9,209 382 - - - Within the “Other currencies”, the main currency for the supervisory trading portfolio is the US dollar.

2. Supervisory trading portfolio: internal models and other sensitivity analysis methods

The Bank uses a single model for monitoring trading portfolio risk. Therefore, the tables below illustrate information on VaR, inclusive of all risk factors. Over the year, the VaR recorded limited values with relation to the entity of the portfolio. The main risk factor to which it is exposed is interest rate risk. Credit risk attributable to investments in bonds is fairly limited given the type and the credit status of the issuers. The disinvestment of the trading portfolio, and, specifically, the full disinvestment of the quotas of UCI held are reflected in a marked decrease in the VaR compared to the values recorded in the previous year.

380

Table 1 – Supervisory trading portfolio - VaR trend (in thousands of EUR)

2007 2006

Average Minimum Maximum 31/12/2007 Average Minimum Maximum 97 23 427 34 533 286 936

Graph 1 – Supervisory trading portfolio - VaR trend

Table 2 – Supervisory trading portfolio – Contribution of risk factors to calculation of VaR

Situation at 31.12.07

Price risk Interest rate risk

Exchange rate risk Issuer risk UCI quotas Hedge fund Benefit of

diversification 0.0% 96.4% 6.7% 1.6% 0.0% 0.0% -4.7%

Table 3 - Supervisory trading portfolio – Breakdown of bond exposures by issuer type

Sovereign issuers Public issuers Banks

Insurance companies and other financial

businesses

Corporate Creval Group

76.2% 16.2% 1.9% 0.0% 0.5% 5.2%

VaR CV 2007

0

50000

100000

150000

200000

250000

300000

350000

400000

450000

2-Jan 31-Jan 1-Mar 30-Mar 3-May 1-Jun 29-Jun 30-Jul 29-Aug 27-Sept 26-Oct 27-Nov 28-Dec

VaR

381

2.2 – INTEREST RATE RISK – BANKING PORTFOLIO

QUALITATIVE INFORMATION

The banking portfolio consists of all financial instrument payable and receivable which are not included in the trading portfolio. It mainly comprises amounts due from and to banks and to customers.

A. General aspects, management processes and measurement methods for interest rate risk

Financial statements of financial intermediaries are typically composed of financial assets and liabilities whose value may vary also as a result of variations in interest rates. Consistent with the mission of a Retail Bank, which mainly assumes credit risk in relation to specific customers, the assumption of interest rate risk deriving from typical banking activities (funding and lending) is kept within low limits. The management of risks aims at limiting the impact of unfavourable variations in the rates curve on the economic value of capital as well as on the cash flows generated by balance sheet items. Limiting exposure to interest rate risk is achieved primarily by index-linking asset and liability items to parameters of the money market (usually the Euribor) and by balancing the duration of the asset or liability at very low levels. Measuring interest rate risk on the banking book is based on the economic value approach, defined as the difference between the present value of assets and the present value of liabilities. This measurement is based on pre-set variations of the structure of the rates applied to balance sheet items on the reference date (static ALM). The reactivity to variations in interest rates is measured by means of sensitivity indicators (modified duration). On the basis of the modified duration of the items subject to valuation, the impact of instantaneous parallel shifts in the interest rate structure of ±100 b.p. and ±200 b.p. The variations are then normalised with relation to the regulatory capital.

B. Fair value hedges

No cash fair value hedges are pending or were carried out.

C. Cash flow hedging

No cash flow hedges are pending or were carried out.

382

QUANTITATIVE INFORMATION

1. Banking portfolio: distribution by residual duration (by re-pricing date) of financial assets and liabilities

The table under this point has not been drawn up, as the following point supplies a sensitivity analysis of interest rate risk based on internal models.

2. Banking portfolio – internal models and other sensitivity analysis methods

At the end of the year, the modified duration calculated for asset and liability items in the banking portfolio was contained; consequently, the variation of the value of the Bank’s economic capital following instantaneous shocks on the rates curve was limited. In the case of instantaneous parallel shifts of +100 basis points in the interest rate curve, the value of economic capital would record a decrease of EUR 8.9 million, equal to approximately 0.54% of the regulatory capital. In the event of a shift of -100 basis points, an increase of EUR 9.5 million would be recorded, corresponding to 0.58% of regulatory capital. Said variation in the interest margin generated by the banking portfolio, in the above hypothesis of a shift of +100 basis points in the interest rate curve, over a time horizon of 12 months, would equal EUR -0.5 million (EUR +0.5 million in case of shifts of -100 basis points). These values express the effect of changes in the interest rates on the banking portfolio, excluding modifications to the composition and size of the financial statement items. As a result, this may not be considered as an indicator for forecasting the expected level of the interest margin.

2.3 PRICE RISK – SUPERVISORY TRADING PORTFOLIO

QUALITATIVE INFORMATION

A. General aspects

Price risk in terms of the supervisory trading portfolio is generated by investments in equity securities.

B. Management processes and measurement methods for price risk

As regards management processes and measurement methods for price risk, refer to that set forth in the paragraph "2.1 Interest rate risk – Supervisory trading portfolio – Qualitative information".

383

QUANTITATIVE INFORMATION

2. Supervisory trading portfolio: Distribution of exposures in equity securities and stock market indices for the main countries in the listing market

Listed

Unlisted

Type of transaction/Listing market Italy Other European countries America

A. Equity securities - - - -

- long positions - - - -

- short positions - - - -

B. Purchases/sales of equity securities not yet settled - - - -

- long positions - - - -

- short positions - - - -

C. Other derivatives on equity securities - - - -

- long positions - - - -

- short positions - - - -

D. Derivatives on stock market indices - - - -

- long positions - - - 466

- short positions - - - 466

3. Supervisory trading portfolio: internal models and other sensitivity analysis methods

As regards internal models for price risk, refer to that set forth in the paragraph "2.1 Interest rate risk – Supervisory trading portfolio – Quantitative information".

2.4 PRICE RISK – BANKING PORTFOLIO

QUALITATIVE INFORMATION

A. General aspects, management processes and measurement methods for price risk

The banking portfolio consists of the listed and unlisted shares which are held within the framework of the more complex relationships with specific companies, or represent instruments supporting significant initiatives in the geographical area involved. The monitoring of price risk for these financial instruments is carried out through the management approach of the investments in associates and companies subject to joint control instead of using the risk measurement techniques and instruments used for the trading portfolio.

B. Price risk hedging

Equity investments allocated to the banking portfolio are not subject to hedging.

384

QUANTITATIVE INFORMATION

1. Banking portfolio: cash exposures in equity securities and UCI

31/12/2007

Type of exposure/Amount Book value

Listed Unlisted

A. Equity securities 26,834 33,402

A.1 Shares 26,834 33,402

A.2 Innovative equity instruments - -

A.3 Other equity securities - -

B. UCI - -

B.1 Italian - -

- harmonised open-ended - -

- non-harmonised open-ended - -

- closed-ended - -

- reserved - -

- speculative - -

B.2 Other EU countries - -

- harmonised - -

- non-harmonised open-ended - -

- non-harmonised closed-ended - -

B.3 Non-EU countries - -

- open-ended - -

- closed-ended - -

Total 26,834 33,402

2.5 EXCHANGE RATE RISK

QUALITATIVE INFORMATION

A. General aspects, management processes and measurement methods for exchange rate risk

Exposure to exchange rate risk, which is negligible, is largely due to transactions carried out with customers, inter-bank transactions and, to a lesser extent, positions in bonds. As regards management processes and measurement methods for exchange rate risk in the trading portfolio, refer to that set forth in the paragraph "2.1 Interest rate risk – Supervisory trading portfolio – Qualitative information".

B. Exchange rate risk hedging

All foreign currency positions generated by transactions with customers are managed together through analysis of open gaps (non-offset positions). The monitoring of exchange rate risk is based on defined limits in terms of maximum acceptable loss, forward gap position and overall open gap position.

385

QUANTITATIVE INFORMATION

1. Distribution of assets, liabilities and derivatives by currency

31/12/2007 Items Currencies

US dollars Swiss francs Yen Sterling Swedish Krona Other currencies

A. Financial assets A.1 Debt securities 34 - 33 - - -

A.2 Equity securities - - - - - -

A.3 Loans to banks 32,822 12,024 1,567 3,682 5 1,148

A.4 Loans to customers 22,383 30,007 9,593 82 39 314

A.5 Other financial assets - - - - - -

B. Other assets 323 1,042 39 253 76 216

C. Financial liabilities C.1 Due to banks 10,913 38,724 8,655 2,734 117 577

C.2 Due to customers 37,683 6,454 2,830 1,206 3 939

C.3 Debt securities - - - - - -

C.4 Other financial liabilities - - - - - -

D. Other liabilities 305 390 - 59 - -

E. Financial derivatives - Options + Long positions - - - - - -

+ Short positions - - - - - -

- Other + Long positions 28,859 8,545 14,811 304 2,118 1,192

+ Short positions 35,607 6,025 14,583 301 2,118 1,300

Total assets 84,421 51,618 26,043 4,321 2,238 2,870

Total liabilities 84,508 51,593 26,068 4,300 2,238 2,816

Difference (+/-) -87 25 -25 21 - 54

2. Internal models and other sensitivity analysis methods

As regards internal models for exchange rate risk in the trading portfolio, refer to that set forth in the paragraph "2.1 Interest rate risk – Supervisory trading portfolio – Quantitative information".

386

2.6 DERIVATIVE FINANCIAL INSTRUMENTS

A. FINANCIAL DERIVATIVES

A.1 - Supervisory trading portfolio: notional values at year-end and averages

Debt securities

and interest rates

Equity-based securities and stock market

indices

Currency and gold-based securities

Other

valuables

Type of transaction/ Underlying Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted

1. Forward rate agreement - - - - - - - -

2. Interest rate swap - 68,388 - - - - - -

3. Domestic currency swap - - - - - - - -

4. Currency interest rate swap - - - - - - - -

5. Basis swap - - - - - - - -

6. Trading, stock mkt. indices - - - - - - - -

7. Trading, real indices - - - - - - - -

8. Futures - - - - - - - -

9. Cap options - Purchased - - - - - - - -

- Issued - - - - - - - -

10. Floor options - Purchased - - - - - - - -

- Issued - - - - - - - -

11. Other options - Purchased - Plain vanilla - - - - - - - -

- Exotic - - - 1,000 - - - -

- Issued - Plain vanilla - - - - - - - -

- Exotic - - - 1,000 - - - -

12. Forward contracts - Purchases - 6,253 - 54 - 55,829 - -

- Sales - 6,151 - 258 - 59,935 - -

- Currency against currency - - - - - - - -

13. Other derivatives contracts - - - - - - - -

Total - 80,792 - 2,312 - 115,764 - -

Average values - 106,708 - 43,884 - 120,889 - -

387

Type of transaction/Underlying 31/12/2007 31/12/2006 Listed Unlisted Listed Unlisted

1. Forward rate agreement - - - -

2. Interest rate swap - 68,388 - 81,353

3. Domestic currency swap - - - -

4. Currency interest rate swap - - - -

5. Basis swap - - - -

6. Trading, stock mkt. indices - - - -

7. Trading, real indices - - - -

8. Futures - - - -

9. Cap options - Purchased - - - -

- Issued - - - -

10. Floor options - Purchased - - - -

- Issued - - - -

11. Other options - Purchased - plain vanilla - - - -

- exotic - 1,000 - 26,000

- Issued - plain vanilla - - - -

- exotic - 1,000 - 26,000

12. Forward contracts - Purchases - 62,136 - 56,687

- Sales - 66,344 - 69,427

- Currency against currency - - - -

13. Other derivatives contracts - - - -

Total - 198,868 - 259,467

Average values - 271,481 - 246,740

388

A. 2 Banking portfolio: notional values at year-end and averages

A.2.2 Other derivatives

Derivative type/Underlying

Debt securities

and interest rates

Equity-based securities and stock market

indices

Currency and gold-based securities

Other

valuables

Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted

1. Forward rate agreement - - - - - - - -

2. Interest rate swap - - - - - - - -

3. Domestic currency swap - - - - - - - -

4. Currency interest rate swap - - - - - - - -

5. Basis swap - - - - - - - -

6. Trading, stock mkt. indices - - - - - - - -

7. Trading, real indices - - - - - - - -

8. Futures - - - - - - - -

9. Cap options - Purchased - - - - - - - -

- Issued - - - - - - - -

10. Floor options - Purchased - - - - - - - -

- Issued - - - - - - - -

11. Other options - Purchased - plain vanilla - - - - - - - -

- exotic - - - - - - - -

- Issued - plain vanilla - - - - - - - -

- exotic - - - - - - - -

12. Forward contracts - Purchases - - - - - - - -

- Sales - - - - - - - -

- Currency against currency - - - - - - - -

13. Other derivatives contracts - - - - - - - 222,731

Total - - - - - - - 222,73

1

Average values - - - - - - - 223,43

4

389

Derivative type/Underlying 31/12/2007 31/12/2006 Listed Unlisted Listed Unlisted 1. Forward rate agreement - - - -

2. Interest rate swap - - - -

3. Domestic currency swap - - - -

4. Currency interest rate swap - - - -

5. Basis swap - - - -

6. Trading, stock mkt. indices - - - -

7. Trading, real indices - - - -

8. Futures - - - -

9. Cap options - Purchased - - - -

- Issued - - - -

10. Floor options - Purchased - - - -

- Issued - - - -

11. Other options - Purchased - plain vanilla - - - -

- exotic - - - -

- Issued - plain vanilla - - - -

- exotic - - - -

12. Forward contracts - Purchases - - - -

- Sales - - - -

- Currency against currency - - - -

13. Other derivatives contracts - 222,731 - 222,689

Total - 222,731 - 222,689

Average values - 223,434 - 208,174

390

A.3 – Financial derivatives: purchase and sale of underlyings

Type of transaction/Underlying

Debt securities and interest rates

Equity-based securities and stock market

indices

Currency and gold-based securities

Other valuables

Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted A. Supervisory trading portfolio: - 1. Transactions with exchange of capital - Purchases - 6,253 - 54 - 55,829 - -

- Sales - 6,151 - 258 - 59,935 - -

- Currency against currency - - - - - - - -

2. Transactions without exchange of capital - Purchases - 34,472 - 1,000 - - - -

- Sales - 33,915 - 1,000 - - - -

- Currency against currency - - - - - - - -

B. Banking portfolio: B.1 Hedging 1. Transactions with exchange of capital - Purchases - - - - - - - -

- Sales - - - - - - - -

- Currency against currency - - - - - - - -

2. Transactions without exchange of capital - Purchases - - - - - - - -

- Sales - - - - - - - -

- Currency against currency - - - - - - - -

B.2 Other derivatives 1. Transactions with exchange of capital - Purchases - - - - - - - 222,731

- Sales - - - - - - - -

- Currency against currency - - - - - - - -

2. Transactions without exchange of capital - Purchases - - - - - - - -

- Sales - - - - - - - -

- Currency against currency - - - - - - - -

391

Type of transaction/Underlying 31/12/2007

31/12/2006

Listed Unlisted Listed Unlisted A. Supervisory trading portfolio: 1. Transactions with exchange of capital - Purchases - 62,136 - 56,687

- Sales - 66,344 - 69,427

- Currency against currency - - - -

2. Transactions without exchange of capital - Purchases - 35,472 - 75,479

- Sales - 34,915 - 57,873

- Currency against currency - - - -

B. Banking portfolio: B.1 Hedging 1. Transactions with exchange of capital - Purchases - - - -

- Sales - - - -

- Currency against currency - - - -

2. Transactions without exchange of capital - Purchases - - - -

- Sales - - - -

- Currency against currency - - - -

B.2 Other derivatives 1. Transactions with exchange of capital - Purchases - 222,731 - 222,689

- Sales - - - -

- Currency against currency - - - -

2. Transactions without exchange of capital - Purchases - - - -

- Sales - - - -

- Currency against currency - - - -

392

A.4 – “Over the counter” financial derivatives: positive fair value – counterparty risk

Counterparty / Underlying

Securities

Debt securities and interest rates

Equity

securities and stock market indices

Currency and gold-based

securities

Gross non-offset Gross offset Future exposure

Gross non-

offset Gross offset Future

exposure Gross non-

offset Gross offset Future value

Supervisory trading portfolio:

A.1 Governments and Central Banks - - - - - - - - -

A.2 Public entities - - - - - - - - -

A.3 Banks 1,269 - 282 466 - 60 285 - 177

A.4 Financial businesses - - - - - - - - -

A.5 Insurance companies - - - - - - - - -

A.6 Non-financial businesses 14 - - - - - 1,084 - 309

A.7 Other 3 - - - - - 160 - 76

Total A 31/12/2007 1,286 - 282 466 - 60 1,529 - 562

Total A 31/12/2006 5,716 - 181 2,057 - 2,080 1,206 - 602

B. Banking portfolio: B.1 Governments and Central Banks - - - - - - - - -

B.2 Public entities - - - - - - - - -

B.3 Banks - - - - - - - - -

B.4 Financial businesses - - - - - - - - -

B.5 Insurance companies - - - - - - - - -

B.6 Non-financial businesses - - - - - - - - -

B.7 Other - - - - - - - - -

Total B 31/12/2007 - - - - - - - - -

Total B 31/12/2006 - - - - - - - - -

393

Counterparty / Underlying Other valuables Different underlyings

Gross non-offset

Gross offset

Future exposure Offset Future

exposure A. Supervisory trading portfolio: A.1 Governments and Central Banks - - - - -

A.2 Public entities - - - - -

A.3 Banks - - - - -

A.4 Financial businesses - - - - -

A.5 Insurance companies - - - - -

A.6 Non-financial businesses - - - - -

A.7 Other - - - - -

Total A 31/12/2007 - - - - -

Total A 31/12/2006 - - - - -

B. Banking portfolio: B.1 Governments and Central Banks - - - - -

B.2 Public entities - - - - -

B.3 Banks - - - - -

B.4 Financial businesses - - - - -

B.5 Insurance companies - - - - -

B.6 Non-financial businesses - - - - -

B.7 Other - - - - -

Total B 31/12/2007 - - - - -

Total B 31/12/2006 - - - - -

394

A.5 – “Over the counter” financial derivatives: negative fair value - financial risk

Counterparty / Underlying

Debt securities and interest rates

Equity-based securities and stock market indices

Currency and gold-based securities

Gross non- offset Gross offset Future

exposure Gross non-

offset Gross offset Future exposure

Gross non- offset Gross offset

Future exposur

e A. Supervisory trading portfolio: A.1 Governments and Central Banks - - - - - - - - -

A.2 Public entities - - - - - - - - -A.3 Banks 844 - 115 466 - 60 1,059 - 378A.4 Financial businesses - - - - - - - - -A.5 Insurance companies - - - - - - - - -A.6 Non-financial businesses 75 - 165 - - - 256 - 198A.7 Other 1 - - - - - 84 - 9Total A 31/12/2007 920 - 280 466 - 60 1,399 - 584Total A 31/12/2006 1,992 - 202 2,057 - 2,080 965 - 484B. Banking portfolio: - B.1 Governments and Central Banks - - - - - - - - -

B.2 Public entities - - - - - - - - -B.3 Banks - - - - - - - - -B.4 Financial businesses - - - - - - - - -B.5 Insurance companies - - - - - - - - -B.6 Non-financial businesses - - - - - - - - -B.7 Other - - - - - - - - -Total B 31/12/2007 - - - - - - - - -Total B 31/12/2006 - - - - - - - - -

Counterparty / Underlying Other valuables Different underlyings

Gross non-offset

Gross offsetFuture

exposure Offset Future exposure

A. Supervisory trading portfolio: A.1 Governments and Central Banks - - - - -

A.2 Public entities - - - - -

A.3 Banks - - - - -

A.4 Financial businesses - - - - -

A.5 Insurance companies - - - - -

A.6 Non-financial businesses - - - - -

A.7 Other - - - - -

Total A 31/12/2007 - - - - -

Total A 31/12/2006 - - - - -

B. Banking portfolio: B.1 Governments and Central Banks - - - - -

B.2 Public entities - - - - -

B.3 Banks - - - - -

B.4 Financial businesses - - - - -

B.5 Insurance companies - - - - -

B.6 Non-financial businesses - - - - -

B.7 Other - - - - -

Total B 31/12/2007 - - - - -

Total B 31/12/2006 - - - - -

395

A.6 – Residual life of "over the counter” financial derivatives: notional values

Underlying/Residual life Up to 1 year

From 1 year to 5

years

Beyond 5 years Total

A. Supervisory trading portfolio:

A.1 Financial derivatives on debt securities and interest rates 13,617 45,488 22,000 81,104

A.2 Financial derivatives on equity securities and stock market indices 2,313 - - 2,313

A.3 Financial derivatives on exchange rates and gold 115,764 - - 115,764

A.4 Financial derivatives on other valuables - - - -

B. Banking portfolio

B.1 Financial derivatives on debt securities and interest rates - - - -

B.2 Financial derivatives on equity securities and stock market indices - 222,731 - 222,731

B.3 Financial derivatives on exchange rates and gold - - - -

B.4 Financial derivatives on other valuables - - - -

Total at 31/12/2007 131,694 268,218 22,000 421,912

Total at 31/12/2006 198,834 274,251 9,071 482,155

With reference to “Day One Profit” (the difference, at the moment of initial recording, between the fair value of an unlisted financial instrument in an active market and the amount determined at that date using valuation techniques), taking into account the composition of the financial instrument portfolio and the results of the analyses carried out, no significant amounts of this nature were identified.

