discussion materials on recent italian rights issues...0 2 4 6 8 10 day 1 day 2 day 3 day 4 day 5...

Marco Morelli – Chief Executive Officer – Banca Monte dei Paschi di Siena SpA - Italy October 17, 2017

Discussion Materials on Recent Italian Rights Issues

What is a Rights Issue?

1

Rights Issue Cheat Sheet

What? Offer of shares to existing shareholders pro-rata to their existing holding

On average used to raise 40-60% pre-money market cap

How?

New shares offered at a discount vs. market price

Existing shareholders receive pre-emptive rights, allowing them to subscribe pro-rata the new shares during

the subscription period

Rights trade in the market during the subscription period

Why?

Most common use of proceeds are:

Repay debt

Fund working capital

Restructure the balance sheet / enhance rating

Fund growth plans (M&A, capex etc.)

Who?

Rights Issues are very common among European companies, almost unknown in North America

In recent years, activity has been dominated by banks’ recapitalisations; M&A-related rights offering becoming

increasingly frequent

Jurisdictions around Europe have different rules/timetables for rights issues, but generally similar mechanics apply

Well-known by investors, especially in Europe

2

Key Advantages of Rights Issues

Friendly structure to shareholders

Certainty of proceeds to issuer

Greatest size capacity even in difficult market conditions

Structure allowing for time dedicated to marketing (roadshow etc.)

3

Mechanics of a Rights Issue

Underwriters and issuer agree on a subscription price at which the new shares will be sold to existing shareholders

Use of proceeds

Absolute & relative size of rights issue

Any new information included in prospectus

Market views on the stock/sector

Volatility of share price

General market conditions

Issuer’s shareholder register

Top shareholders’ commitments

Price / discount is irrelevant to the issuer and to existing shareholder, but relevant for the underwriters

Pricing of Rights Issues – Key Factors

4

Shareholder Options

Exercise Rights Shareholders can exercise their rights and purchase the new shares they are entitled to

Disbursement proportional to the offer size, % interest in the company to remain unchanged

Sell Rights

Rights are listed and trade actively and independently in the market during the rights’ trading period

Shareholders can decide to sell their rights in the market at their prevailing price, suffering dilution of their %

interest

“Tail-Swallow”

Shareholders can sell the portion of their rights needed to exactly fund the subscription of the rest (cash neutral

strategy)

Strategy minimizing dilution, maintaining the “Euro” investment unchanged

Percentage of dilution not impacted by TERP discount

Do Nothing

Irrational economic behaviour, sometimes due to lack of information / slow decision making process

In absence of any indication, depositary brokers often sell unexercised rights towards the end of the offer on

behalf of the shareholders

1

2

3

4

At the end of the offer, any new shares left unsubscribed are typically auctioned to the market or eventually taken-up by underwriters

0

2

4

6

8

10

Day 1 Day 2 Day 3 Day 4 Day 5 Day 6 Day 7 Day 8 Day 9 Day 10

Use proceeds to buy rights and exercise them

Deliver the shares obtained, closing the short position

Retain the difference, i.e. a “free lunch”

Short-sell shares in the market

5

Rights and Shares Trading Pattern

Rights Issue Arbitrage

Example of Arbitrage Opportunity

€

Rights and shares typically trade at the same time for 1-2 weeks

Normally, rights representing a “levered” way to play the shares

If discrepancies in valuation materialise, arbitrage opportunities arise

If rights trade cheap vs. their theoretical value an opportunistic investor could:

Implied Value of Rights Share Price

1

2

3

4

In standard and liquid rights issues (with availability of stock borrow) arbitrage opportunities occur, but tend to be limited

+12%

+36%

UniCredit €13bn Case Study

Company UniCredit S.p.A.