B. CREDIT DERIVATIVES

No credit derivatives are pending.

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SECTION 3 – LIQUIDITY RISK

QUALITATIVE INFORMATION

A. General aspects, management processes and measurement methods for liquidity risk

The approach taken in managing liquidity risk involved the integration of cash flow matching approach (which tends to match the expected incoming and outgoing cash flows for each time frame) with the liquid assets approach (which maintains a specific amount of instruments in the balance sheet which can be easily liquidated). The Bank’s objective is to fund assets at the most favourable conditions possible in ordinary operating circumstances and to be able to fulfil its obligations in the event of a liquidity crisis. This objective is achieved through:

- centralising liquidity management within Bancaperta in order to reduce the need to seek funding outside of the Group and to make access to markets more efficient;

- appropriately diversifying sources of funding, both as regards the technical type of deposits and counterparties.

From an operating perspective, liquidity management can be broken down into two processes:

- short-term liquidity management, whose objective is to guarantee that the Bank is able to promptly fulfil its obligations. This is achieved by appropriately matching incoming and outgoing cash flows. Furthermore, holding assets that can be promptly converted into cash enables the Bank to respond to the need to cover any unexpected obligations;

- Structural liquidity management is more strictly related to asset funding which, in the final analysis, implies assessing business strategy as a whole (growth objectives and their time horizons; loans policies and deposits by destination, sources, duration, technical type and cost).

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QUANTITATIVE INFORMATION

1. Distribution of financial assets and liabilities by residual contractual duration

Currency: EURO

Items/Time periods

On demand

From over 1

day

From over 7 days

From over 15 days

From over 1 months

From over 3

months

From over 6

months

From over 1 year

Beyond 5 years

Unspecified maturity

to 7 days

to 15 days

to 1 month

up to 3 months

up to 6 months

up to 1 year

up to 5 years

Cash assets 1,688,309 79,926 96,262 257,932 653,725 257,436 418,237 2,318,979 797,480 22,684

A.1 Government bonds 100 - 223 44 173 477 385 7,573 152 X A.2 Debt securities listed 48 - - 2 7 1 92 54 25 X

A.3 Other debt securities 202 - 99 3 16 106 105,062 524,331 731 X

A.4 Quotas of UCI - - - - - - - - - X Non-performing securities X X X X X X X X X -

Unsettled securities X X X X X X X X X -

A.5 Loans 1,687,959 79,926 95,940 257,883 653,529 256,852 312,698 1,787,021 796,572

- Banks 111,613 29,261 29,114 47,719 190,816 44,998 100,080 2,013 - X - Customers 1,576,346 50,665 66,826 210,164 462,713 211,854 212,618 1,785,008 796,572 X Doubtful loans X X X X X X X X X 22,655

Delinquent loans X X X X X X X X X 29

Cash liabilities 2,544,955 48,736 72,153 311,318 376,236 185,233 342,708 1,712,473 302,429

B.1 Deposits 2,495,406 20,018 - 100,217 68,926 238 56 732 -

- Banks 255,093 20,018 - 100,040 68,443 - - - - X - Customers 2,240,313 - - 177 483 238 56 732 - X B.2 Debt securities 12,773 1,734 10,028 11,492 50,766 105,188 341,344 1,711,711 302,429 X B.3 Other liabilities 36,776 26,984 62,125 199,609 256,544 79,807 1,308 30 - X Off-balance sheet transactions -74,620 565 - -3,453 9,684 17,477 45,887 7,241 1,464

C.1 Financial derivatives - with exchange of capital

124

321

- -3,453 4,086

1,517 2,265

-616 -

- Long positions 124 4,001 284 25,621 12,201 9,251 9,493 397 - X - Short positions - 3,680 284 29,074 8,115 7,734 7,228 1,013 - X C.2 Deposits and loans to be received - - - - - - - - -

- Long positions - - - - - - - - - X - Short positions - - - - - - - - - X C.3 Irrevocable commitments to grant finance

-74,744 244 - - 5,598 15,960 43,622 7,857 1,464

- Long positions 25,336 244 - - 5,598 15,960 43,622 230,588 1,464 X - Short positions 100,080 - - - - - - 222,731 - X

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Other currencies

Items/Time periods On demand

From over 1

day

From over 7 days

From over 15

days

From over 1 months

From over 3 months

From over 6 months

From over 1 year

Beyond 5

years

Unspecified

maturity

to 7 days to 15 days to 1 month

Up to 3 months

Up to 6 months Up to 1 year up to 5

years

Cash assets 9,429 1,595 40,027 23,835 31,663 7,026 95 63 - -

A.1 Government bonds - - - - - 4 - 33 - X A.2 Debt securities listed - - - - - - - 30 - X

A.3 Other debt securities - - - - - - - - - X

A.4 Quotas of UCI - - - - - - - - - X Non-performing securities X X X X X X X X X -

Unsettled securities X X X X X X X X X -

A.5 Loans 9,429 1,595 40,027 23,835 31,663 7,022 95 - -

- Banks 3,113 - 34,453 13,682 - - - - - X - Customers 6,316 1,595 5,574 10,153 31,663 7,022 95 - - X Doubtful loans X X X X X X X X X -

Delinquent loans X X X X X X X X X -

Cash liabilities 46,752 - 11,616 22,167 26,295 4,005 - - -

B.1 Deposits 46,752 - 11,616 22,167 26,295 4,005 - - -

- Banks 40 - 11,616 22,167 24,322 3,575 - - - X - Customers 46,712 - - - 1,973 430 - - - X B.2 Debt securities - - - - - - - - - X B.3 Other liabilities - - - - - - - - - X Off-balance sheet transactions 44 -478 - 3,421 -3,565 -1,488 -2,250 564 -

C.1 Financial derivatives with exchange of capital

-123 -311 - 3,421 -3,565 -1,488 -2,250 564 -

- Long positions - 3,540 275 28,838 8,263 7,361 6,959 946 - X - Short positions 123 3,851 275 25,417 11,828 8,849 9,209 382 - X C.2 Deposits and loans to be received - - - - - - - - -

- Long positions - - - - - - - - - X - Short positions - - - - - - - - - X - - - - - - - - -

C.3 Irrevocable commitments to grant finance

167 -167 - - - - - - -

- Long positions 189 - - - - - - - - X - Short positions 22 167 - - - - - - - X

Within the “Other currencies”, the main currency is the US dollar.

399

2. Distribution of financial liabilities by sector

Governments and

Other public

Financial Insurance Non Other

Exposures/Counterparts Central entities businesses companies Financial parties Banks businesses

1. Due to customers 9,153 65,005 38,532 1,438 1,026,816 1,782,238

2. Securities issued - - - - - 2,547,466

3. Financial liabilities held for trading - - 1,930 - 330 525

4. Financial liabilities designated at fair value - - - - - -

TOTAL 31/12/2007 9,153 65,005 40,462 1,438 1,027,146 4,330,229

TOTAL 31/12/2006 11,094 62,459 41,568 747 937,542 3,750,261

3. Distribution of financial liabilities by region

Exposures/Counterparts ITALY OTHER

EUROPEAN COUNTRIES

AMERICA ASIA REST OF THE

WORLD

1. Due to customers 2,899,246 16,788 6,093 210 845

2. Due to banks 467,987 68,443 - - -

3. Securities issued 2,547,466 - - - -

4. Financial liabilities held for trading 2,785 - - - -

5. Financial liabilities designated at fair value - - - - -

TOTAL AS AT 31/12/2007 5,917,484 85,231 6,093 210 845

TOTAL AS AT 31/12/2006 5,791,156 40,723 6,618 287 920

SECTION 4 – OPERATIONAL RISKS

QUALITATIVE INFORMATION

A. General aspects, management processes and measurement methods for operating risk

Operational risk management is a component of the integrated risk strategy which aims at containing the overall risks also through preventing the propagation and transformation of risks. Operational risk, which comprises a heterogeneous class, is not risk typical of banking or business activities. The origin of this risk can be internal or external and such risk can extend to beyond the perimeter of the company. The definition adopted by the Bank, in accordance with the content of supervisory provisions, identifies operational risk as the risk of incurring losses due to the inadequate or inefficient procedures, human

400

resources and internal systems, or external events. The latter definition also includes losses resulting from fraud, human error, the interruption of operations, contractual non-fulfilment and natural disasters. Operational risk also encompasses legal risk, while it doesn’t include strategic or reputation risks. The containment of risk also seeks to safeguard the Bank’s reputation and brand name. It is based on the following guidelines:

- to increase overall operating efficiency; - to avoid the occurrence or reduce the likelihood of events that may potentially generate operating

losses through appropriate regulatory, organisational, procedural and training measures; - to lessen the expected impact of said events; - to transfer risk that the Bank does not intend to expose itself to, by means of insurance

arrangements. An advanced operational risk management system is made up of a structured set of processes, functions and resources to identify, assess and control operational risks, concentrating particularly on effectively preventing and reducing said risks. In line with best practices, the model adopted to identify operational risks involves the combined use, from a bottom-up perspective, of the four components envisaged by prudential regulations for advanced measurement approaches (AMA):

- internal operating loss data; - external operating loss data; - scenario analysis (self-assessment); - factors in the operating context and internal auditing system.

From an organisational perspective, operational risk, in a strict sense, is managed at Group and corporate level. At Group level, the Risk Management Department of Deltas contributes to establishing risk management policies, developing assessment models, addressing and coordinating Group entities in defining and performing activities related to complying with prudential regulations. At corporate level, the Risk Management Department is supported by the presence of liaison officers, who ensure that Group entities are sufficiently aware of the Group’s operations and exchanging the necessary information flows with the same. The network of liaison officers use software developed in-house at Group level to provide information on potential or actual losses encountered in day-to-day operations and information on the trends of risk indicators adopted for the various processes. The electronic procedure, whose purpose is the timely and prompt detection of events that could potentially generate operating losses, integrates assessments and damages of estimates, final accounting and off-accounts data and the effects of mitigating the risk through the use of insurance cover. In accordance with the guidelines of risk management policy, identifying, assessing and monitoring risk leads to action to mitigate the effects of the same. Risks are also contained through the use of regulatory, organisational, procedural measures and training. Any critical areas, identified by means of the joint analysis of various sources of data, are examined in further depth by functional managers, who together with the Risk Management Department, establish the appropriate corrective action. The Bank has also drawn up a series of insurance policies to guarantee extensive cover against different types of potentially harmful events. Optimising said cover, in line with the various risk scenarios faced, is one of the objectives of operational risk management. B. Legal risks Risks linked to legal disputes are constantly monitored by the Bank. When a legal and accounting analysis shows likelihood of losing in a legal dispute and having to outlay economic resources, suitable allocations to provisions for risks and charges are made as a precautionary measure, based on a possibly reliable estimate. The following paragraphs illustrate the most complex, significant legal disputes. Dispute regarding anatocism

401

Judgement no. 21095 of 4 November 2004 of the Court of Cassation sitting en banc confirmed the principle regarding the transactional nature of the clause regarding quarterly capitalisation of interest generally included in the old current account agreements and, therefore, ruled that said clause did not derogate from the general prohibition of anatocism set forth in art. 1283 of the Italian Civil Code. The above decision can be criticised and disagreed with under many legal profiles, as well as based on the concept of substantive fairness. The Bank, in line with that carried out by the rest of the banking system, has continued to object to this decision in the competent legal venues, sustaining, at the very least, the need to calculate interest income and expense with the same frequency also for the periods prior to the resolution by the Bank of Italy’s Credit Committee (CICR) which introduced, in this regard, the criteria of reciprocity. The focus of the press on the aforementioned judgement and the initiatives promoted by consumer associations have exposed the Bank to several customer claims aimed at obtaining the recalculation and reimbursement of interest considered as anatocism. In the event that these claims develop into lawsuits, the Bank then allocates, from time to time, suitable provisions to cover the related risks, as quantified by the account reconstructions effected. Dispute regarding bonds in default The insolvency for the years 2001-2003 of the Argentine government and several leading national Italian companies, such as Parmalat, Cirio and Giacomelli subsequently resulted in litigation, including judicial litigation, instituted by customers who had acquired the bonds in default. In this regard, the Bank has always aimed at being sensitive to the criteria of fairness and convenience, avoiding cold, expensive disputes in court, if possible, and taking into account the considerations of case law which has built up over time. In this context, the Bank has often applied transactional logic, either based on the claims received or during legal proceedings. On the contrary, for several disputes, due to their specific nature, settlement was ruled out and it was decided to see the proceedings through to a decision by the courts. In all cases, however, based on a preventative analysis of the dispute and the type of bonds involved, the Bank allocates the required provisions. Disputes regarding bankruptcy liquidations The recent bankruptcy reform, supplemented by what is known as the “corrective decree”, reduced the powers of actions carried out by the receivership pursuant to art. 67 of the Bankruptcy Law. Nonetheless, there are still several bankruptcy proceedings instituted according to the regulations prior to the reform, as provided by the transitory regulations. In these cases, the Bank pursues careful, considered transactional logic, based on an in-depth analysis of the concrete grounds on which the actions are based, meaning the existence of both the subjective and objective elements. Specifically the Bank generally carries out accounting verifications, as a precautionary measure, in order to concretely quantify risk and effect the resulting prudential allocations. SECTION 5 – OTHER RISKS The categories described in the Sections above constitute the main risks to which the Bank’s operations are exposed. However, the “second cornerstone” of the prudential regulations introduced by the new Basel Agreement envisages that when banks assess the adequacy of their own equity, they consider all risks to which they are exposed. The Group has therefore commenced the process of detecting further risks that, on first analysis, appear to be strategic risk and reputation risk. This process will enable the effectiveness of risk management within the internal audit system to be further improved, as well as being instrumental to the preparation of ICAAP reports, envisaged by the regulations of the second cornerstone, which must be submitted each year to the Supervisory Authority.

402

PART F – INFORMATION ON EQUITY

SECTION 1 – CORPORATE EQUITY

A. Qualitative information

The equity policy adopted by the Bank is based on a combination of the following three approaches: 1. full respect of the requirements dictated by supervisory regulations (regulatory approach); 2. adequate supervision of the risks associated with the banking business (management approach); 3. support for corporate growth projects (strategic approach). Each approach indicated corresponds to the appropriate definition of equity, precise objectives and specific corporate functions. Under the regulatory profile, the configuration of equity used is that defined by regulatory provisions. Respect of minimum capital requirements on a continuous basis, monitored regularly and adopted as a restriction during planning, represents an essential condition for the bank’s business activities. With regard to risk management, which represents one of the fundamental functions of banking activities, equity is considered to be the prime defence against possible unexpected losses arising from various risks encountered (credit, market and operational risks). From this perspective, the optimal magnitude of equity is that which, allowing for the absorption of unexpected losses calculated with a specific confidence interval, guarantee business continuity over a certain period of time. From a corporate standpoint, equity is considered to be a productive and strategic factor that allows the bank to independently pursue business initiatives and, at the same time, to preserve the Bank’s stability. Under this profile, evaluation of the capital adequacy refers to the financing of assets that create a return over the long-term (property, plant and equipment, investments in associates and companies subject to joint control, goodwill), to strategic reorganisation transactions, to relaunching of activities and investment requirements and, finally, to reputation. The actual availability of adequate capital, considered to be a scarce and costly resource, is related to the creation of value as a condition for the expected reward. In line with its nature as a cooperative bank, which is firmly rooted in the local areas in which it operates, Credito Valtellinese realises its equity policy mainly through:

- the progressive expansion of the size and geographical extension of the shareholding structure; - the issuing of financial instruments (ordinary shares and convertible bonds) without complex

characteristics; - significant possibility of trading the instruments issued, through listing on regulated markets; - stable remuneration of risk capital through the distribution of a consistent share of profits earned.

In the first six months of the year, the first part of the share capital increase of Credito Valtellinese was positively completed, as resolved by the Shareholders’ Meeting of 19 February 2007. The operation was organised as follows:

- increase of share capital (bonus shares) for a par value of EUR 53.5 million through the increase in the par value of shares from EUR 3 to EUR 3.50;

- share capital increase against payment, for an amount of EUR 187.3 million. The above operation was carried out following the conversion of the third and final tranche of the bond issue "Credito Valtellinese 2.8% 2004-2007 convertible”, for an amount of EUR 48.3 million.

403

B. Quantitative information

Equity is broken down as follows, in thousands of euro:

Items/Amounts 31/12/2007 31/12/2006

1. Capital 562,061 272,9142. Share premium reserve 738,303 323,0233. Reserves 138,102 127,4604. (Treasury shares) -1,338 -7615. Valuation reserves 48,510 98,9946. Equity instruments - 7087. Net income (loss) for the period 63,603 48,121Total 1,549,240 870,459

Statement of distribution and availability of shareholders’ equity items (art. 2427, paragraph 7 bis of the Italian Civil Code)

404

Share capital 562.061Share premium reserve 738.303 A, B, C (1) 677.016Treasury shares -1.338Equity instruments -

Valuation reserves: 48.510

Valuation reserves for assets available for sale 11.662 -2

Valuation reserves for property, land and equipment 36.848 A, B, C (3) 36.848

Other reserves: 138.101Legal reserve 51.125 B (4) 51.125Statutory reserve 35.705 A,B,C (5) 35.705

Other reserves 51.271 A,B,C (6) 51.271Retained earnings A,B,C Net income for the period 63.603Total 1.549.240 174.949

Statement of distribution and availability of shareholders’ equity items (art. 2427, paragraph 7 bis of the Italian Civil Code)

Use during the three prior years

Amount Utilisation options (*) Amount available (in thousands of EUR)

Loss coverage Other

(1) Pursuant to art. 2431 of the Italian Civil Code, this reserve is distributable in full provided the legal reserve holds theminimum established under art. 2430 of the Civil Code. As at 31 December 2007, the distributable amount is that remainingafter allocation to the legal reserve of the sum needed to reach one fifth of share capital.

(5) Pursuant to art. 55 of the Articles of Association, this reserve is completely available and distributable.(6) This item includes EUR 4,456 thousand in restricted monetary reserves pursuant to art. 1, subsections 469-477 of Law266/2005.

(*) A: for share capital increase; B: as loss coverage; C: for allocation to Shareholders.

(2) This reserve is unavailable pursuant to art. 6, Legislative Decree 38/2005.

(4) The amount available for share capital increases is that in excess of one fifth of the share capital. As at 31 December2007 the legal reserve did not total one fifth of the share capital.

(3) This reserve may be decreased only in observance of the provisions of art. 2445, subsections 2 and 3 of the Italian CivilCode. It includes EUR 16,218 thousand residual monetary reserve pursuant to art. 1, subsections 469-477 of Law 266/2005not recognised to share capital, restricted as at the date of the financial statements.

SECTION 2 – EQUITY AND CAPITAL RATIOS

A. Qualitative information

1. Tier 1 capital After the application of prudential filters, Tier 1 capital amounts to EUR 1,368.9 million. A comparison with the figure from the previous year shows that Tier 1 capital increased by EUR 640.4 million. This change results from the share capital increase carried out during the first half of the year, the conversion into shares of the last maturing tranche of the bond issue "Credito Valtellinese 2.80% 2004-2007 convertible” and the share of profits allocated to reserves. No innovative equity instruments are included in Tier 1 capital.

2. Tier 2 capital

405

Tier 2 capital, following the application of prudential filters, amounts to EUR 342.7 million, of which EUR 301.5 million represented by subordinate liabilities which are fully accountable. A comparison with the figure from the previous year shows that Tier 2 capital decreased by EUR 51.7 million (-13%). The following sets forth the subordinated liabilities issued by Credito Valtellinese:

- “Credito Valtellinese 2003/2013 subordinated EMTN” with par value of EUR 150 million. This issue, linked to the 3-month Euribor, can be called by the issuer starting from April 2008;

- “Credito Valtellinese 2005/2015 subordinated EMTN” with par value of EUR 150 million. This issue, linked to the 3-month Euribor, can be called by the issuer starting from 20 March 2010;

No innovative equity instruments are included in Tier 2 capital.

3. Tier 3 capital Credito Valtellinese did not issue any financial instruments accountable under Tier 3 capital, for which coverage of market risks could be applied.

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B. Quantitative information

31/12/2007 31/12/2006 A. Tier 1 capital before application of prudential filters 1,439,927 728,525B. Tier 1 capital prudential filters: B.1 Positive IAS/IFRS prudential filters (+) - -B.2 Negative IAS/IFRS prudential filters (-) - -C. Tier 1 capital before items to be deducted (A+B) 1,439,927 728,525D. Items to deduct from Tier 1 capital 70,997 -E. Total Tier 1 capital (C-D) 1,368,930 728,525F. Tier 2 capital before application of prudential filters 348,491 398,671G. Tier 2 capital prudential filters: G.1 Positive IAS/IFRS prudential filters (+) - -G.2 Negative IAS/IFRS prudential filters (-) -5,831 -4,308H. Tier 2 capital before items to be deducted (F+G) 342,660 394,363I. Items to deduct from Tier 2 capital 70,997 -L. Total Tier 2 capital (H-I) 271,663 394,363M. Items to deduct from total Tier 1 and Tier 2 capital 2,066 116,566N. Regulatory capital (E+L-M) 1,638,527 1,006,322O. Tier 3 capital (TIER 3) - -P. Regulatory capital including TIER 3 (N+O) 1,638,527 1,006,322

The 2006 data was obtained by applying the supervisory instructions in force as at 31 December 2006. Therefore, this did not include the amendments applied through the 12th update of Circular no. 155 of 18 December 1991 “Instructions for compiling notifications on regulatory capital and prudential ratios” issued on 5 February 2008.

2.2 - Capital adequacy

A. Qualitative information

In terms of capital adequacy, Credito Valtellinese has capital amounts that are higher than the regulatory requirements. As at 31 December 2007, the ratio of Tier 1 capital to risk-weighted assets stood at 21.34%, compared to 13.16% at the end of 2006. The ratio of regulatory capital to risk-weighted assets amounts to 25.54% (18.18% at the end of 2006). During the year, risk-weighted assets recorded an increase of 15.88%.

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B. Quantitative information

31/12/2007 31/12/2006 31/12/2007 31/12/2006

Categories/Values non-weighted amounts weighted amounts/requirements

A. RISK ASSETS A.1 CREDIT RISK 8,211,080 7,260,107 6,408,403 5,506,225

STANDARD METHODOLOGY CASH ASSETS 1. Exposures (other than equity securities and other subordinated assets) towards (or secured by): 1.1 Governments and Central Banks 428,944 685,721 - -

1.2 Public entities 4,182 8,397 836 1,679

1.3 Banks 990,146 658,049 198,029 131,610

1.4 Other parties (other than mortgage loans on residential and non-residential properties) 4,628,306 3,884,990 4,628,306 3,884,990

2. Mortgages on residential properties 434,317 400,426 217,159 200,213

3. Mortgages on non-residential properties 319,196 306,691 159,598 153,345

4. Shares, investments in associates and companies

subject to joint control and subordinated assets 648,321 611,395 648,878 611,951

5. Other cash assets 310,003 287,705 206,398 199,729

OFF-BALANCE SHEET ASSETS 1. Guarantees and commitments with (or secured by): 1.1 Governments and Central Banks 7,879 7,147 - -

1.2 Public entities 2,640 3,433 528 687

1.3 Banks 110,591 105,154 22,117 21,022

1.4 Other parties 326,554 300,999 326,554 300,999

2. Derivatives with (or secured by): 2.1 Governments and Central Banks - - - -

2.2 Public entities - - - -

2.3 Banks 1 - - -

2.4 Other parties - - - -

B. REGULATORY CAPITAL REQUIREMENTS B.1 CREDIT RISK 448,588 385,436

B.2 MARKET RISKS X X 487 2,114

1. STANDARD METHODOLOGY X X of which: + position risk on equity securities X X 322 510

+ position risk on debt securities X X - 1,381

+ exchange risk X X - -

+ other risks X X 165 223

2. INTERNAL MODELS X X of which: + position risk on equity securities X X - -

+ position risk on debt securities X X - -

+ exchange risk X X - -

B.3 OTHER PRUDENTIAL REQUIREMENTS X X 449,076 -

B.4 TOTAL PRUDENTIAL REQUIREMENTS (B1+B2+B3) X X 898,151 387,550

C. RISK ASSETS AND CAPITAL RATIOS C.1 Risk-weighted assets X X 6,415,366 5,536,427

C.2 Tier 1 capital/risk-weighted assets

(Tier 1 capital ratio) X X 21.34% 13.16%

C.3 Regulatory capital/Risk-weighted assets

(Total capital ratio) X X 25.54% 18.18%

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PART G – BUSINESS COMBINATIONS

SECTION 1 – OPERATIONS CARRIED OUT DURING THE YEAR

In 2007, the Bank did not carry out any business combinations.

SECTION 2 – OPERATIONS CARRIED OUT AFTER THE END OF THE YEAR

Also after the end of 2007, the Bank did not carry out any business combinations.

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PART H – TRANSACTIONS WITH RELATED PARTIES

1. INFORMATION ON COMPENSATION FOR DIRECTORS AND EXECUTIVES

The table below summarises the fees paid to directors and executives with strategic responsibilities, as defined in point 2.

31/12/2007 a) short-term benefits in favour of employees (*) 4,884b) benefits subsequent to employment 157Total 5,041

(*) The amount includes payments to directors for EUR 2,511 thousand, compared to EUR 2,014 thousand in 2006. The amount highlighted represents the total cost borne by the company. Furthermore, in 2007, payments were made to members of the Board of Statutory Auditors for a total amount of EUR 354 thousand, compared to EUR 273 thousand in 2006. Pursuant to art. 78 of Consob Regulation 11971/1999 - "Issuers’ Regulation" – remuneration paid to members of administrative and control bodies, general managers and directors with strategic responsibilities are detailed below. The payments to directors with strategic responsibilities are indicated as an aggregate.

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Pursuant to CONSOB Resolution no. 11971 of 14 May 1999 as amended, details of fees paid are provided below.(in thousands of EUR)

INDIVIDUAL

Name and surname Office Expiry of office

Giovanni De Censi D* 12 months Approval of 2009 financial statements 1.164

from Credito Artigiano S.p.A. 95 C

Renato Bartesaghi D 4 months Approval of 2006 financial statements 463

from Bankadati Servizi Informatici S.p.A. 250 C

Salvatore Vitali D* 4 months Approval of 2006 financial statements 37

from Mediocreval S.p.A. 35 CFranco Bettini D 10 months 30/10/2007 41 from Stelline Servizi Immobiliari S.p.A. 27 C

Mario Cotelli D* 12 months Approval of 2009 financial statements 104

from Credito Siciliano S.p.A. 26 C from Banca dell'Artigianato e dell'Industria S.p.A. 9 C

Fabio Bresesti D* 8 months Approval of 2009 financial statements 39

Paolo De Santis D 8 months Approval of 2009 financial statements 32

Franco Moro D* 12 months Approval of 2009 financial statements 60

Michele Colombo D 12 months Approval of 2009 financial statements 42

Giovanni Continella D 12 months Approval of 2009 financial statements 47

Marco Santi D 4 months Approval of 2009 financial statements 13

Giuliano Zuccoli D* 12 months Approval of 2009 financial statements 171

Angelo Maria Palma D 12 months Approval of 2009 financial statements 58

from Credito Artigiano S.p.A. 327 C from Credito Piemontese S.p.A. 15 C

Maurizio Quadrio D 12 months Approval of 2009 financial statements 52

Alberto Ribolla D 12 months Approval of 2009 financial statements 48

Vico Valassi D 8 months Approval of 2009 financial statements 31

Gabriele Cogliati D* 12 months Approval of 2009 financial statements 53

from Bankadati Servizi Informatici S.p.A. 4 C

Valter Pasqua D 12 months Approval of 2009 financial statements 57

from Credito Artigiano S.p.A. 8 C

Roberto Campidori S 12 months Approval of 2009 financial statements 123

from Credito Artigiano S.p.A. 16 C

Aldo Cottica S 12 months Approval of 2009 financial statements 1

from Stelline Servizi Immobiliari S.p.A. 8 C from Bankadati Servizi Informatici S.p.A. 2 C from Deltas S.p.A. 11 C

Alfonso Rapella S 12 months Approval of 2009 financial statements 77

Angelo Garavaglia S 12 months Approval of 2009 financial statements 83

from Credito Siciliano S.p.A. 46 C from Mediocreval S.p.A. 13 C

Gabriele Villa S 12 months Approval of 2009 financial statements 1

from Credito Artigiano S.p.A. 55 CMiro Fiordi GM 5 F 794 E from Credito Artigiano S.p.A. 6 C from Credito Siciliano S.p.A. 67 C from Bancaperta S.p.A. 98 C

Strategic executives VGM 10 F 1,036 E

* = member of the Executive Committee** C = company directors' or auditors' fees paid by subsidiaries P = other professional fees E = other remuneration as employee (annual figure) F = fringe benefitsKEY: (D) DIRECTOR (S) STATUTORY AUDITOR (MG) MANAGING DIRECTOR (VMG) VICE MANAGING DIRECTOR

DESCRIPTION FEES

Remuneration for company

officeNon-monetary

benefits

Bonuses and other

incentives

Other fees **Period of office

411

2. INFORMATION ON TRANSACTIONS WITH RELATED PARTIES

On the basis of the instructions of IAS 24 applied to the organisational and governance structure of the company and of the Credito Valtellinese banking group, the following natural persons and corporate bodies are considered related parties: - subsidiaries, companies in which Credito Valtellinese directly or indirectly exercises control, as defined by

IAS 27; - affiliated companies, companies over which Credito Valtellinese directly or indirectly exercises significant

influence, as defined by IAS 28; - companies subject to joint control, companies on which Credito Valtellinese directly or indirectly

exercises joint control, as defined by IAS 31; - directors with strategic responsibilities and supervisory authorities, namely Directors, Statutory Auditors,

the General Manager and the Deputy General Managers of Credito Valtellinese; - other related parties, which include:

- immediate family members – partners, children, the partner's children and dependents of the individual or partner - of Directors, Auditors, the General Manager and the Vice General Managers of Credito Valtellinese;

- subsidiaries, subject to joint control or subject to significant influence by Directors, Statutory Auditors, the General Manager and the Deputy General Managers of Credito Valtellinese, as well as their immediate family members, as defined above;

- pension funds established by companies of the Group. Relations with the other Credito Valtellinese Group companies are established within the sphere of a consolidated “network company” organisational model on the basis of which each member is focused exclusively on its core business, within a business context which permits the effective and efficient management of the Group’s global resources. All the dealings entered into with the Group banks mainly concern correspondent transactions for services rendered, deposit and financing services within the sphere of ordinary inter-bank operations. Other contractual relations with specialised finance companies and complementary companies regard assistance and consulting services and specialised services to support banking operations. The economic effects of inter–bank transactions are regulated on the basis of primary market conditions, while other transactions are regulated on the basis of the specific contractual terms which - maintaining the principal objective of optimising the synergies and economies of scale and purpose at the Group level - refer to parameters that are objective and constant over time, marked by essential transparency and equity. The fees for the services rendered are calculated according to tested parameters that take into account the actual utilisation of said services by each user company. Transactions with related parties other than companies belonging to the Credito Valtellinese group are part of normal banking activities and are generally regulated at market conditions for specific operations, or aligned to the most favourable measure that may have been established for employees. Bank transactions with groups headed by Directors of the company or by the parent company Credito Valtellinese and other companies of the Credito Valtellinese Group are performed in compliance with the provisions of art. 136 of the Consolidated Banking Act and settled at normal market conditions established for the specific operations. The impact of transactions with related parties, as defined above, on the balance sheet, income statement and economic result for the year ended as at 31 December 2007, as well as the percentage weight of said transactions on the corresponding financial statement items, are illustrated in detail in the following financial statements;

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TRANSACTIONS WITH RELATED PARTIES (in thousands of EUR)

SUBSIDIARIES (*) ASSOCIATED COMPANIES

COMPANIES SUBJECT TO

JOINT CONTROL

EXECUTIVES AND CONTROL BODIES

OTHER RELATED PARTIES

% INCIDENCE ON THE CORRESPONDING BALANCE SHEET

ITEMS

BALANCE SHEET ITEMS20. Financial assets held for trading 1.141 7,77%60. Due from banks 1.147.617 5.387 93,47%70. Loans to customers 1.528 10.391 273 651 55.818 1,26%130. Tax assets: a) current -24.187150. Other assets 3.725 2,65%TOTAL ASSETS 1.129.824 15.778 273 651 55.818 15%10. Due to banks 336.327 62,70%20. Due to customers 29.488 1.630 15.360 1,59%30. Securities issued 60.581 70 5.727 2,61%40. Financial liabilities held for trading 1.471 52,80%100. Other liabilities 1.645 0,62%TOTAL LIABILITIES 429.512 1.700 21.087 6%Guarantees given 16.597 5.000 9.482 5,65%Commitments 8.377 2,01%TOTAL GUARANTEES AND COMMITMENTS 24.974 5.000 9.482 4%

TRANSACTIONS WITH RELATED PARTIES (in thousands of EUR)

SUBSIDIARIES (*) ASSOCIATED COMPANIES

COMPANIES SUBJECT TO

JOINT CONTROL

EXECUTIVES AND CONTROL BODIES

OTHER RELATED PARTIES

% INCIDENCE ON THE CORRESPONDING BALANCE SHEET

ITEMS

INCOME STATEMENT ITEMS10. Interest income and similar income 48.368 614 7 37 2.206 14,69%20. Interest expense and similar expense -18.685 -38 -33 -435 10,06%40. Fee and commission income 4.945 2.069 42 131 10,68%50. Fee and commission expense -8.809 63,45%80. Profits (losses) on trading activities -25 -1,19%150. Administrative expenses: a) personnel 10.118 -77 -5.026 -206 -8,77%150. Administrative expenses: b) other administrative expenses -28.774 -9 -1.579 -15 45,79%190. Other operating expenses/income 1.598 158 11,40%

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(*) The economic, operating and financial effects of intragroup transactions are broken down by company in the table below. DETAILED STATEMENT OF TRANSACTIONS WITH GROUP COMPANIES (in thousands of EUR) Credito Artigiano Credito Siciliano

Banca dell'Artigianato e

dell'industriaMediocreval Bancaperta Credito Piemontese Finanziaria San

GiacomoAperta

Fiduciaria Aperta SGR Bankadati S.I. Deltas Stelline S.I. Creset

BALANCE SHEET ITEMS20. Financial assets held for trading 403 112 251 37560. Due from banks 253.653 114 50.846 75.805 767.155 4470. Loans to customers 171 221 990 146130. Tax assets: a) current -16.071 -2.492 -201 -3.480 -12 -32 -401 -668 -536 -223 -71150. Other assets 882 166 1.327 791 461 98TOTAL ASSETS 237.985 -2.266 50.896 75.805 764.050 926 159 -32 -235 880 1.245 238 17310. Due to banks 74.371 28.431 71.154 139 162.23220. Due to customers 6 69 5.257 3.520 4.726 835 15.07530. Securities issued 50.909 3 9.66940. Financial liabilities held for trading 320 92 1.059100. Other liabilities 1 350 112 5 63 654 369 91TOTAL LIABILITIES 125.600 28.526 71.154 140 172.960 350 118 74 5.320 3.520 5.380 1.204 15.166Guarantees given 450 7.453 115 6.869 14 46 1.500 150Commitments 8.377TOTAL GUARANTEES AND COMMITMENTS 450 7.453 115 - 15.246 14 - - - - 46 1.500 150

DETAILED STATEMENT OF TRANSACTIONS WITH GROUP COMPANIES (in thousands of EUR) Credito Artigiano Credito Siciliano

Banca dell'Artigianato e

dell'industriaMediocreval Bancaperta Credito Piemontese Finanziaria San

GiacomoAperta

Fiduciaria Aperta SGR Bankadati S.I. Deltas Stelline S.I. Creset

INCOME STATEMENT ITEMS10. Interest income and similar income 9.437 1 2.077 1.865 34.519 69 241 15920. Interest expense and similar expense -4.790 -5.213 -2.576 -5.516 -2 -139 -102 -31 -4 -31240. Fee and commission income 222 3.784 500 1 1 4 2 3 42850. Fee and commission expense -7.990 -30 -78980. Profits (losses) on trading activities -131 -60 166150. Administrative expenses: a) personnel 1.290 248 555 2.302 1.020 221 785 3.059 74 564150. Administrative expenses: b) other administrative expenses -121 -2.974 -2.520 -112 -55 -12.899 -6.632 -2.365 -1.096190. Other operating expenses/income 413 23 36 252 343 241 202 88

414

PART I – SHARE-BASED PAYMENTS

A. QUALITATIVE INFORMATION

No share-based payment agreements were put in place.

415

Guide to consultation This section of the financial statements contains the following documents: Report of the Board of Statutory Auditors In its report to the Shareholders’ Meeting called for approval of the financial statements, the Board of Statutory Auditors reports on the supervisory activity performed and on omissions and reprehensible facts found. It may also submit proposals to the Shareholders’ Meeting with regard to the financial statements and their approval and on matters within its authority. The document is governed by Article 153, of Legislative Decree no. 58 dated 24 February 1998, “Consolidated document containing the provisions on the matter of financial intermediation, pursuant to Articles 8 and 21 of Law no. 52 dated 6 February 1996” (Consolidated Financial Law). Report on corporate governance In order to guarantee proper functioning of the market and correct corporate information, the administrative bodes of Italian companies with shares listed on the stock exchange are required to provide a special report, on a yearly basis, on its system of corporate governance and on compliance with the Self Disciplinary Code for Listed Companies. The report on corporate governance is required by Article 124-bis of the Consolidated Financial Law and by Article 89-bis of the Issuers’ Regulations adopted by CONSOB with resolution no. 11971 dated 14 May 1999 and subsequent amendments and integrations and by section IA.2.6 of the Instructions for Regulation of markets organised and managed by Borsa Italiana S.p.A.. Certification of the delegated administrative body and of the executive in charge of drawing up the company accounts This document has been drawn up pursuant to Article 81-ter of the Issuers’ Regulations adopted by CONSOB with resolution no. 11971 dated 14 May 1999 and subsequent amendments and integrations, in implementation of Article 154-bis, sub-section 5, of the Consolidated Financial Law. The certification model is provided in Attachment 3C-ter of the aforesaid CONSOB Regulations. Independent Auditors’ Report With this document, drawn up in accordance with Article 156, of the Consolidated Financial Law, the independent auditors express their opinion on the financial statements. The report is signed by the person in charge of the audit, who must be a partner or director of the auditing company and enrolled in the register of auditors held at the Ministry of Grace and Justice.

416

OTHER DOCUMENTS

417

REPORT OF THE BOARD OF STATUTORY AUDITORS TO THE SHAREHOLDERS’ MEETING

Dear Shareholders, In accordance with the provisions of Article 153 of Legislative Decree no. 58 dated 24 February 1998 and of Article 2429, sub-section 3 of the Italian Civil Code, the Board of Statutory Auditors hereby presents the following Report on its supervisory activities carried out during 2007. * * * Foreword Before providing due information on the supervisory and control activity and on the outcome of inspections performed, we report that during the year the Bank’s management confirmed the growth targets with significant progress represented by the positive trends in the financial aggregates and the main economic ratios. The positive results of the Consolidated Financial Statements show that, even at Group level, considerable growth has been achieved with regard to the various Group entities coordinated in a network-wide organisation rationale. Precise information and comments on the performance of the Company and of the subsidiary and associate companies are provided in the reports to the Shareholders’ Meeting, with specification of the balance sheet and income statement figures and results achieved over the past year. * * * Supervisory and control activity We acknowledge that, in accordance with the mandate received, we performed the supervisory and control activity by referring to prevailing general and special regulations, providing the following information that takes specific account of CONSOB notice no. 1025564 dated 6 April 2001 and subsequent amendments and integrations. We continuously followed the development of corporate decisions and the various aspects of the Bank’s performance and we obtained regular information on the performance of Group Companies by attending all the meetings of the Board of Directors and of the Executive Committee. We also ascertained that the delegated bodies duly reported to the Board of Directors on the transactions performed by virtue of the powers assigned. Pursuant to Article 2391 of the Italian Civil Code and Article 136 of Legislative Decree no. 385 of 1993, the Directors provided prior information on transactions involving a potential conflict of interest, abstaining from the related vote. We also gathered useful and necessary information on company organisation, on the internal auditing system and on the administration/accounting system, assessing their structure and any changes made. This information was also gathered through meetings with the Independent Auditors, Top Management, the Group Auditing Department and the Inspection Service, as well as with the Heads of the Bank’s various services, and was supplemented by direct observations and specific supervisory activity which allowed us to assess its adequacy and operational reliability. We held meetings and performed inspections on general and specific issues subject to supervision and control, examining and recording the activities performed. In order to ascertain compliancy with the law and internal regulations, and to verify situations and conduct at operational level, we carried out, often individually on behalf of the Board and liaising with the Inspection Service at all times, on-site visits to branches and operational offices. We commissioned the Inspections Service to perform inspections on behalf of the Board of Statutory Auditors. As part of the management and coordination activity, as Statutory Auditors of the Parent Bank, we called meetings that included the Chairmen of the Boards of Statutory Auditors of the Banks and other companies in the Group, in order to gather the necessary information in compliance with Article 151, sub-section 2 of Legislative Decree 58/1998, and to examine and deal with issues of common interest. These meetings were also attended by members of the Group Auditing Department and the Heads of the Inspection Services. The Auditing Department of Deltas coordinates and integrates the Bank’s internal auditing system into the Group’s internal auditing system. The Head of this Department and the Head of the Inspection Service were important contacts for the Board of Statutory Auditors, acting as an information link within the auditing system. Attendance of the meetings of the Internal Auditing Committee, at which the Chairman of the Board of Statutory Auditors or another delegated Auditor were always present, and at which the Head of the Auditing

418

Department also performs the function of Secretary/Coordinator, provided punctual update on the activity of the Committee and a link with the Head of the Group Auditing Department. The Head of the Group Auditing Department, with whom frequent contact was maintained and the Head of the Inspection Service, who attended almost all the meetings of the Statutory Auditors, were always willing to cooperate in the activity performed by the Board and reported no specific irregularities in corporate management and in operating activity. The Independent Auditors represent an important contact for the Board of Statutory Auditors as its audit of the accounts and of the financial statements completes the general framework of the auditing functions established by law. With the Independent Auditors Reconta Ernst & Young S.p.A., to whom the auditing of the accounts and the individual and consolidated financial statements was assigned pursuant to Article 155 and thereafter of Legislative Decree no. 58 dated 24 February 1998, the Board held the customary meetings for the purpose of exchanging information and knowledge on the supervisory and control activities performed within the respective mandates. During these meetings the Independent Auditors informed the Board of Statutory Auditors of the controls performed pursuant to Article 155, sub-section 1, letter a), of Legislative Decree 58/98, declaring that no reprehensible facts or irregularities requiring report to the Control Bodies or the Supervisory Authorities had emerged from said controls. The Independent Auditors also reported on the correct presentation of the individual and consolidated financial statements, in accordance with the regulations governing their preparation and with the guidelines provided on the matter by Bank of Italy. * * * Expansion policies and significant and material events The Board of Statutory Auditors was able to verify the plan for territorial expansion at Group level that aims to achieve the targets set by the 2007-2010 Strategic Plan. Credito Valtellinese opened 6 new branches, which primarily served to strengthen the local network in the Bergamo area, and brought the number of branches in its operating network to 112. Internal Group expansion continued with the opening in 2007 of 21 branches (Lombardy, Rome and Veneto) which brought the total branches in the Group operating network to 389. After this, external expansion led to finalisation of the agreement for acquisition of 35 branches of the Intesa San Paolo Group. The most significant and material operations performed in 2007 by Credito Valtellinese included some important share capital transactions. Other transactions, performed at Company and Group level, led to reorganisation and optimisation of the organisational and corporate models and to increased growth in external lines through agreements and alliances with other banking and financial players. An outline of the aforesaid transactions, involving both the Bank and other Group companies, is provided below. Share capital transactions a) An important transaction to strengthen the capital of Credito Valtellinese was approved on 10 February

2007 by the Bank’s Extraordinary Shareholders’ Meeting, with the aim of supporting internal expansion plans and the progressive expansion of strategic partnerships, and ensuring an adequate level of free capital to allow the Bank to take advantage of any acquisition opportunities. Details of the transaction are provided in the reports to the Shareholders’ Meeting. The capital increase was widely approved by the shareholders.

b) Prior to execution of the aforesaid capital increase, in April 2007 the redemption period for the third and final tranche of the “Credito Valtellinese 2.8% 2004-2007 convertible” bond loan was concluded. The transaction closed with shareholders opting for almost full (99.7%) conversion into shares with an increase in the Parent Bank’s capital of approximately EUR 117 million.

As a result of the aforesaid share capital transactions and the other changes occurring in the year, as at 31 December 2007, Credito Valtellinese’s Shareholders’ Equity totalled EUR 1,549 million compared to EUR 870 million as at 31 December 2006. Following the increases, as at 31 December 2007, the share capital is equal to EUR 562 million, divided into 160,588,764 shares, each with a par value of EUR 3.5. As at 31 December 2007 the consolidated Shareholders’ Equity is equal to EUR 1,567 million compared to EUR 882 million as at 31 December 2006. Other significant transactions: Other significant and material transactions concerning the Bank and other Group Companies are reported below: - Merger by incorporation of Crypto Spa into Bankadati Spa

419

The purpose of the merger between the two companies is to simplify the organisational architecture of the Group IT department, with the final aim of centralising the IT management and development functions under a single structure.

- “Banca della Ciociaria” Project The transaction is part of a wider project of strategic cooperation between the two groups with commercial and operating synergies.

- Acquisition of 35 branches of the Intesa San Paolo Group As part of its growth policies, the Bank acquired 35 branches of the Intesa San Paolo Group, choosing territorial locations that were consistent with the Group expansion plan. The acquisition allowed the Creval Group to found Credito Piemontese and to upgrade Credito Artigiano in Pavia area.

- Share capital increase in Mediocreval Spa The second and final tranche of the share capital increase of Mediocreval SpA, a Group bank specialising in medium and long term lending, was concluded with the subscription of 3,672,000 shares offered under option, for an amount equal to EUR 22.032 million, of which EUR 11.016 million for share capital and EUR 11.016 million for share premiums. Hence the Share Capital of Mediocreval has risen from EUR 44.064 million to EUR 55.080 million.

- Assignment of “non-performing” loans to Finanziaria San Giacomo SpA In accordance with the sector restructuring that affected Mediocreval and Finanziaria San Giacomo, the assignment of non-performing loans of Credito Valtellinese, of Credito Artigiano and of Credito Siciliano to Finanziaria San Giacomo was finalised in November 2007 for a total net book value of EUR 36.695 million.

- Agreement with Banca Tercas In November 2007 an important agreement governed the operational, management and governance aspects underlying the launch of the strategic alliance project with Banca Tercas (Cassa di Risparmio della Provincia di Teramo spa).

- Agreement with Ri-Fin (Global Assicurazioni and Global Assistance) During the year the Bank reviewed the agreements with Ri-Fin relating to the investment held in Global Assicurazione in compliance with the Creval Group 2007-2010 strategic plan which identifies the life and non-life bancassurance sector as providing one of the main business and growth opportunities of the next few years.

- New issue as part of the EMTN programme This concerns the Parent Bank’s placement on the Euromarket of a senior bond issue worth EUR 350 million with variable rate and 5 year maturity.

Details of the aforesaid transactions are provided in the corporate report to the Shareholders’ Meeting. • Intragroup transactions and transactions with related parties The criteria for identifying transactions with related parties as well as the procedures for executing the related decision-making processes and managing the transactions in question are governed by principles of conduct and procedural rules contained in specific regulations approved by the Board of Directors, entitled the "Principles of Conduct for related party, intragroup, unusual and/or atypical transactions". This document provides a clear and approved reference framework that systematically summarises the various provisions regulating management of these transactions, formally defining criteria for identifying the transaction and the related procedures for executing the decision-making process. It is noted that intragroup transactions and transactions with related parties are submitted to annual examination by the Board of Directors, in order to clearly verify the consistency of the criteria governing their management, in relation to developments in the legal and operational framework. On this occasion a summary of the significant aspects of operating activity within the Credito Valtellinese Group was provided. With regard to the transactions in question, extensive information and accounting data is provided on the global situation in the reports to the Shareholders’ Meeting, and it is acknowledged that said transactions: - comply with the criteria of competence and substantive and procedural correctness specified in reference

legislation; - form part of ordinary operations as they are performed in compliance with market values and decided on

the basis of criteria of mutual economic advantage. Transactions with related parties, as defined by IAS 24, forming part of standard banking activity are usually governed at market conditions, or are aligned with the most favourable conditions applied to Personnel. Transactions falling under the scope of application of Article 136 of the Consolidated Banking Law, as amended by Law no. 236 dated 28 December 2005, are deliberated in compliance with the provisions contained in the aforesaid law and regulated at the standard market conditions for the specific operating activity.

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As far as intragroup transactions are concerned, it is reiterated and confirmed that transactions with the other Companies of the Credito Valtellinese Banking Group form part of a consolidated organisational “company network” model in which each component focuses exclusively on performing its core business, with a Group synergy business approach that allows effective and efficient management of global resources. In accordance with this approach, all the transactions implemented with Companies belonging to the Group – which are all of an ordinary nature – concern interbanking transactions when banking companies are involved, and contractual relations, implemented with specialised finance companies and special purpose companies, relating to the provision of assistance and consulting services and specialised services supporting current operations. Lastly, there is the use of seconded staff. The economic effects of the interbanking relations are governed, as stated, in accordance with standard market conditions. The other transactions – of which the economic aspects are based on specific agreements using objective and constant parameters – are distinguished by criteria of substantive transparency and fairness that take the effective use of each user company into account. With regard to transactions with Group Companies and other related parties, extensive information and accounting data is provided in the reports to the Shareholders’ Meeting and, specifically, in the Notes to the Financial Statements, to which reference is made. * * * Derivative transactions and exposure towards assets linked to subprime and Alt-A mortgages In relation to the well-known events that sparked the so-called subprime mortgage crisis, the Parent Bank, complying with the request made by CONSOB to all listed banking and insurance companies, provided special market disclosure when communicating approval of the half year report as at 30 June 2007, specifying exposure and commitments associated with the aforesaid segment. The information provided specifically acknowledged that Credito Valtellinese and its subsidiaries have no exposure or commitments relating to disbursement of these types of mortgages, nor investments in financial instruments of which the underlying assets consist in these mortgages. With regard to derivative transactions and exposure towards assets associated with subprime and Alt-A mortgages, the Parent Bank Credito Valtellinese performed specific self-assessment checks transmitted to Bank of Italy as requested by the latter from all banking Groups and all Banks that are not members of Groups. With regard to the aforesaid problems, which upset the financial markets and had series repercussions for a number of banks, especially foreign ones, the Creval Group reports no critical elements in terms of quantity or quality. * * * INFORMATION AND STATEMENTS REGARDING THE INSPECTIONS PERFORMED As a result of the supervisory and control activities performed and on the basis of the direct knowledge and information gathered, we can reasonably affirm the following: • We oversaw observance of the law and the Memorandum of Association, checking that the actions of the

Directors complied with the provisions of the law and the Articles of Association, and were also consistent with the need to satisfy the interests of the Company; By attending the meetings of the Board of Directors and the Executive Committee, and examining the related minutes, we gathered adequate information on the activities carried out and the transactions of greater importance in economic, financial and equity terms performed by the Bank and its subsidiaries. We can state, also on the basis of the information gathered, that these transactions were carried out in compliance with the law and the Articles of Association, and always in the interest of the Company. They did not appear to be patently imprudent or risky, in conflict of interest, in contrast to the resolutions of the Shareholders’ Meeting or, in any event, such as to compromise the protection and proper use of corporate assets. Extensive information and comments on these transactions are provided in the Report on Operations, and appropriate accounting figures are also provided in the Notes to the Financial Statements.

• As confirmed by the Directors in the Report on Operations, no atypical or unusual transactions were carried out, with Group companies and/or related parties.

• Intragroup transactions were all of a standard nature and adequate information has been provided earlier in this report. As stated, the economic effects of the aforesaid transactions are regulated by standard market conditions with regard to interbanking relations, while the other transactions are based on contractual agreements that refer to objective parameters that tend to remain constant. These parameters are distinguished by criteria of substantive transparency and fairness and reflect the extent to which the services supplied are exploited by the user companies.

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Transactions with other related parties, as specified by the Board of Directors in the Report on Operations, fall within normal banking activities and are generally governed by market conditions.

• Adequate information regarding the transactions referred to above is provided in the Report on Operations and the Notes to the Financial Statements.

• On 2 April 2008, the Independent Auditors Reconta Ernst & Young S.p.A. issued their Report on the Financial Statements of Credito Valtellinese as at 31 December 2007. In their Report they expressed a positive opinion without observations or objections. On the same date the Independent Auditors also expressed a positive opinion on the Consolidated Financial Statements, without observations or objections

• During 2007, the Board of Statutory Auditors did not receive any claims and/or reports from shareholders pursuant to Article 2408 of the Italian Civil Code.

• For the purposes of the provisions of paragraph 4.5.2.2. on the Principles of Auditors’ Independence, recommended by CONSOB, the Independent Auditors Ernst & Young SpA reported the fees received by the company and by member companies of its network for services rendered during 2007. Said fees are specified by Credito Valtellinese S.c. in an attachment to the Financial Statements as at 31 December 2007 pursuant to the provisions of Article 160, sub-section 1-bis of the Consolidated Financial Law and of Article 149-duodecis of the Issuers’ Regulations. The Company Reconta Ernst & Young declared its independence from Credito Valtellinese S.c. and its subsidiaries and associates. With regard to the above we have no observations to make and no critical aspects have emerged. The services not included in the audit assignment are listed in the following paragraph.

• The assignments requested by the Credito Valtellinese Group, that are not included in the assignment to audit the financial statements and the accounts, performed by Reconta Ernst & Young spa and by subjects belonging to the Ernst & Young network during 2007 and included in the certified services are listed below:

A) Services performed by Reconta Ernst & Young S.p.A: − performance of verification procedures on the tax returns of Credito Valtellinese S.c.. The

remuneration for this assignment amounted to EUR 6,763, in addition to expenses and VAT. − performance of verification procedures on the tax returns of the companies of the Credito Valtellinese

Group. The remuneration for this assignment amounted to EUR 26,495, in addition to expenses and VAT.

− performance of verification procedures on the “Prospectus” drawn up by Credito Valtellinese S.c. as part of renewal of the programme for issue of debt securities on international markets. With reference to this activity, 1 Comfort Letter was issued. The remuneration for this assignment amounted to EUR 50,000, in addition to expenses and VAT.

− performance of verification procedures on the “Final Terms” drawn up by Credito Valtellinese S.c. as part of the aforesaid programme for issue of debt securities on international markets. With reference to this activity, 1 Comfort Letter was issued. The remuneration for this assignment amounted to EUR 15,000, in addition to expenses and VAT.

− performance of verification procedures on the “Prospectus” relating to the offer under option of newly issued ordinary shares matched free of charge to ordinary warrant shares 2008 and ordinary warrant shares 2009 of Credito Valtellinese S.c.. With reference to this activity, 1 Comfort Letter was issued. The remuneration for this assignment amounted to EUR 50,000, in addition to expenses and VAT.

− examination of the forecast results of Credito Valtellinese S.c. and of the companies of the Group that it heads relating to the years 2007-2010, contained in Chapter 13 of the aforementioned “Prospectus” as well as the assumptions and elements on which they were based. With reference to this activity, 1 Report was issued. The remuneration for this assignment amounted to EUR 160,000, in addition to expenses and VAT.

− examination of the forecast results of Credito Artigiano S.p.A. relating to the years 2007-2010, contained in Chapter 13 of the Prospectus relating to the offer under option of new issue ordinary shares of the Bank as well as the assumptions and elements on which they were based. With reference to this activity, 1 Report was issued. The remuneration for this assignment amounted to EUR 70,000, in addition to expenses and VAT.

− examination of the proforma figures of Credito Artigiano S.p.A. as at 30 June 2007 included in the Prospectus relating to the offer under option of new issue ordinary shares of the Bank. With reference to this activity, 1 Report was issued. The remuneration for this assignment amounted to EUR 35,000, in addition to expenses and VAT.

B) Services performed by Ernst & Young Financial Advisors S.p.A.

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− providing assistance to the Appointed Executive of Credito Valtellinese S.c. in the activity of reporting, analysing and formalising the administrative/accounting procedures (reconnaissance phase). The remuneration relating to the aforesaid activity was invoiced to Credito Valtellinese S.c. and amounted to EUR 35,000, in addition to expenses and VAT;

− providing assistance to the Appointed Executive of Credito Valtellinese S.c. and of Credito Artigiano S.p.A. in the activity of reporting, analysing and formalising the administrative/accounting procedures (reporting and formalisation phase). The remuneration relating to the aforesaid activity was invoiced to Deltas S.p.A. and amounted to EUR 200,000, in addition to expenses and VAT.

No assignments have been commissioned to the subjects belonging to the “Italian Network” of the Independent Auditors Reconta Ernst & Young S.p.A. other than those listed in point b) above.

• During the year we issued the following mandatory opinions: - opinion pursuant to Article 2389, sub-section 3, of the Italian Civil Code; - opinion pursuant to Article 52 of the Articles of Association on the appointment of the Executive in

charge of drawing up the company accounts; - opinion on appointment of the Head of the Compliance Function.

• During 2007 2 Shareholders’ Meetings, 17 meetings of the Board of Directors and 12 meetings of the Executive Committee were held, which were all attended by the Board of Statutory Auditors. The Chairman of the Board of Statutory Auditors also attended the meetings of the Internal Auditing Committee (9), and the meetings of the Supervisory and Control Committee created pursuant to Article 6 of Legislative Decree 231/2001 (4). Two meetings of the Supervisory and Control Committee were also attended by the Chairman of the Parent Bank’s Board of Statutory Auditors and by another Auditor designated by the latter. The Board of Statutory Auditors held a total of 48 meetings/inspections concerning supervisory and control activity, of which 36 collegial meetings and 12 inspections, performed individually by one Auditor representing the entire Board, at operating headquarters and branches, with the assistance of the Inspection Service; inspections were also entrusted to and regularly performed by said Service on behalf of the Board of Statutory Auditors at 12 branches.

• We acquired knowledge and supervised, also through information gathered from the Function Heads, compliance with the principles of correct administration and transparent reporting on the management performance and we have no observations to raise on the matter.

• We acquired knowledge and supervised the adequacy of the company’s organisational structure and the internal auditing system and, specifically, the activity of those in charge of the internal auditing system. Furthermore, as far as our authority permits, we supervised the adequacy of the administrative/accounting system, as well as the reliability of this system to correctly represent operational events. We have no observations to raise on the matter. The organisational structure and the powers delegated by the Board of Directors are consistent with the size of the company and with the specific characteristics of the banking activity performed. Some amendments have been made to the Group organisational and corporate models in order to adjust these, where necessary, to the changed regulatory and market context. In the past year further changes of considerable importance were introduced and others are currently being implemented. Hence measures to improve processes and procedures continue to take due account of Group dynamics and the auditing system proves to be based on a group logic, in accordance with the provisions of the “Auditing Activity Rules” and the “Manual of Auditing Activity Tools” set up, adjusted and updated at all times to ensure greater regularity and effectiveness of controls. The activities and functions of the Group and Bank organisational structures interact within the global internal auditing system. The overall framework of rules, processes and procedures, defined by the system, is reasonably believed to allow adequate guarantee of processes, protection of corporate assets and verification of compliance with internal and external regulations with efficient and effective risk control. We acknowledge that the various risk profiles, associated with operations and the correct application of the specific legislation, are subject to observation in the periodic inspections performed by the competent services. The reports to the Shareholders’ Meeting drawn up for the Bank and the Group contain detailed illustration of the internal auditing system. With regard to the aforesaid supervisory activity, as far as our authority permits, we have no observations to raise.

• We assessed the adequacy of the internal auditing system, also gathering information from the Auditing Department and the Inspection Service.

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• With regard to the activity of direction and coordination performed by the Parent Bank, we verified and ascertained the punctuality, efficiency and adequacy of the strategic and operating instructions, the periodic analysis of the performance posted in activities performed and of the results of Group companies and the oversight of related risks.

• We deem the instructions provided by the Parent Bank to the subsidiaries pursuant to Article 114, sub-section 2 of Legislative Decree 58/1998 to be adequate, and we have no observations to make on the adequacy of the information flows from the subsidiaries to the Parent Bank, for the timely fulfilment of reporting obligations pursuant to law.

• During meetings held with the Independent Auditors the Board of Statutory Auditors did not receive any notice of aspects worthy of report and/or of irregularities.

• During the year the Board of Directors approved the annual update of the Security Policy Document drawn up for all the Group Companies.

• With reference to the provisions of Article 2545 of the Italian Civil Code the Directors briefed the Shareholders on the criteria on which the Bank bases its corporate management to ensure pursuit of its cooperative purpose. The Board of Statutory Auditors, confirming the Directors’ guidelines, report that the management complies with the provisions of Article 2 of the Company’s Articles of Association.

• The annual Report on the system of corporate governance adopted with reference to the 2006 version of the Self Disciplinary Code for Corporate Governance has been drawn up and attached to the report to be submitted to the Shareholders’ Meeting. The Board of Directors has implemented a number of decisions aimed at progressively adjusting the governance structure to the provisions set forth in the code without prejudice to some criteria that do not apply due to the Bank’s specific corporate nature. Within the context of Corporate Governance the Board Committees for Internal Auditing, Remuneration and Appointments perform the functions assigned thereto. The Board of Statutory Auditors, as far as its authority permits, supervised the procedures for implementation of corporate governance in compliance with the Self Disciplinary Code adopted. The Board of Statutory Auditors deems the Report on corporate governance relating to the year 2007, approved by the Board of Directors on 18 March 2008, to be exhaustive, and has not observations to raise on the matter. Recently Bank of Italy issued (4 March 2008) the document entitled “Supervisory provisions concerning the organisation and corporate governance of banks”, which has already been submitted to preliminary examination by the competent bodies of the Parent Bank Credito Valtellinese so that all the measures required for its full assimilation at Group level can be duly planned. The Statutory Auditors will obviously supervise correct implementation of the guidelines provided by Bank of Italy on the matter.

• The Board of Statutory Auditors verified and confirmed correct application of the assessment criteria and procedures adopted by the Board of Directors to assess the independence of its members.

• On the matter of Market Abuse and Privileged Information the Company issued and implemented the “Credito Valtellinese’s Banking Group’s internal regulations relating to laws governing market abuse Legislative Decree 58/98 (Consolidated Financial Law)”, approved by the Boards of Directors of the Group banks affected by the legislation in question. This document provides systematic definition of the operating rules and procedures adopted by the Group to ensure Group compliance with the regulations governing the reporting of suspicious transactions.

• In compliance with legal provisions, the “Credito Valtellinese Banking Group’s internal procedures concerning Privileged Information, the register of persons having access to Privileged Information and the reports on the matter of Internal Dealing” have been drawn up and implemented at Group level.

• In 2005, the company formalised the “Organisational, management and control model” required by Legislative Decree 231/2001. Subsequently, the Supervisory and Control Body was formed pursuant to Article 6 of the aforesaid Legislative Decree 231/2001, which now carries out its assigned duties.

• During the year the model was adjusted and updated in order to take into account extension of the scope of reference of the aforesaid legislative decree ensuing from identification of new potential offences.

• During the year all the certifications for the services provided by Group Banks and Companies that have already obtained ISO 9001 standard certification, were renewed; Bancaperta obtained certification for the QWEB Mark e-commerce services; Aperta SGR embarked on the procedure for certification in accordance with the provisions of the ISO 9001 standards for the first time in 2007, proving the conformity of its specific operating processes. The certification body issued for the first time, “UNI EN ISO 9001:2000 Corporate Certification for the Credito Valtellinese Group” in order highlight the integration and consistency, throughout the various Group companies, of the quality system and the certified processes.

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Certification of all the PattiChiari protocols has also been confirmed; the only PattiChiari protocol that is still outstanding is no. IX “Financial investments compared” as the protocol and organisational measures must be reviewed and coordinated with the MiFID legislation that entered into force last November.

• During the year the Bank applied to the “Conciliatore Bancario” association, at system level, for the out-of-court settlement of disputes with customers as provided by Article 128 of the Consolidated Banking Law and Article 8 of Legislative Decree 253/2000.

• In compliance with the provisions of Bank of Italy and of the MiFID legislation, the “Group Compliance Function” has been set up with the duty of ensuring efficient and effective control of compliance with legislation and consequent risk control.

• The Company drew up, within the required terms, the quarterly reports and the half-year report as provided by Article 2428, sub-section 3, of the Italian Civil Code, in compliance with the obligations prescribed by legal provisions.

* * * Significant events occurring after year end On 21 February 2008 the Bank formalised the contract for acquisition of 35 branches of Intesa San Paolo for a consideration of EUR 395 million estimated on the basis of total deposits as at 31 December 2007 and to be defined in the final amount at the date of assignment of the branches. 20 March 2008 marked the conclusion of the transaction to increase the share capital of Credito Artigiano SpA approved by the Extraordinary Shareholders’ Meeting of 20 December 2007. The overall commitment of Credito Valtellinese was equal to 228.4 million and the investment held in the company’s share capital is equal to 69.7%. No other significant event affecting the company’s state of affairs occurred. * * * CONCLUSIONS Dear Shareholders, In view of the information provided above, the Board of Statutory Auditors can reasonably ensure you that, on the basis of the activity performed and the information gathered, it has found no reprehensible facts and/or irregularities or omissions requiring report to the Control Body or mention hereunder. The Statutory Auditors can therefore conclude that, through the supervisory and control activity performed during the year they were able to ascertain: − compliance with the Law and the Articles of Association; − observance of the principles of correct administration; − adequacy of the organisational structure and, as far as our authority permits, of the internal auditing

system and the accounting/administration system, as well as reliability of said system to correctly represent operational events;

− sound implementation of the corporate governance rules set forth in the Code of Conduct; − adequacy of the instructions provided by the Company to its subsidiaries pursuant to Article 114,

paragraph 2. * * * With regard to the individual Financial Statements and the Consolidated Financial Statements of the Credito Valtellinese Group as at 31 December 2007, it is stated that the Chairman of the Board of Directors and the Executive in charge of drawing up the company accounts, signed a special report, providing certification of the individual and consolidated financial statements as prescribed by Article 81-ter of CONSOB Regulations no. 11971 dated 14 May 1999 and subsequent amendments and integrations pursuant to Article 154-bis, sub-section 5 of the Consolidated Financial Law,. The certification confirms that obligations have been fully and regularly fulfilled, as required by law, and no problems or anomalies have been observed. The Independent Auditors Reconta Ernst & Young S.p.A., to whom the audit of the accounts and the financial statements was entrusted pursuant to Articles 155 and thereafter of Legislative Decree 58/1998, issued a positive opinion, without observations or objections, on the Financial Statements as well as the Consolidated Financial Statements. As far as its authority permits, the Board of Statutory Auditors verified, also through the information gathered, that the structural components comprising the Financial Statements and Consolidated Financial Statements as at 31 December 2007, fully reflect the general and specific regulations that govern their preparation and also found the information provided by the Directors in their respective Reports to be complete and adequate. The Board of Directors’ proposal for allocation of profit complies with provisions of the Law and of the Articles of Association.

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Considering the information set forth above, and referring to the opinion expressed by the Independent Auditors, as far as our authority permits, as no impediments have emerged, we propose that the Shareholders’ Meeting approves the Financial Statements as at 31 December 2007, and the allocation of profit for the year proposed by the Board of Directors. * * * As we have reached the end of our report we would like to draw attention to some important awards obtained by the Company and the Group: - The Credito Valtellinese Group was one of the finalists of the national “Financial Statements Oscar 2007” award, as in drawing up its financial statements it succeeded in placing a strong focus on its reference territory and public and in producing a very transparent and reader-friendly document.

- The Associazione Italiana Financial Innovation (AIFIN) named Creval as the most innovative intermediary in 2007; the Creval Group ranked first in the “Premio Cerchio d’Oro per l’Innovazione Finanziaria” award organised by AIFIN.

The Board of Statutory Auditors, expressing its congratulations for the aforesaid award, and for the activity performed and the results achieved during the year, also conveys its best wishes to the Bank for the important milestone of its centenary, and takes the opportunity to extend its appreciation to all those who, directly or indirectly, through their respective roles and responsibilities, contributed to the remarkable growth that has brought prestige to the reference territory and has also achieved widespread diffusion through other territorial units. Sondrio, 2 April 2008

THE BOARD OF STATUTORY AUDITORS (Roberto Campidori) (Angelo Garavaglia)

(Alfonso Rapella)

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REPORT ON CORPORATE GOVERNANCE

1. ISSUERS’ PROFILE Foreword Credito Valtellinese, a bank based in Sondrio and established in 1908, is the head of a banking group and a cooperative bank, listed on the Mercato Telematico Azionario (electronic equities market) organised and managed by Borsa Italiana S.p.A. (MTA). Its activity is founded on the principles of solidarity and it places a strong focus on guaranteeing improvement in the social/economic and cultural welfare of the reference territory. Credito Valtellinese stands out for its constant attention to the territory and to small-sized businesses. Its brand has long been present in the provinces of Sondrio, Lecco, Como, Bergamo and Verbania, and as at 31 December 2007 its territorial network totals 112 branches. The Credito Valtellinese Group carries on business in 6 regions - Lombardy, Piedmont, Veneto, Lazio, Tuscany and Sicily – with 389 branches. Since March 2000 Credito Valtellinese has adhered to the Self Disciplinary Code for Listed Companies as recommended by Borsa Italiana S.p.A. and, as from the Shareholders’ Meeting of 2001, has provided Shareholders with a report on the system of corporate governance adopted by our Company and on compliance with the aforesaid Code. During 2002, the Corporate Governance Committee set up at the Italian Stock Exchange, began review of the Self Disciplinary Code, taking into account the experiences of the listed companies during the Code’s two years of application and international developments in corporate best practices. In February 2003 the “guidelines for drawing up the corporate governance report” were also reviewed. Accordingly the Company took appropriate steps to ensure substantive compliance with the new provisions of the Code and to adjust the Board’s report to the Shareholders in accordance with the provisions of the new Guidelines, also taking into consideration the suggestions contained in the “Guide to the preparing the Report on Corporate Governance”, drawn up in February 2004 by Assonime, after having consulted Borsa Italiana. After almost a year’s work, in February 2006, the Corporate Governance Committee drew up the new Code, and in March of the same year Borsa Italiana issued the new edition, which replaced the one released in 1999 and reviewed in 2002. The new version of the Code takes into account developments in the principles and systems of governance observed on the market, as well as sector legislation, and places specific focus on the figures and roles of the independent director and of the internal committees within the Board, which over the years have expanded their content through practical experience. The new law on the protection of public savings also imposes the obligation on listed issuers to provide annual disclosure on compliance with codes of conduct recommended by companies managing regulated markets or trade associations and on observance of the commitments contained therein. The new law – assimilated in sub-section c-bis of Article 149 of the Consolidated Financial Law – states on the matter that the Board of Statutory Auditors supervises the procedures for sound implementation of the rules of corporate governance prescribed by codes of conduct drawn up by companies managing regulated markets or trade associations, with which the Company declares its compliance in reports to the public. In December 2006 the Board of Directors, after an in-depth analysis of the content of the Code, approved the Company’s adherence to the provisions contained therein, with the following specifications:

- the criterion that provides for appointment of a “lead independent director” does not apply as the Chairman of the Board of Directors is not in charge of corporate management;

- criterion 7.C.1 (Directors’ Remuneration) applies only partially, with exclusive reference to the members of General Management, whose salary package is linked to the achievement of budget targets;

- the recommendations pertaining to identification of an executive director (usually, one of the managing directors) entrusted with overseeing the functioning of the internal auditing system do not apply to the Company’s current governance system, as no Managing Director has been appointed.

With specific regard to the new principles and criteria concerning independent directors, it was deemed advisable to gradually assimilate the new criterion according to which, in the absence of a Managing Director, the members of the Executive Committee must consider themselves “executive”. The Board of Directors then implemented a series of steps to progressively adjust the governance structure to the provisions of the Code.

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This report has been drawn up in compliance with the “Experimental format for the report on corporate governance”, drawn up by Borsa Italiana and available to issuers in March 2008. This format – which has not been imposed by Borsa Italiana, as it does not integrate the “criteria” for drawing up the corporate governance report referred to in Article 89-bis of the Issuers’ Regulations – takes account of the following criteria and principles:

- firstly, it highlights the information required to ensure thorough compliance with legal obligations, taking into specific account the fact that Article 89-bis of the Issuers’ Regulations requests analytic information, specified point by point, on compliance with the code of conduct to which the company adheres;

- it also includes information that it is advisable to provide to ensure extensive transparency towards the market, even if it is not mandatory for the purposes of legal obligations;

- it also includes information required by other legislation, with specific regard to Article 123-bis of the Consolidated Financial Law introduced by the legislative decree to assimilate the Thirteenth Directive, Article 144-decies of the Issuers’ Regulations and Article 37 of the Markets Regulations.

The report provides a detailed examination of the corporate governance structure of Credito Valtellinese with specific reference to the following aspects:

- Issuer’s profile; - Information on the ownership structure; - Compliance; - Activity of direction and coordination; - Board of Directors; - Treatment of corporate information; - Committees within the Board; - Appointments Committee; - Remuneration Committee; - Directors’ Remuneration; - Internal Auditing Committee; - Internal auditing system; - Directors’ interests and transactions with related parties; - Appointment of Statutory Auditors; - Statutory Auditors; - Relations with shareholders; - Shareholders’ Meetings; - Changes since closure of the reference year.

2. INFORMATION ON THE OWNERSHIP STRUCTURE (PURSUANT TO ARTICLE 123 BIS CONSOLIDATED FINANCIAL LAW) AS AT 31 DECEMBER 2007

A) Share capital structure As at 31 December 2007 the share capital of Credito Valtellinese – made up of ordinary shares only – is equal to EUR 562,060,674, divided into 160,588,764 shares each with a par value of EUR 3.50. The right to receive the dividend and the related amount are decided by the Shareholders’ Meeting, as provided by Article 55 of the Articles of Association. The shares entitle to equal rights, with regard to both profit sharing and the distribution of residual assets in the case of wind-up of the Bank. The dividends on shares become statute barred five years after the period specified for payment and the amount of said dividends is transferred to the legal reserve, as provided by Article 56 of the Articles of Association. The period of exercise relating to the 21,397,572 2008 warrants arising from the share capital increase transaction approved by the Extraordinary Shareholders’ Meeting on 10 April 2007 will begin on 1 April. These financial instruments will allow subscription of ordinary shares of the Company, until 30 April 2008, at a ratio of 1 Conversion Share for each 2008 Warrant held and presented for exercise, in accordance with the terms and conditions set forth in the related Regulations. b) Limitations to share transfer

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Shares are registered, freely transferable and indivisible. There are no limitations or restrictions to the free transferability of shares. The limits to share ownership are those established at a general level by the law and by the Articles of Association. Specifically, given that Credito Valtellinese is a cooperative company, Article 30, sub-section 2 of the Consolidated Banking Law provides that no-one may hold shares in excess of 0.50 percent of the share capital. This prohibition does not apply to undertakings for collective investment in securities, for which the limits prescribed by the regulations of each one apply. c) Significant shareholdings As at 31 December 2007 no subject holds a direct or indirect interest exceeding 2% of the subscribed share capital. d) Securities that entitle to special rights No securities entitling to special controlling rights have been issued. e) Employee shareholding: mechanism for exercise of the voting rights No provision has been made for employee shareholding systems. f) Restrictions to the voting right There is no restriction to the voting right. g) Shareholders’ agreements The Board of Directors is not aware of the existence of agreements between shareholders as referred to in Article 122 of the Consolidated Financial Law. h) Appointment and replacement of directors and amendments to the Articles of Association The Board of Directors is appointed by the Shareholders’ Meeting on the basis of lists submitted by Shareholders, in accordance with the procedure prescribed by Article 32 of the Articles of Association. Pursuant to the aforesaid article and in compliance with Application Criterion 6.C.1 of the Code, the lists for appointment of Directors must be filed at the registered office at least fifteen days prior to the date set for the Shareholders’ Meeting in first call. Together with each list, and within the deadline for the filing of said lists, the professional curriculum of each candidate and the statements by which each candidate accepts nomination, certifies under his own responsibility the inexistence of causes of ineligibility and of incompatibility, as well as the existence of the requisites prescribed by laws in force and by these Articles of Association for holding the office of Director, must be filed under penalty of ineligibility. The candidates declare whether they are “independent” pursuant to the Self Disciplinary Code of Listed Companies adopted by the Company, and whether they possess the requisites of independence provided by Article 148, sub-section 3, of Legislative Decree no. 58, dated 24 February 1998. Each list must be signed by one or more shareholders who together hold, at the date on which the list is submitted, an interest of no less than 0.3% in the share capital, or by at least 500 shareholders irrespective of the interest that they hold in the share capital. Each shareholder may contribute to submitting one list only and, in the case of failure to comply, his signature will not be counted for any of the lists; each candidate must appear on one list only, under penalty of ineligibility. The signature of each submitting shareholder must be duly authenticated pursuant to law or by one or more Executives or Managers of the Company or of Group companies specially delegated by the Board of Directors. Lists that are not submitted in accordance with the terms and conditions prescribed by the provisions of the Articles of Association, and by prevailing laws, will not be admitted to voting. Each shareholder may vote for one list only. Election to the office of Director occurs as follows:

– from the list that obtained the majority of votes cast a number of directors equal to the number established by Shareholders’ Meeting less one will be taken in the numerical order in which they appear on the list;

– from the list that, among the remaining lists, obtained the highest number of votes and meets the requisites required by law, the candidate indicated at the top of list will be elected to the office of director.

If only one list is submitted, or only one listed is admitted, all the Directors will be taken from this list.

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In the event that no list is submitted, the Directors will be appointed by Shareholders’ Meeting with relative majority vote and in accordance with the provisions of the Shareholders’ Meeting Regulations, from amongst the candidates that have been presented by the Board of Directors or by the other shareholders at least 7 days prior to the date set for the Meeting in first call, with observance of the obligation to file the documentation referred to above. In the event that only one list achieves the percentage required, or only one list is submitted or admitted, all the members of the Board of Directors will be taken from said list. In the event that no list achieves the percentage referred to in paragraph 9, all the members of the Board of Directors will be taken from the list that obtained the highest number of votes. The Board of Directors will be responsible for replacement of Directors, which will occur by cooptation pursuant to Article 2386 of the Italian Civil Code and for subsequent appointment through Shareholders’ Meeting without recourse to list vote, in accordance with the criteria established by the combined provisions of Articles 33 and 32 of the Articles of Association. There are no regulations for amendment of the Articles of Association other than those applicable pursuant to law. i) Delegation of authority to increase share capital and to purchase treasury shares As at today’s date no authority to increase share capital pursuant to Article 2443 of the Italian Civil Code or to issue financial instruments has been delegated to the Board of Directors. With regard to transactions performed on treasury shares the Ordinary Shareholders’ Meeting held on 21 April 2007 renewed the annual authorisation to the Board of Directors, in compliance with Article 12 of the Articles of Association, to perform transactions to purchase treasury shares and to replace or cancel said shares, in compliance with prevailing laws (Article 2357 and thereafter and Article 2529 of the Italian Civil Code; Article 132 of Italian Legislative Decree 58 dated 24 February 1998 and subsequent amendments) and regulations (Article 144-bis, CONSOB Resolution 11971/99 and subsequent amendments). The authorisation to conclude this type of transaction aims to promote circulation of securities within standard brokerage activities. The transactions must be performed in accordance with the procedures and limits set forth below:

– without prejudice to Article 132, sub-section 3 of Legislative Decree 58/98, purchase and sale transactions involving treasury shares – ordinary Credito Valtellinese shares – must be performed on regulated markets in accordance with the operating procedures established in the organisation and management regulations of such markets, which do not allow direct matching of purchase orders with predetermined sales orders;

– said transactions may take place, through a number of transactions performed between this Shareholders’ Meeting and the next Shareholders' Meeting called to approve the 2007 financial statements;

– the purchase of treasury shares will involve a maximum of 4,000,000 shares for a maximum countervalue of EUR 50,000,000.00;

– the total treasury shares traded per month may not exceed 25% of the average monthly total of shares traded in the previous half-year;

– the number of treasury shares held in the portfolio may not however exceed 3% (three percent) of the total shares making up the share capital;

– share purchases must be concluded at a price no higher than the maximum official closing price indicated by the Italian Stock Exchange immediately prior to each transaction, and no lower than the minimum par value of the share;

– the sale of treasury shares must be executed at a price no lower than the official closing price indicated by the Italian Stock Exchange immediately prior to each sale transaction;

– upon purchase of treasury shares a special treasury shares reserve will be established pursuant to Article 2357-ter of the Italian Civil Code;

– any cancellation of treasury shares must occur in accordance with the Articles of Association and current law, with use of the treasury shares reserve to cover any difference between par value and purchase price;

– in addition to the reporting obligations specified by prevailing laws, a monthly status report will be issued to the market with regard to the treasury shares purchase programme".

The Shareholders Meeting, to convene on 18 and 19 April 2008, will be called to pass similar resolution with substantially the same terms as the authorisation granted by the Shareholders’ Meeting of 2007.

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l) Change of control clauses The Board of Directors is not aware of agreements that will become effective, be amended or discharged, in the case of change of control of the company. m) Indemnity for directors in the event of resignation, dismissal or termination of the relationship following public purchase offer There are no agreements between the Company and the Directors that provide for indemnity in the case of resignation or dismissal/removal without just cause or if the employment relationship terminates following public purchase offer. 3. COMPLIANCE The Company has adopted the Self Disciplinary Code for Listed Companies approved in March 2006 by the Corporate Governance Committee and promoted by Borsa Italiana S.p.A.. The Company is not subject to the provisions of non-Italian laws that influence the corporate governance structure.

4. ACTIVITY OF DIRECTION AND COORDINATION

Credito Valtellinese, in its capacity as Parent Bank of the Credito Valtellinese Banking Group, exercises activity of direction and coordination pursuant to Article 2497 of the Italian Civil Code over member companies of the aforesaid banking group. 5. BOARD OF DIRECTORS

5.1. Composition The current Board of Directors was appointed by Ordinary Shareholders’ Meeting on 21 April 2007 for the three year period 2007-2009 and the mandate will expire with the Shareholders’ Meeting called to approve the financial statements as at 31 December 2009. At the time the lists were filed, only one list was submitted which included the current board members, with the exception of Aldo Fumagalli Romario who was appointed by the Board of Directors on 11 December 2007 pursuant to Article 2386 of the Italian Civil Code to replace the Director Franco Bettini, who left office following resignation. The table below provides a breakdown of the Board in office as at 31 December 2007, accompanied by the following information:

– date of the ordinary shareholders’ meeting in which appointment was made; – expiry of the Director’s mandate; – personal and professional characteristics of each Director.

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Name Position In office since Expiry List Exec.

Non exec.

Indep. Indep. CFL

% BoD

Other offices

DE CENSI GIOVANNI

C 21/4/2007 31/12/2009 X

100 4

ZUCCOLI GIULIANO

VC 21/4/2007 31/12/2009 X 76 3

BRESESTI FABIO

D 21/4/2007 31/12/2009 X X 100 -

COGLIATI GABRIELE

D 21/4/2007 31/12/2009 X X 94 1

COLOMBO MICHELE

D

21/4/2007 31/12/2009

X X

53 -

CONTINELLA GIOVANNI

D 21/4/2007 31/12/2009 X 100 -

COTELLI MARIO

D 21/4/2007 31/12/2009 X 100 2

DE SANTIS PAOLO

D 21/4/2007 31/12/2009 X X 75 -

FUMAGALLI ROMARIO ALDO

D 11/12/2007 31/12/2007

X X

100 3

MORO FRANCO D 21/4/2007 31/12/2009 X X 100 - PALMA ANGELO D 21/4/2007 31/12/2009 X 88 5 PASQUA VALTER

D 21/4/2007 31/12/2009 X X 100 1

QUADRIO MAURIZIO

D 21/4/2007 31/12/2009 X X 76 -

RIBOLLA ALBERTO

D 21/4/2007 31/12/2009 X X 82 -

VALASSI VICO D 21/4/2007 31/12/2009 X X 59 - KEY Position: C = Chairman, VC = Vice Chairman, D = Director, GM = General Manager List: M/m according to whether the director was elected from the list voted by the majority or by a minority (Article 144-decies, of CONSOB Issuers’ Regulations) Exec.: the director indicated qualifies as executive Non exec.: the director indicated qualifies as non-executive Indep.: the director indicated qualifies as independent according to the criteria established by the Code, specifying at the foot of the table if said criteria have been integrated or amended (see Section 5.5 of this report)) Indep. CFL: the director meets the requisites of independence established by Article 148, sub-section 3 of the Consolidated Financial Law (Article 144-decies, of CONSOB Issuers’ Regulations) % BoD: attendance, in percentage terms, of the director at Board meetings Other offices: total number of offices held in other companies listed in regulated markets (including foreign markets), in financial, banking, insurance or large-sized companies. The list of these companies with reference to each director – with specification of whether the company in which the office is held is a member of the Credito Valtellinese banking group – is attached to this Report.

1. Giovanni De Censi: a graduate in Political Science, he has a long professional experience in Credito Valtellinese, which he joined in 1958, performing various managerial roles until he was appointed Chairman of the Board of Directors on 26 April 2003.

2. Giuliano Zuccoli: a graduate in Engineering, he began his professional activity in the Falck Group,

holding the position of General Manager in Falck Nastri S.p.A.. He is currently Chairman of the Board of Directors of A2A S.p.A., Chairman of Edison S.p.A. and Managing Director of Transalpina di Energia S.r.l..

3. Fabio Bresesti: a certified electro-mechanical expert, he founded the company Effe.Bi S.r.l.,

specialising in the construction of equipment for the treatment of air for plants installed on ships, oil platforms, incinerators, trade fairs and civil constructions. Since 2004 he has been Chairman of the Sondrio Union of Small Businesses.

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4. Gabriele Cogliati: a certified industrial export, he is the owner of companies working in the electronic components industry. Specifically, he is founder and Chairman of the Board of Directors of Elemaster S.p.A. – Electronic Technologies, Chairman of Elesystem S.r.l. – Electronic Components, and Director of several companies in the high technology sector.

5. Michele Colombo: a graduate in Business Administration from the University of California, Los

Angeles (U.C.L.A.), he is founder and Chairman of the Board of Directors of Colombo Design S.p.A..

6. Giovanni Continella: a graduate in Agricultural Science, he has been an ordinary professor since 1993, first at the faculty of Agriculture of the University of Reggio Calabria, then at the University of Catania.

7. Mario Cotelli: a graduate in Economics and Commerce, he fulfilled managerial roles in the national

skiing teams and in the International Ski Federation from 1970 to 1979.

8. Paolo De Santis: a graduate in Economic and Social Subjects, he is an entrepreneur in the tourism/hotel sector in the Como area. He currently holds the office of Chairman of the Como Chamber of Commerce.

9. Aldo Fumagalli Romario: a graduate in Engineering, he is Chairman and Managing Director of the

SOL Group, an Italian-based multinational group, listed on the Italian Stock Exchange since 1998, which operates in the industrial and medicinal gas production and distribution industry and in that of home medical assistance.

10. Franco Moro: a certified accountant, he is Chairman and Managing Director of the company

Bresaole Del Zoppo S.r.l. and of Pastificio di Chiavenna S.r.l..

11. Angelo Palma: a graduate in Economics and Commerce, he works as a Chartered Accountant and Auditor; he is a professor in Corporate Economics at the faculty of Banking and Insurance Sciences at the Università Cattolica of Milan.

12. Valter Pasqua: a graduate in Engineering, he gained considerable professional and managerial

experience in the ENI Group (1975-1995). He is also professor of the course “high technology industrial planning” at the faculty of electronic engineering of the Università degli Studi of Rome.

13. Maurizio Quadrio: a graduate in Political Economics, he is a Chartered Accountant and is enrolled

in the Register of Auditors, he currently holds the office of Chairman of the Board of Directors and Technical Director of Quadrio Gaetano Costruzioni S.p.A.

14. Alberto Ribolla: a graduate in Engineering, Managing Director of Sices S.p.A., a company working

in the industrial plant sector and Parent Company of the Sices Group. He is Chairman of the Industrial Union of the Province of Varese and member of the Confindustria Council.

15. Vico Valassi: a graduate in Engineering, he is owner of a construction company Valassi Carlo S.r.l..

He has been Chairman of the Chamber of Commerce of Lecco since 1993, and Director of the National Research Centre. Between 1994 and 2000 he also held the office of Chairman of the National Building Constructors Association of Confindustria.

All the members of the Board of Directors meet the requisites of professionalism provided for the office by the prevailing Supervisory Instructions for banks.

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NAME EC % EC A.C.

% A.C. R.C.

% R.C. I.A.C.

% I.A.C.

GIOVANNI DE CENSI C 75 GIULIANO ZUCCOLI M 67 FABIO BRESESTI M 100 GABRIELE COGLIATI M 92 MICHELE COLOMBO M 100 GIOVANNI CONTINELLA C 100 MARIO COTELLI M 100 C 100 PAOLO DE SANTIS M 100 FRANCO MORO M 92 M 100 MAURIZIO QUADRIO C 88 VALTER PASQUA M 100 M 88 ALBERTO RIBOLLA M 100 KEY EC: executive committee; C = chairman M = member of the executive committee. % EC: attendance, in percentage terms, of the director at executive committee meetings A.C.: appointments committee; C = chairman M = member of the appointments committee % A.C.: attendance, in percentage terms, of the director at appointments committee meetings R. C.: remuneration committee; C = chairman M = member of the remuneration committee % R.C.: attendance, in percentage terms, of the director at remuneration committee meetings I.A.C.: internal auditing committee; C = chairman M = member of the internal auditing committee %. I.A.C.: attendance, in percentage terms, of the director at internal auditing committee meetings It is reminded that Director Franco Bettini left the office of Director on 30 October 2007. He was also member of the Internal Auditing Committee. From 31 December 2007 to the date of this report there has been no change in the composition of the Board of Directors. Maximum number of offices that may be held in other companies The Board of Directors passed a resolution during 2007 to launch a project to define precise criteria on the maximum number of offices of administration and control in other companies that may be considered compatible with effective performance of the role of director in accordance with the Application Criterion 1.C.1. As a general rule, the offices held in companies of the Credito Valtellinese Banking Group, in companies subject to joint control or associated with the Credito Valtellinese Banking Group will not be included in the calculation of offices for the purposes of application of the aforesaid Criterion, and differentiation will be made between the maximum number of offices of Executive Director and Non-Executive/Independent Director. 5.2. Role of the Board of Directors Article 40 of the Articles of Association provides that an ordinary meeting of the Board of Directors is called each month. During 2007 the Board of Directors held 17 meetings. The average length of the meetings was approximately four hours and 30 minutes. The average attendance of Directors during 2007 was equal to approximately 86%. For the year underway 14 meetings have been scheduled, of which 3 have already been held at the date of approval of this Report. Directors are provided with documentation pertaining to the business on the agenda of board meetings, so that they can deliberate in an informed manner, transmitted also through online connection systems, equipped with suitable security measures aimed at guaranteeing confidentiality. Furthermore, in order to widen knowledge of corporate dynamics and group strategic policies special meetings are set up to which members of the governance bodies of all the group companies are invited. Directors are kept constantly

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informed of laws and provisions for implementation issued by the Supervisory Bodies (Application criterion 2.C.2.). The Board of Directors has exclusive authority for examination and approval (Application criterion 1.C.1., letter a) of strategic, industrial and financial plans as well as of the system of corporate governance. The Board assesses the adequacy of the organisational, administration and general accounting structure of the company, with particular regard to the internal auditing system and to the management of conflicts of interest (Application criterion 1.C.1., letter b). The Bank’s Board of Directors constantly exercises careful control over the strategic development of the various business divisions, with specific regard to risk control, constant management control, aimed at ensuring the maintenance of conditions of equilibrium with regard to technical/management profitability profiles, capitalisation and liquidity and operational control aimed at assessing the various types of risk to which corporate operations are exposed, which is mainly the responsibility of risk management. The Board of Directors approves the Bank’s strategic guidelines, risk management policies and organisational structure; it ensures that a correct, complete and punctual information system is defined; it periodically assesses the functioning, efficiency and effectiveness of the internal auditing system; if shortcomings or anomalies are found, it adopts suitable and timely corrective measures. The Board of Directors attributes and revokes the powers of attorney to the Executive Committee, defining the limits and procedures for exercise. The Board of Directors also delegates specific powers for management of current operations, according to rank and for decreasing limits of amount, to members of the General Management, Executives or other Employees of the Company or of Companies of the Credito Valtellinese Banking Group in relation to the functions performed. The Board of Directors is informed of the decisions taken by the delegated bodies, as provided by the Articles of Association (Application criterion 1.C.1., letter c). After examining the proposals submitted by the special committee, and with the favourable opinion of the Board of Statutory Auditors, the Board establishes the remuneration of directors who hold specific offices (Application criterion 1.C.1., letter d). The Board assesses, usually during each meeting, the operating results for the period of the Bank and the Group, comparing the results achieved with those forecast (Application criterion 1.C.1., letter e). Pursuant to law and the Articles of Association, the Board of Directors has exclusive authority for the examination and approval of transactions that have significant importance in strategic, economic, equity or financial terms for the company, as well as transactions in which one or more directors hold a direct or third party interest, or all transactions implemented with related parties (Application criterion 1.C.1., letter f). The Board carries out an annual assessment of the size, composition and functioning of the board itself and of its committees, possibly recommending the inclusion of appropriate professional figures within the board (Application criterion 1.C.1., letter g). In the meeting held on 11 December 2007, the Board of Directors – having consulted the Appointments Committee – expressed an opinion on the adequacy in terms of size, composition and functioning of the Board, also considering the specific competences and the experience and knowledge of the current Directors. The Board of Directors deemed that on the whole the composition of the Board was suitably structured, as it can count on diversified and specialist professional experience and competences such as to ensure competent opinions and views on matters relating to corporate management and matters of a financial, accounting and legal nature. No general and preventive authorisation has been granted by the Shareholders’ Meeting to derogate the non-competition clause provided by Article 2390 of the Italian Civil Code (Application criterion 1.C.4.). The Ordinary Shareholders’ Meeting to convene on 18 and 19 April 2008, will be called to appoint a member of the Board of Directors pursuant to Article 2386, subject to authorisation pursuant to Article 2390 of the Italian Civil Code.

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5.3. Delegated bodies The Board of Directors has not appointed a Managing Director. Chairman The Chairman has not been assigned management powers with specific regard to the drawing up of corporate strategies (Application criterion 2.C.1.). Pursuant to the Articles of Association, the Chairman may adopt – upon proposal of the General Manager and in circumstances of absolute urgency – measures pertaining to credit lines and current management, that should lie with the Board of Directors and the Executive Committee, with the obligation to report these decisions to the Board in the next meeting (Principle 2.P.5.). Executive Committee During 2007 the Executive Committee held 12 meetings. The average length of meetings was just under three hours. The Members attended assiduously: the percentage attendance of meetings was equal to 89%. For the year underway 12 meetings have been scheduled, of which 3 have already been held at the date of approval of this Report. The Executive Committee is exclusively assigned powers pertaining to credit lines – up to a maximum amount of EUR 15 million for each proposal – and current operations. The Board of Directors is informed of resolutions passed by the Executive Committee in the next meeting, usually on a monthly basis. 5.4. Other executive directors In the meeting held in December 2006, the Board of Directors approved compliance with almost all the specifications of the Self Disciplinary Code for Listed Companies. With particular regard to the new principles and criteria concerning independent directors, while compliance has been approved, it has been deemed advisable to gradually assimilate the new criterion according to which, in the absence of a Managing Director, the members of the Executive Committee must consider themselves “executive”. In the Board meeting held on 21 April 2007 after the Shareholders’ Meeting, the Board reiterated the importance of gradual introduction of the aforesaid criterion, which will be applied in full when the Board is next renewed. According to the criteria of the Code (Application criterion 2.C.) the following members of the Executive Committee - Giovanni De Censi, Giuliano Zuccoli and Mario Cotelli – qualify as “executive” Directors. 5.5. Independent Directors In the meeting held on 21 April 2007 after the Shareholders’ Meeting the Board of Directors assessed the existence of the requisites of independence, prescribed by the Code, that must be met by the non-executive directors, Fabio Bresesti, Gabriele Cogliati, Michele Colombo, Paolo De Santis, Franco Moro, Valter Pasqua, Maurizio Quadrio, Alberto Ribolla and Vico Valassi (Application criterion 3.C.4.). The newly appointed Aldo Fumagalli Romario was included among the above independent directors on 11 December 2007. The Board also verified with positive outcome that the aforesaid independent Directors have maintained the requisites of independence (Application criterion 3.C.4.). In performing said assessments the Board of Directors applied all the criteria prescribed by the Code (Application criteria 3.C.1. and 3.C.2.), with particular regard to the substance of the provisions over their form.

436

The Board of Statutory Auditors verified without observations the application of the assessment criteria adopted by the Board of Directors in assessing the independence of its members (Application criterion 3.C.5). The independent directors do not see the need to call a meeting without the presence of the other Directors (Application criterion 3.C.6).

5.6. Lead independent director

Application criterion 2.C.3. has not been applied, as the Chairman of the Board of Directors is not the person in charge of management of the Issuer (chief executive officer) and does not control the company. 6. TREATMENT OF CORPORATE INFORMATION The Board of Directors has approved adoption of a special “INTERNAL PROCEDURE FOR THE MANAGEMENT AND DISCLOSURE TO THE MARKET OF INFORMATION OF A PRIVILEGED NATURE AND INTERNAL DEALING”, which governs – among other things – the communication of privileged information outside the company, or of information destined for disclosure at the time of important corporate events. The procedure provides that the contents of said information must be subject to preventive validation by top management and that the press releases issued pursuant to the specific provisions of the Consolidated Financial Law and CONSOB Regulations 11971/1999 are generally approved by the same Board of Directors that also authorised disclosure (Application criterion 4.C.1.). 7. COMMITTEES WITHIN THE BOARD The Board of Directors has set up three sub-Committees prescribed by the Code. 8. APPOINTMENTS COMMITTEE The Board of Directors has set up an Appointments Committee (Principle 6.P.2.), which provides an assessment of the personal and professional characteristics that should be met by the candidates to be proposed for appointment as member of the Board, also in consideration of the offices that they could be called to fulfil, and taking into account any specifications received, it submits a proposal to the Board on the candidates considered (Application criterion 6.C.2., letter a) and b). The Committee is also responsible for providing opinions to the Board of Directors, for the purpose of annual assessment of the size and composition of the Board, and on the professional figures that should be present within the Board (Application criterion 6.C.2., letter c). The Committee is made up of three members appointed from amongst the members of the Board of Directors upon proposal of the Chairman and for the most part chosen amongst the independent Directors (Principle 6.P.2.). During 2007 the Appointments Committee met twice, to assess the candidates to be proposed in the list to be submitted to the 2007 Shareholders’ Meeting, and for the annual verification of the size and composition of the Board of Directors. At this meeting the members of the Committee did not deem the participation of other subjects to be necessary (Application criterion 5.C.1., letter f). Minutes of the meetings were drawn up (Application criterion 5.C.1., letter d). In performing its functions, the Appointments Committee was allowed access to the information and to the corporate functions required for performance of its duties, while it did not deem the engagement of external consultants to be necessary (Application criterion 5.C.1., letter e). In order to provide the Committee with adequate financial resources for the correct performance of the assigned functions, a special cost item has been set up in the corporate budget (Application criterion 5.C.1., letter e).

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9. REMUNERATION COMMITTEE

The Board of Directors has set up a Remuneration Committee (Principle 7.P.3.), which provides advice and submits proposals on the matter of remuneration of the Directors holding specific offices. For this purpose, it may also engage external consultants at the Company’s expense. The Committee also periodically assesses the criteria adopted for remuneration of Top Management, oversees their application and submits general recommendations on the matter to the Board of Directors (Application criterion 7.C.3.). During 2007, the Committee met twice, to draw up proposals on remuneration of the Directors entrusted with specific offices, as well as on the criteria for determination of the remuneration of members of General Management. These meetings were not attended by other subjects (Application criterion 5.C.1., letter f). Minutes of the meetings were drawn up (Application criterion 5.C.1., letter d). In 2007 the Remuneration Committee was made up of three non-executive Directors (Application criterion 5.C.1., letter a), the majority of whom were independent (Principle 7.P.3.). The Directors abstain from attending meetings of the Committee in which proposals to the Board relating to their own remuneration are being drawn up (Application criterion 7.C.4.). In performing its functions, the Remuneration Committee was allowed access to the information and to the corporate functions required for performance of its duties, while it did not deem the engagement of external consultants to be necessary (Application criterion 5.C.1., letter e). In order to provide the Committee with adequate financial resources for the correct performance of the assigned functions, a special cost item has been set up in the corporate budget (Application criterion 5.C.1., letter e). 10. DIRECTORS’ REMUNERATION

Criterion 7.C.1 (Directors’ Remuneration) has been partially applied, with exclusive reference to the members of General Management, whose salary package is linked to the achievement of budget targets. No provision has been made for share-based incentive plans in favour of executive directors or even executive with strategic responsibilities. The remuneration of non-executive Directors is not in any way linked to the economic results achieved by the company and consists exclusively of the fees established by the Shareholders’ Meeting at the time of their appointment for the full duration of the three-year term of office (Application criterion 7.C.2.). Non-executive Directors are not the beneficiaries of share-based incentive plans (Application criterion 7.C.2.). Pursuant to Article 78 of CONSOB Regulations 11971/1999 – “Issuers’ Regulations” – details are provided of the fees paid to members of the administration and control bodies, to general managers and to executives with strategic responsibilities. The fees paid to executives with strategic responsibilities are specified on an aggregate basis.

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Pursuant to CONSOB Resolution no. 11971 of 14 May 1999 as amended, details of fees paid are provided below.(in thousands of EUR)

INDIVIDUAL

Name and surname Office Expiry of office

Giovanni De Censi D* 12 months Approval of 2009 financial statements 1.164

from Credito Artigiano S.p.A. 95 C

Renato Bartesaghi D 4 months Approval of 2006 financial statements 463

from Bankadati Servizi Informatici S.p.A. 250 C

Salvatore Vitali D* 4 months Approval of 2006 financial statements 37

from Mediocreval S.p.A. 35 CFranco Bettini D 10 months 30/10/2007 41 from Stelline Servizi Immobiliari S.p.A. 27 C

Mario Cotelli D* 12 months Approval of 2009 financial statements 104

from Credito Siciliano S.p.A. 26 C from Banca dell'Artigianato e dell'Industria S.p.A. 9 C

Fabio Bresesti D* 8 months Approval of 2009 financial statements 39

Paolo De Santis D 8 months Approval of 2009 financial statements 32

Franco Moro D* 12 months Approval of 2009 financial statements 60

Michele Colombo D 12 months Approval of 2009 financial statements 42

Giovanni Continella D 12 months Approval of 2009 financial statements 47

Marco Santi D 4 months Approval of 2009 financial statements 13

Giuliano Zuccoli D* 12 months Approval of 2009 financial statements 171

Angelo Maria Palma D 12 months Approval of 2009 financial statements 58

from Credito Artigiano S.p.A. 327 C from Credito Piemontese S.p.A. 15 C

Maurizio Quadrio D 12 months Approval of 2009 financial statements 52

Alberto Ribolla D 12 months Approval of 2009 financial statements 48

Vico Valassi D 8 months Approval of 2009 financial statements 31

Gabriele Cogliati D* 12 months Approval of 2009 financial statements 53

from Bankadati Servizi Informatici S.p.A. 4 C

Valter Pasqua D 12 months Approval of 2009 financial statements 57

from Credito Artigiano S.p.A. 8 C

Roberto Campidori S 12 months Approval of 2009 financial statements 123

from Credito Artigiano S.p.A. 16 C

Aldo Cottica S 12 months Approval of 2009 financial statements 1

from Stelline Servizi Immobiliari S.p.A. 8 C from Bankadati Servizi Informatici S.p.A. 2 C from Deltas S.p.A. 11 C

Alfonso Rapella S 12 months Approval of 2009 financial statements 77

Angelo Garavaglia S 12 months Approval of 2009 financial statements 83

from Credito Siciliano S.p.A. 46 C from Mediocreval S.p.A. 13 C

Gabriele Villa S 12 months Approval of 2009 financial statements 1

from Credito Artigiano S.p.A. 55 CMiro Fiordi GM 5 F 794 E from Credito Artigiano S.p.A. 6 C from Credito Siciliano S.p.A. 67 C from Bancaperta S.p.A. 98 C

Strategic executives VGM 10 F 1,036 E

* = member of the Executive Committee** C = company directors' or auditors' fees paid by subsidiaries P = other professional fees E = other remuneration as employee (annual figure) F = fringe benefitsKEY: (D) DIRECTOR (S) STATUTORY AUDITOR (MG) MANAGING DIRECTOR (VMG) VICE MANAGING DIRECTOR

DESCRIPTION FEES

Remuneration for company

officeNon-monetary

benefits

Bonuses and other

incentives

Other fees **Period of office

11. INTERNAL AUDITING COMMITTEE The Board of Directors has set up an Internal Auditing Committee (Principle 8.P.4.). The Committee provides advice and submits proposals to the Board of Directors on the matter of internal auditing (Application criterion 8.C.1.). To this end, the Committee provides opinions on: a) adequacy of the internal auditing system (Application criterion 8.C.3., letter b);

439

b) work schedule drawn up by the internal auditing officers and periodic reports provided by said officers (Application criterion 8.C.3., letter c);

c) proposals drawn up by the independent auditors for the purpose of obtaining the related assignment, work schedule prepared for the audit and results set out in the report and in the letter of recommendations (Application criterion 8.C.3., letter d);

d) approval of financial statements and half-year reports; e) adequacy of the accounting standards used and their consistency for the purpose of drawing up the

consolidated financial statements (Application criterion 8.C.3., letter a); f) procedures for approval and execution of the transactions performed by the issuer, or by its subsidiaries,

with related parties. The Chairman of the Committee or other member designated by the Chairman reports to the Board of Directors at least once every six months on the activity performed and on the adequacy of the internal auditing system (Application criterion 8.C.3., letter g). During 2007 the Committee met nine times. Minutes of the meetings were drawn up (Application criterion 5.C.1., letter d). Pursuant to related Regulations, the Chairman of the Board of Statutory Auditors or other Statutory Auditor designed by the Chairman attended Committee meetings. The Executive in charge of drawing up company accounts was also invited to attend the Committee meetings when the items set forth in points c), d) and e) were being discussed, (Application criterion 5.C.1., letter f). The Internal Auditing Committee is currently made up of three non-executive Directors, all of whom independent (Principle 8.P.4 - Application criterion 5.C.1., letter a). The Chairman of the Internal Auditing Committee has suitable experience in accounting and financial matters, ascertained by the Board at the time of his appointment (Principle 8.P.4.). In performing its functions, the Internal Auditing Committee mainly availed of the corporate and Group functions in charge of internal auditing and did not deem the engagement of external consultants to be necessary (Application criterion 5.C.1., letter e). In order to provide the Committee with adequate financial resources for the correct performance of its functions, a special cost item has been set up in the corporate budget (Application criterion 5.C.1., letter e). 12. INTERNAL AUDITING SYSTEM

Given its fundamental importance to Group management, considerable focus is placed on the implementation of an effective Internal Auditing System, adjusted to comply with recent developments in legislation, changes in the market context and the entrance into new business areas. As a general rule, the Board of Directors believes that Bank’s competitiveness, its medium and long term stability and the principles of sound and prudent management cannot be furthered without a solid and efficient Internal Auditing System. In accordance with the Supervisory Instructions applicable to banks and banking groups, the Internal Auditing System is understood to be a series of rules, procedures and organisational structures that aim to ensure compliance with corporate strategies and achievement of the following goals:

- effective and efficient corporate processes; - safeguarding the value of assets and protecting against losses; - reliability and completeness of accounting and management information; - transactions that comply with the law, with supervisory regulations and with internal policies,

plans, regulations and procedures. As part of the unitary management activities provided for the banking Group, the Bank constantly performs:

- control over the strategic development of the various areas of business in which the Group operates, with particular focus on the risks assumed by the various subsidiaries;

- management control, aimed at ensuring maintenance of the conditions of equilibrium with regard to the technical/operational profiles of profitability, capitalisation and liquidity of the individual companies as well as of the Group as a whole;

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- operational control aimed at assessing the various risk profiles of the individual subsidiaries, which is mainly the responsibility of risk management.

In view of the Bank’s control responsibilities, the General Management of Credito Valtellinese has been assigned the necessary authority to take suitable measures to ensure the setting up and maintenance of an efficient and effective Internal Auditing System operating at Bank and Group level. The Internal Auditing System is based on various levels of interaction between Company and Group departments, of which the coordinated action contributes to achieving the objectives of system effectiveness and efficiency. In compliance with explicit instructions of the Supervisory Authorities, internal auditing is divided into the following types of controls:

- line controls, aimed at ensuring proper execution of transactions, normally incorporated into the procedures or attributed to the production structures and carried out as part of back office activities;

- risk management controls, assigned to structures other than the production structures, aimed at defining risk measurement methods, verifying compliance with assigned powers and checking consistency of operations within the single areas with the risk-return objectives assigned;

- internal auditing controls, aimed at identifying anomalous trends and breaches of procedures and regulations, as well as evaluating the functionality of the overall internal auditing system, attributed, also through on-site inspections, continuously, periodically or, in exceptional cases, to independent structures outside of the operating units.

With regard to the organisational measures implemented during the year under review, attention is drawn to the following:

- unification, with effect from 1 January 2008, of the Group risk management units under the Risk Management Division of Delta, entrusted with controlling management of credit, market and operating risks;

- setting up of the compliance function at the subsidiary Deltas and appointment of the compliance officer, in order to create a single office responsible for oversight and control of compliance risk;

- locating the Group Loans Division within the Parent Bank and assigning responsibility for defining increasingly uniform and consistent credit policies at Group level and monitoring the quality level of consolidated assets.

On the basis of express provisions of prevailing Supervisory Instructions, the Board of Directors deems the information system to be correct, complete and timely. On a more general level the Board periodically assesses the overall functionality, efficiency and effectiveness of the internal auditing system; if shortcomings or anomalies are found, it adopts suitable and timely corrective measures. 12.1. Executive Director in charge of the internal auditing system Application criterion 8.C.1., letter b) which provides for the appointment of an executive director (usually one of the managing directors) to oversee the functioning of the internal auditing system has not been applied, as no Managing Director has been appointed. As reported in the previous point, the aforesaid functions are included amongst the responsibilities assigned to General Management. Specifically, the General Manager, assisted by the Vice General Managers, is responsible for:

– arranging the necessary measures to ensure the setting up and maintenance of an efficient and effective internal auditing system; specifically he:

– ensures effective management of operating activity and related risks, defining appropriate control policies and procedures;

– continuously verifies, also in the light of changes in internal and external conditions affecting the banks operations, the overall functioning, efficiency and effectiveness of the internal auditing system, also arranging for its adjustment to manage new risks or to improve control of established risks;

– identifies and assesses, also on the basis of analysis of management trends and variances from forecasts, the factors that may give rise to risks;

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– defines the duties of the operating units dedicated to control functions, ensuring that the various activities are managed by qualified staff, with appropriate experience and technical knowledge;

– establishes effective communication channels to ensure that all staff are aware of the policies and procedures relating to their duties and responsibilities;

– defines information flows aimed at ensuring the Board of Directors, or its delegated bodies, full knowledge and governability of corporate events.

12.2. Internal auditing officer To deal with the risks underlying the flow of current operations, the Bank avails of the series of rules, procedures and structures that make up the Group internal auditing system, defined to guarantee process efficiency and effectiveness, protect company assets, safeguard the reliability and integrity of data and verify compliance with internal and external regulations. The system is based on various levels of interaction between Company and Group departments, of which the coordinated action contributes to achievement of set targets. Specifically, the Bank’s Inspection Service is responsible for identifying any anomalies in conduct or procedures, also performing a global assessment of the effectiveness of control methods and mechanisms. As from 2008 the Inspection Service is also responsible for inspection activity in the loans area, previously performed within the Loans Division. In terms of corporate hierarchy, the Service reports directly to General Management, and is therefore in a position of total independence from operational departments, while on a functional level it reports to the Group Auditing Department set up at Deltas S.p.A. to provide guidelines and coordination of inspection and auditing activity. In relation to anti-money laundering, in addition to verifying strict compliance with regulations, the Inspection Service constantly works to ensure effective assistance and heightened awareness. The department also manages customer complaints, performing monitoring and control activities to guarantee appropriate correction of any anomalies detected. The activity performed by the Inspection Service integrates with that of the Financial Auditing Service and the EDP Auditing Service, both based at the Deltas Auditing Department. Of these, the first (the Financial Auditing Service) is responsible for controls pertaining to investment services provided, while the second (EDP Auditing Service) focuses on Group IT processes, with the purpose of verifying EDP system reliability, compliance with quality procedures in the amendment and implementation of programmes, and the existence of adequate data security systems. Internal controls performed by the Bank’s various internal auditing departments are carried out in accordance with Group Auditing Activity Regulations, adopting techniques defined for this purpose, based on the use of constantly updated special checklists and the increasingly intense use of remote monitoring methods. 12.3. Organisational model pursuant to Legislative Decree 231/2001

The structure of the organisational, management and control model, pursuant to Legislative Decree 231/2001 governing the administrative liability of companies for offences committed by its employees and collaborators was approved by the Board of Directors in 2005. The duties of Supervisory and Control Body set forth in Article 6 of the aforesaid Legislative Decree 231/2001 were assigned to a specific Supervisory and Control Committee made up of the Directors who are members of the Internal Auditing Committee, the head of the Group Auditing Department and the head of the Internal Auditing function. The Chairman of the Board of Statutory Auditors, or other Auditor appointed by the Chairman, also participates in the work of the Committee. The Committee is responsible for overseeing the functioning of and compliance with the Model and ensuring its update. Although the final responsibility for adoption of the Model lies with the Board of Directors, the Committee is entrusted with the following duties:

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– analysis of the adequacy of the organisational, management and control model adopted by Credito Valtellinese pursuant to and for the purposes of Articles 6 and 7 of Legislative Decree 231/01, in terms of effective capacity to prevent the offences referred to in the Decree;

– supervising the effective implementation of the model adopted, in terms of consistency between actual conduct and the model adopted;

– monitoring the effectiveness and maintenance over time of the model’s requisites of solidity and functionality;

– update of the model, should the need to make corrections or adjustments arise or prove necessary as a result of changes in legislation.

During 2007 the model was updated following the changes made to the corporate organisation (modification of operating divisions, changes in procedures and in internal regulations) and to the external reference legislation (introduction of new offences to Legislative Decree 231/2001, such as Market Abuse and the failure to report conflict of interest). Thereafter:

– the aforesaid model was also adopted by the Group’s territorial banks (Credito Artigiano, Credito Siciliano and Banca dell’Artigianato e dell’Industria) and extended to other Group companies included within the scope of intervention (Deltas, Bancaperta, Mediocreval, Stelline, Aperta Sgr, Aperta Fiduciaria, Creset and Bankadati).

12.4. Independent Auditors The Ordinary Shareholders’ Meeting held on 22 April 2006 passed a resolution to assign the audit appointment for the 2006-2011 period to the company Reconta Ernst & Young S.p.A. pursuant to Article 159 of Legislative Decree 58/1998. 12.5. Executive in charge of drawing up the company accounts In the meeting held on 12 June 2007 the Board of Directors appointed, with the favourable opinion of the Board of Statutory Auditors, the Vice General Manager Enzo Rocca as Executive in charge of drawing up company accounts, in compliance with the new provisions of Law 28 December 2005 (law on protection of savings) fully assimilated in the new Articles of Association approved by the Extraordinary Shareholders’ Meeting held on 21 April 2007. The executive in charge of drawing up the company accounts has been assigned the powers and duties established by law.

13. DIRECTORS’ INTERESTS AND TRANSACTIONS WITH RELATED PARTIES In the meeting held on 14 December 2004 the Board of Directors approved the document entitled the "Code of Conduct for related party, intragroup, unusual and/or atypical transactions". The document determines the criteria for identification of operations concerning the aforesaid situations and related procedures for the decision-making process, implementing the specific requirements of the Self Disciplinary Code for Listed Companies (Application criterion 9.C.1.) The aim is to insert, in a clear and approved reference framework, application of the various provisions affecting the transactions in question, codifying and, if necessary, integrating the operating practices and corporate regulations already in force. In this way formal standards are established that meet the cognitive requirements of the control body, in turn obliged – pursuant to CONSOB regulations for listed companies – to provide notice in its report to the financial statements on transactions involving potential conflict of interest. The document provides systematic and complete summary of all the operating modes, most of which are already in place, and attributes a central role to the Board of Directors, which:

- is assigned decision-making authority on the main transactions with related parties; - is ensured constant feedback on the decisions adopted on the matter by the Bank’s delegated

bodies.

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During 2007 the Board of Directors examined the annual update of the report on transactions with Group companies and with related parties within the Group. The transactions implemented between companies of the Credito Valtellinese Banking Group form part of the consolidated organisational model based on a network logic. Accordingly, all intragroup transactions implemented with banking companies mainly concern transactions relating to services rendered, deposits and financing within the scope of ordinary interbanking business. Other contractual dealings entered into with the Group’s specialised finance companies and special purpose companies concern assistance and consulting services and specialised services supporting current operations. The economic effects of the aforesaid transactions are regulated on the basis of primary market conditions as far as the interbanking transactions are concerned and on the basis of the specific contractual agreements which, with the main objective of optimising the synergies and economies of scale and purpose at Group level, refer to parameters that are objective and constant over time, distinguished by substantive transparency and fairness. As in other years, last year payments due for services provided were formally quantified according to standard, tested parameters that take account of the actual use made by each member company. Related party transactions are classed as part of the Bank’s ordinary operations and are governed by standard market conditions, or are aligned with the most favourable conditions applied to Personnel. 14. APPOINTMENT OF STATUTORY AUDITORS

The Board of Statutory Auditors is appointed by the Ordinary Shareholders’ Meeting and is made up of three permanent Auditors and two substitute auditors, possessing the requisites prescribed by law. The Statutory Auditors remain in office for three financial years, their mandate expires at the date of the Shareholders’ Meeting called to approve the financial statements relating to their third year of office and they may be re-elected. The entire Board of Statutory Auditors is appointed on the basis of lists containing no more than five and no less than two candidates, submitted by shareholders, in which the candidates must be listed in numerical order. Each list is made up of two sections. One for the candidates to the office of permanent Auditor and one for the candidate to the office of substitute auditor. The lists must be filed at the registered office at least fifteen days prior to the date set for the Shareholders’ Meeting in first call. Each list must be signed by one or more shareholders who together hold an interest of no less than 0.3% in the share capital. Each shareholder may contribute to submitting one list only and, in the case of failure to comply, his signature will not be counted for any of the lists; each candidate must appear on one list only, under penalty of ineligibility. Each shareholder may vote for one list only. Election to the Board of Statutory Auditor occurs as follows:

a) from the list obtaining the highest number of votes two permanent Auditors and one substitute auditor are taken in the numerical order in which they appear in the sections of the list;

b) the third permanent Auditor and the second substitute auditor are taken from the list that – among the remaining lists – obtained the highest number of votes and meets legal requirements;

c) in the event of votes being equal between lists, precedence will be given to the candidate appearing on the list signed by shareholders representing a higher percentage of share capital and, where said percentage is equal, from the list signed by the highest number of shareholders.

The candidate appearing at the top of the minority list that, among the remaining lists, achieved the highest number of votes, is entitled to the office of Chairman of the Board of Statutory Auditors. If only one list is submitted or admitted – in compliance with the law, regulations or by-laws – the Shareholders’ Meeting casts its vote on said list and the first three candidates in numerical order will be elected permanent Auditors and the next two substitute auditors. In this case the candidate appearing at the top of the list is entitled to the office of Chairman of the Board of Statutory Auditors. In the event that no list is submitted or admitted – in compliance with the law, regulations or by-laws – the Board of Statutory Auditors and its Chairman will be appointed by Shareholders’ Meeting by relative majority vote and in compliance with the provisions of the Shareholders’ Meeting Regulations, from amongst the

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candidates presented by the Board of Directors or by other shareholders at least 7 days prior to the date set for the Meeting in first call, with observance of the obligation to file the documentation referred to in paragraph 4 above. 15. STATUTORY AUDITORS

The table below provides a breakdown of the composition of the Board of Statutory Auditors as at 31 December 2007. In this regard it is stated that:

– the current Board of Statutory Auditors was appointed by the Ordinary Shareholders’ Meeting held on 21 April 2007 for the 2007-2009 three-year period and its mandate will expire with the Shareholders’ Meeting called to approve the financial statements as at 31 December 2009;

– At the time the lists were filed, only one list was submitted which included the current board members.

Name

Position In office since

List

Indep. As per Code

% att. S.A. Other offices

ROBERTO CAMPIDORI

Chairman 21/4/2007 X 100 13

ANGELO GARAVAGLIA

Permanent Auditor

21/4/2007 X 100 13

ALFONSO RAPELLA

Permanent Auditor

21/4/2007 X 100 10

KEY Position: specify if chairman, permanent auditor, substitute auditor. List: M/m according to whether the auditor was elected from the list voted by the majority or by a minority (Article 144-decies, of CONSOB Issuers’ Regulations) Indep.: cross if the auditor can qualify as independent according to the criteria established by the Code, specifying at the foot of the table if said criteria have been integrated or amended % att. S.A..: insert the attendance, in percentage terms, of the auditor at board meetings (in calculating this percentage consider the number of meetings at which the auditor was present compared to the number of meetings held during the year or after assumption of office). Other offices: total number of offices held in other companies referred to in Volume V, Section V, Chapters V, VI and VII of the Italian Civil Code, as resulting from the attached list, pursuant to Article 144-quinquiesdecies of CONSOB Issuers’ Regulations as at 31 December 2007. All members of the Board of Statutory Auditors are graduates in Economics and Commerce and are enrolled in the Register of Auditors. All members of the Board of Statutory Auditors meet the requisites of professionalism provided for the subjects who perform control functions in banks by the prevailing Supervisory Instructions. During 2007 the Board of Statutory Auditors held 48 meetings (of which 36 were collegial meetings and 12 were individual inspections performed with the Inspection Service attended by just one member of the Board of Statutory Auditors upon mandate of the Board). No Board members left office and hence its composition has not changed. The Shareholders’ Meeting held on 21 April 2007 renewed the Board of Statutory Auditors confirming the three permanent members and the two substitute members. The Board of Statutory Auditors formalised the assessment of the independence of its members for the purpose of this Report in accordance with the assessment criteria provided by the Code (Application criterion 10.C.2.). Credito Valtellinese manages any conflict of interest of the members of the Board of Statutory Auditors in compliance with the provisions of Articles 2391 and 2391bis of the Italian Civil Code, and of Article 136 of the Consolidated Banking Law, and also with the provisions of the document “Transactions with related parties” issued by the Issuer in implementation of the Self Disciplinary Code for Listed Companies. (Application criterion 10.C.4.).

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During the year the Board of Statutory Auditors monitored the independence of the independent auditors, verifying compliance with applicable provisions, concerning the nature and entity of the services other than the audit provided to the Issuer and to its subsidiaries by the independent auditors and the entities belonging to the same network (Application criterion 10.C.5.). In performing its activity the Board of Statutory Auditors liaised with the Auditing Department, with the Bank’s Inspection Service and with the Internal Auditing Committee (Application criteria 10.C.6. and 10.C.7.).

16. RELATIONS WITH SHAREHOLDERS

The Company has set up a special section dedicated to shareholders on its website, at the address http://www.creval.it/investorRelations/Informazioni. The section can be easily identified and accessed and provides all the information of importance to shareholders, in order to allow them to exercise their rights in an informed manner (Application criterion 11.C.1.). Management of relations with financial analysts, institutional investors and other shareholders has been entrusted to the Corporate Identity, Institutional and Press Service of Deltas, on the basis of instructions issued by the Company’s General Management. The investor relations manager has been identified as the Head of the Corporate Identity, Institutional and Press Service, Tiziana Camozzi. (Application criterion 11.C.2.). The functions pertaining to relations with shareholders have been assigned to the General Secretariat Service, in association, where possible and appropriate, with General Management (Application criterion 11.C.2.). 17. SHAREHOLDERS’ MEETINGS

The Shareholders’ Meeting may be attended and the voting right exercised by shareholders who have been enrolled in the Shareholders’ Register for at least ninety days and who have forwarded to the head office of Credito Valtellinese, at least two working days prior to the date set for the Meeting in first call, the special notice that the intermediary entrusted with keeping the accounts is obliged to issue pursuant to Article 34 bis of CONSOB resolution no. 11768/1998; shareholders whose shares are registered in an account held with Credito Valtellinese or with other banking companies of the Credito Valtellinese Group are not obliged to forward said communication. The business dealt with in Shareholders’ Meetings may be followed through the bank’s website. Voting by correspondence and/or by electronic means is not however permitted. The Ordinary Shareholders’ Meeting held on 21 April 2007 approved some amendments to the Shareholders’ Meeting Regulations concerning the section dedicated to voting and other limited adjustments of an ordinary nature to the text so as to improve the document and guarantee ordered performance of Shareholders’ Meeting. The new Regulations are available on the bank’s website at the address http://www.creval.it/investorRelations/index.html Article 13 of the Shareholders’ Meeting Regulations provides that: “Each Shareholder is entitled to take the floor on each of the items on the agenda and to submit proposals. Those who intend to speak must request permission from the Chairman submitting to the special delegates written application containing specification of the item to which the application refers, after the agenda has been read and at any time, provided it is before the discussion of the item in question has been declared closed. The members of the Board of Directors and the Statutory Auditors may request to intervene in the discussion.

446

Part of the business of the Shareholders’ Meeting will consist in the Chairman and the General Manager providing an extensive briefing on the activity performed during the year, the strategic growth lines, the activities and accounting results of the Credito Valtellinese Group. The draft financial statements to be submitted to the Shareholders’ Meeting and the report illustrating the items on the agenda are available to shareholders at the company’s head office and are also filed at the market management company in accordance with legal terms. 18. CHANGES SINCE CLOSURE OF THE REFERENCE YEAR From 31 December 2007 until the date of approval of this report there has been no change in the corporate governance structure.

447

LIST OF THE OFFICES HELD BY MEMBERS OF THE BOARD OF DIRECTORS IN OTHER COMPANIES OF THE CREDITO VALTELLINESE GROUP, AND IN COMPANIES LISTED IN

REGULATED MARKETS, INCLUDING FOREIGN MARKETS, IN FINANCIAL, BANKING, INSURANCE OR LARGE-SIZED COMPANIES

Director Position Company Membership of the Credito Valtellinese

Banking Group Chairman I.C.B.P.I. SpA Chairman Finanziaria Canova SpA Vice Chairman Credito Artigiano SpA X

Giovanni De Censi

Director Edison SpA Chairman of the Management Board A2A SpA

Chairman Edison SpA Giuliano Zuccoli

Managing Director Transalpina di Energia Srl

Gabriele Cogliati Director Bankadati S.I. SpA X Director Credito Siciliano SpA X

Mario Cotelli Director BAI SpA X

Chairman and Managing Director

SOL SpA

Director Centrobanca SpA Aldo Fumagalli Romario

Director Centrobanca Sviluppo

Impresa SGR SpA

Chairman Credito Artigiano SpA X Chairman Credito Piemontese SpA X Permanent Auditor Finanziaria Canova SpA Permanent Auditor ACSM SpA

Angelo Palma

Chairman of the Board of Statutory Auditors

Transalpina di Energia Srl

Valter Pasqua Director Finanziaria Canova S.p.A

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Certification of the Financial Statements pursuant to Article 81-ter of CONSOB Regulations no. 11971 dated 14 May 1999 and subsequent amendments and integrations 1. The undersigned Giovanni De Censi, in his capacity as Chairman of the Board of Directors and Enzo Rocca, in his capacity as Executive in charge of drawing up the accounts of Credito Valtellinese S.c., certify, also taking into account the provisions of Article 154-bis, sub-sections 3 and 4, of Legislative Decree no. 58 dated 24 February 1998:

- adequacy in relation to the characteristics of the company and - effective application, of the administrative and accounting procedures for drawing up the financial statements during 2007.

2. Assessment of adequacy of the administrative and accounting procedures for drawing up the financial statements as at 31 December 2007 is based on a model defined by Credito Valtellinese S.c. in compliance with the ’”Internal Control – Integrated Framework” and ”Cobit”, which represent reference standards for internal auditing systems general accepted at international level. 3. It is also certified that the financial statements as at 31 December 2007:

a) are consistent with the results of the accounting records and ledgers; b) have been drawn up in compliance with the International Financial Reporting Standards adopted by

the European Union as well as with the provisions issued in implementation of Article 9 of Legislative Decree 38/2005, insofar as they are able to provide a true and fair view of the issuer’s state of affairs.

Sondrio, 18 March 2008

The Chairman of the Board of Directors The Executive in charge of drawing up the company accounts

Giovanni De Censi Enzo Rocca

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450

Guide to consultation The following documents are found in this section: Statement of revaluations This statement indicates the assets currently held that have been subject to monetary revaluations and the amount of the revaluation. The statement is required by Article 10 of Law no. 72 dated 19 March 1983. Statement of significant shareholdings in unlisted companies Listed companies are obliged to communicate to CONSOB the shareholdings exceeding 10% of share capital represented by shares with voting right in an unlisted joint stock company or by shares in a limited liability company that they hold at the year end date. The statement of significant shareholdings in unlisted companies is requested by Article 120 of the Consolidated Financial Law and by Articles 125 and 126 of the Issuers’ Regulations adopted by CONSOB with resolution no. 11971 dated 14 May 1999 and subsequent amendments and integrations. Statement of considerations for services provided by the independent auditors This document is requested by Article 149-duodecies of Issuers’ Regulations adopted by CONSOB with resolution no. 11971 dated 14 May 1999 and subsequent amendments and integrations. It includes the considerations pertaining to the year, paid for services provided to the company by the following subjects: a) by the independent auditors, for the provision of audit services; b) by the independent auditors, for the provision of services other than audit, divided into inspection services for the purpose of issue of certification and other services broken down by type; c) by the entities belonging to the network of auditing companies, for the provision of services, broken down by type. Pursuant to sub-section 2, of the aforesaid article, the above considerations also include services provided by the independent auditors of the Parent Bank and by the entities belonging to its network to the subsidiaries.

451

ATTACHMENTS

452

Statement of revaluations – Article 10 Law 72/1983

(in EUR)

AGLIENTU 10.496 79.433

APRICA Via Roma 41.317 275.751 156.051 1.889.692 2.370.228

ARDENNO Via Libertà 106.063 44.379 398.275 514.382

BERBENNO Via Adua 41.127 42.774 283.278 465.313

BORMIO Via Roma 61.975 1.456.667 488.120 5.539.077 6.731.062

BORMIO Via dei Mulini 32.768 3.881 515.960 683.880

BULCIAGO Via D. Alighieri 93.278 544.845

CAMPODOLCINO Via Corti 194.446 64.814 554.645 911.587

CASPOGGIO Via Vanoni 263.229 762.976 1.131.179

CHIAVENNA Via Saliceto 234.134 444.452 2.678.104 3.220.072

CHIURO Via IV Novembre 117.650 708.537 883.280

COMO Via Sant'Elia 567.151 3.248.674

COMO Via Virgilio 15.805 144.000

COSIO VALTELLINO Via Roma 81.388 369.776 647.355

DELEBIO S.S. dello Stelvio 157.029 796.600 1.567.576

DUBINO Via Indipendenza 23.890 74.961

ERBA Via Adua 59.039 1.300.642

GROSIO Via Roma 200.903 144.288 489.342 957.668

GROSOTTO S.S. dello Stelvio 44.055 212.276 274.651

LANZADA Piazza del Magnan 86.610 50.132 399.786 476.836

LECCO Via Parini 542.581 1.469.055 7.960.899

LIVIGNO Plaza dal Comun 41.317 718.885 365.456 3.063.975 4.945.485

MADESIMO P.zza Bertacchi 65.391 369.617

MERATE V.le Verdi 6.587 744.609

MILAN C.so Magenta 1.984.733 10.087.689 11.412.438

MILAN Via Copernico 308.683 1.344.000

MORBEGNO Via Ambrosetti 25.823 371.865 2.180.694 2.512.633

NUOVA OLONIO Via Valeriana 197.973 776.634 1.457.234

OSNAGO Via Tessitura 75.618 540.752

PASTURO Viale Trieste 69.690 281.230 564.028

ROME Lungotevere Mellini 311.966 4.230.887 5.168.561

S. CATERINA VALFURVA Via Magliaga 27.636 15.787 197.482 198.641

S. GIACOMO TEGLIO Via Nazionale 16.646 154.964 339.232

S. NICOLO' VALFURVA Piazza Frodaglio 52.621 618.598 743.466

SIRONE Via Mazzini 63.103 279.437

SONDALO Via Zubiani 25.823 195.115 81.092 354.231 668.487

SONDRIO Largo Sindelfingen 261.829 588.181 1.024.174

SONDRIO Via Trento/P. Valgoi 651.811 3.917.503 5.785.246

SONDRIO Piazza Garibaldi 3.099 77.469 431.242 171.765 2.108.564 2.978.976

SONDRIO Piazza Quadrivio 1.026.154 9.809.978 13.213.927

SONDRIO Via Mazzini 2.998 80.774 86.601SONDRIO Via Aldo Moro 229.896 176.183 1.094.990 1.208.150

SONDRIO Via Caimi 924.923 4.737.887 6.111.327

SONDRIO Via Cesura 75.403 2.084.617 309.309 3.988.604 8.483.682

SONDRIO Via Pergole 91.434 951.771 2.095.938

SONDRIO Via XXV Aprile 31.452 51.646 103.291 2.252.894 1.023.723 6.998.160 9.070.745

SONDRIO Albergo Posta 103.291 1.533.114 497.772 4.883.229 5.812.190

SONDRIO Via Gianoli 24.568 330.921 700.341

SONDRIO Via Stelvio 360.196 1.346.545

TALAMONA P.zza IV Novembre 56.767 214.068

TIRANO Piazza Marinoni 624.606 444.062 2.663.540 3.572.310

TRESIVIO Via Lago 252.028 870.106 1.623.921

VARESE Via Crispi 12.423 412.428

VILLA DI TIRANO Via Roma 2.116 102.231 169.546

TOTAL 34.551 51.646 555.708 10.726.472 11.973.328 83.858.631 129.387.257

* The total value of properties included in this table refers to the aggregate of land and buildings.

OWNED PROPERTY* BOOK VALUE

2007

REVALUATION - Law 74,

11/02/1952

REVALUATION - Law 823,

19/12/1973

REVALUATION - Law 576,

02/12/1975

REVALUATION - Law 72,

19/03/1983

REVALUATION - Law 413,

30/12/1991

REVALUATION - Law 266,

23/12/2005

453

INVESTORInvestee Head office %

Credito Valtellinese S.C. equity inv. E Banca della Ciociaria S.p.A. Frosinone 6.000.000 € 0,03 2.277.427 37,957% 37,957%

Credito Valtellinese S.C. equity inv. A Banca dell'Artigianato e dell'Industria S.p.A. Brescia 13.477.184 € 5,16 5.297.721 39,309% 60,122%Credito Artigiano S.p.A. equity inv. A Banca dell'Artigianato e dell'Industria S.p.A. Brescia 13.477.184 € 5,16 2.804.940 20,813%

Credito Valtellinese S.C. equity inv. E Banca di Cividale S.p.A. Cividale del Friuli 12.525.000 € 5,00 3.131.250 25,000% 25,000%

Credito Valtellinese S.C. equity inv. A Bancaperta S.p.A. Sondrio 4.212.000 € 20,00 2.672.280 63,444% 100,000%Credito Artigiano S.p.A. equity inv. A Bancaperta S.p.A. Sondrio 4.212.000 € 20,00 1.029.600 24,445%Credito Siciliano S.p.A. equity inv. A Bancaperta S.p.A. Sondrio 4.212.000 € 20,00 510.120 12,111%

Credito Valtellinese S.C. equity inv. A Bankadati Servizi Informatici S.p.A. Sondrio 500.000 € 5,00 400.000 80,000% 100,000%Credito Artigiano S.p.A. equity inv. A Bankadati Servizi Informatici S.p.A. Sondrio 500.000 € 5,00 100.000 20,000%

Credito Valtellinese S.C. equity inv. E Consulting S.p.A. Sondrio 150.000 € 1,00 7.500 5,000% 15,000%Deltas S.p.A. equity inv. E Consulting S.p.A. Sondrio 150.000 € 1,00 15.000 10,000%

Credito Valtellinese S.C. equity inv. A Credito Siciliano S.p.A. Palermo 9.582.557 € 10,00 3.857.642 40,257% 76,049%Credito Artigiano S.p.A. equity inv. A Credito Siciliano S.p.A. Palermo 9.582.557 € 10,00 3.429.820 35,792%

Credito Valtellinese S.C. equity inv. A Creset S.p.A. Sondrio 2.000 € 1.300,00 2.000 100,000% 100,000%

Credito Valtellinese S.C. equity inv. A Credito Piemontese S.p.A. Torino 3.106.704 € 5,00 3.099.743 99,776% 99,776%

Credito Valtellinese S.C. equity inv. A Deltas S.p.A. Sondrio 24.000 € 5,00 12.000 50,000% 100,000%Credito Artigiano S.p.A. equity inv. A Deltas S.p.A. Sondrio 24.000 € 5,00 12.000 50,000%

Credito Valtellinese S.C. equity inv. E Global Assistance S.p.A. Milan 2.583.000 € 1,00 1.033.200 40,000% 40,000%

Credito Valtellinese S.C. equity inv. E ICBPI S.p.A. Milan 11.049.413 € 3,00 2.485.850 22,498% 22,500%Credito Siciliano S.p.A. equity inv. E ICBPI S.p.A. Milan 11.049.413 € 3,00 134 0,001%Credito Artigiano S.p.A. equity inv. E ICBPI S.p.A. Milan 11.049.413 € 3,00 134 0,001%

Credito Valtellinese S.C. equity inv. A Mediocreval S.p.A. Sondrio 18.360.000 € 3,00 6.875.875 37,450% 99,970%Credito Artigiano S.p.A. equity inv. A Mediocreval S.p.A. Sondrio 18.360.000 € 3,00 5.744.362 31,287%Credito Siciliano S.p.A. equity inv. A Mediocreval S.p.A. Sondrio 18.360.000 € 3,00 5.734.387 31,233%

Credito Artigiano S.p.A. pledge E Nava Group S.p.A. Milan 4.500 € 1,00 1.500 33,333% 33,333%Credito Valtellinese S.C. pledge E Petrolvaves S.r.l. Milan 1.820.000 - 473.200 26,000% 26,000%Credito Valtellinese S.C. equity inv. E Soc.Coop.del Polo dell'Innovazione della Valtellina p.A. Sondrio 4.897 € 50,00 1.005 20,523% 20,523%Credito Valtellinese S.C. equity inv. A Rajna Immobiliare S.r.l. Sondrio 20.000 - 10.000 50,000% 50,000%

Credito Valtellinese S.C. equity inv. A Stelline Servizi Immobiliari S.p.A. Sondrio 2.500.000 € 5,00 2.000.000 80,000% 100,000%Credito Artigiano S.p.A. equity inv. A Stelline Servizi Immobiliari S.p.A. Sondrio 2.500.000 € 5,00 500.000 20,000%

Credito Valtellinese S.C. equity inv. E Sviluppo Como S.p.A. Como 10.000.000 € 1,00 1.500.000 15,000% 15,000%

Credito Valtellinese S.C. equity inv. E Valtellina Golf Club S.p.A. Sondrio 3.202 € 516,00 634 19,800% 19,800%

Bancaperta S.p.A. equity inv. A Aperta Fiduciaria S.r.l. Milan 50.000 - 50.000 100,000% 100,000%Bancaperta S.p.A. equity inv. A Aperta SGR S.p.A. Milan 4.966.000 € 1,00 4.966.000 100,000% 100,000%Bancaperta S.p.A. equity inv. E Aperta Gestioni Patrimoniali S.A. Lugano 3.500 CHF 1.000,00 1.680 48,000% 48,000%Bancaperta S.p.A. equity inv. E Global Assicurazioni S.p.A. Milan 120.000 € 1,00 48.000 40,000% 40,000%Bancaperta S.p.A. equity inv. E Tecnologia e Territorio S.p.A. Milan 258.300 € 10,00 50.000 19,357% 19,357%

Credito Siciliano S.p.A. equity inv. E Serv.Int. Sicilia S.r.l. Palermo 52.000 - 15.600 30,000% 30,000%

Mediocreval S.p.A. equity inv. A Finanziaria San Giacomo S.p.A. Sondrio 300.000 € 10,00 300.000 100,000% 100,000%Mediocreval S.p.A. equity inv. E Pensotti Fabbrica Caldaie Legnano S.p.A. Legnano 4.657.895 € 1,00 1.769.750 37,995% 37,995%Mediocreval S.p.A. equity inv. E Duea Film S.p.A. Rome 1.000.000 € 1,00 150.000 15,000% 15,000%

Stelline Servizi Immobiliari S.p.A. equity inv. E Progetti Industriali Valtellina S.r.l. Sondrio 100.000 - 49.000 49,000% 49,000%Stelline Servizi Immobiliari S.p.A. equity inv. E Sondrio Città Centro S.r.l. Sondrio 100.000 - 30.000 30,000% 30,000%Stelline Servizi Immobiliari S.p.A. equity inv. E Esseti Servizi Tecnici S.r.l. Sondrio 10.000 - 1.500 15,000% 15,000%* A = Voting admitted E = Voting excluded

INFORMATION ON THE INVESTEE INFORMATION ON THE INVESTMENT

Prospectus of relevant investments in unlisted companies - Art. 120 Legislative Decree 58/98 and Art. 125-126 CONSOB Res. 11971/99 and subsequent amendmentsVOTING

RIGHTS (*) total no. of shares/quotas

par value of shares/quotas

no. shares/quotas

% total with voting rights

OWNERSHIP TITLE

454

Statement of considerations for services provided by the independent auditors pursuant to Article 149-duodecies of CONSOB Regulations no. 11971/1999 Fees paid in

2007 (*) Services provided to the Parent Bank Credito Valtellinese S.c. Independent auditors: Reconta Ernst & Young S.p.A. - Auditing services 169,584 - Inspection services for the purpose of issuing certification (* *) 281,762 - Other services - Companies belonging to the independent auditors’ network: Ernst & Young FBA S.p.A - Other services – Support services to activities of reporting, analysis and formalisation of the

administrative/accounting procedures 35,000

Services provided to the subsidiary companies Independent auditors: Reconta Ernst & Young S.p.A. - Auditing services 404,170 - Inspection services for the purpose of issuing certification 131,495 - Other services - Companies belonging to the independent auditors’ network: Ernst & Young FBA S.p.A. - Other services - Support services to activities of reporting, analysis and formalisation of the

administrative/accounting procedures 200,000

Total 1,222,011 (*) these amounts must be increased by the costs incurred for performing the work and VAT. (* *) the item mainly includes the considerations for performance of the inspection activities associated with tax returns, those for drawing up the prospectus for the share capital increase transaction and those for drawing up the prospectus for renewal of the programme to issue debt securities on international markets.