Ticker / Listing

UCG IM / Milan Stock Exchange

Offer Type Fully Underwritten Rights Offering

Offer Size / Statistics

Gross proceeds of c.€13bn / c.$14bn

1,607m new ordinary shares issued

Ratio: 13 new shares for every 5 shares held

Subscription price: €8.09 per share

Discount to TERP: 38.9% (based on closing price on 1 February 2017)

c.79.0% of Market Capitalization / c.94.9% of free float pre setting of terms

42 days trading equivalent (based on 6M ADTV on the domestic line)

Use of

Proceeds Strengthening the UniCredit Group’s capital structure and increasing the capital ratios in line with best in class G-SIFIs

Key Dates

Rights Issue Intention Announced: 13 December 2016

EGM: 12 January 2017

Rights trading period: 6 February – 17 February 2017

Subscription period: 6 February – 23 February 2017

Initial take-up: 23 February 2017

Auction of unexercised rights: 27 February 2017

Take-up

99.8% before auction of unexercised rights

Remaining rights were all sold at the first auction on Monday 27 February and a full take-up achieved on Thursday 2 March

6

UniCredit €13bn Rights Issue - Transaction Summary

“Documento di Registrazione”

7

AVVERTENZE PER L’INVESTITORE .............................................................................................................. 1

DEFINIZIONI .............................................................................................................................................. 21

GLOSSARIO ............................................................................................................................................... 29

1. PERSONE RESPONSABILI ....................................................................................................................... 45

2. REVISORI LEGALI DEI CONTI .................................................................................................................. 46

3. INFORMAZIONI FINANZIARIE SELEZIONATE ......................................................................................... 47

4. FATTORI DI RISCHIO .............................................................................................................................. 96

5. INFORMAZIONI SULLA SOCIETÀ ......................................................................................................... 225

6. PANORAMICA DELLE ATTIVITÀ ........................................................................................................... 245

7. STRUTTURA ORGANIZZATIVA ............................................................................................................. 361

8. IMMOBILI, IMPIANTI E MACCHINARI ................................................................................................. 372

9. RESOCONTO DELLA SITUAZIONE GESTIONALE E FINANZIARIA .......................................................... 378

10. RISORSE FINANZIARIE ....................................................................................................................... 446

11. RICERCA E SVILUPPO, BREVETTI E LICENZE ...................................................................................... 463

12. INFORMAZIONI SULLE TENDENZE PREVISTE .................................................................................... 464

13. PREVISIONI O STIME DEGLI UTILI ..................................................................................................... 468

14. ORGANI DI AMMINISTRAZIONE, DI DIREZIONE O DI VIGILANZA E ALTI DIRIGENTI.......................... 503

15. REMUNERAZIONI E BENEFICI ........................................................................................................... 533

16. PRASSI DEL CONSIGLIO DI AMMINISTRAZIONE ............................................................................... 540

17. DIPENDENTI ...................................................................................................................................... 553

18. PRINCIPALI AZIONISTI ....................................................................................................................... 563

19. OPERAZIONI CON PARTI CORRELATE ............................................................................................... 564

20. INFORMAZIONI FINANZIARIE RIGUARDANTI LE ATTIVITÀ E LE PASSIVITÀ, LA SITUAZIONE FINANZIARIA E I PROFITTI E LE PERDITE DELLA SOCIETÀ ....................................................................... 574

21. INFORMAZIONI SUPPLEMENTARI ..................................................................................................... 702

22. CONTRATTI IMPORTANTI ................................................................................................................. 722

23. INFORMAZIONI PROVENIENTI DA TERZI, PARERI DI ESPERTI E DICHIARAZIONI DI INTERESSI …...... 746

24. DOCUMENTI ACCESSIBILI AL PUBBLICO ........................................................................................... 747

25. INFORMAZIONI SULLE PARTECIPAZIONI .......................................................................................... 748

Table of Contents “Documento di Registrazione”

UniCredit €13bn Rights Issue - Transaction Summary (Cont’d)

9M2016 2019

Strengthen and Optimise Capital

M&A actions: Pioneer, Pekao and 30% of Fineco €13bn rights-issue Conservative plan delivering organic capital generation

>10.8% CET1 ratio >12.5% CET1 ratio

Improve Asset Quality

Addressed Italian legacy issues, through de-risking of €17.7bn portfolio and proactive bad loans management

Detailed review of portfolio resulting in strengthened coverage ratio

Tightened risk discipline to further improve credit portfolio risk profile

€8.1bn one-off LLPs

254 bps (1) CoR 49bps CoR

Transform Operating Model

Operating model transformation to a sustainable lower cost structure

Further improve customer focus, service and products

IT investments lo support business transformation

Digitalisation as enabler

€1.7bn net annual recurring cost savings as of 2019

944 branches reduction in Western Europe by 2019

€1.6bn IT investment cash out over plan period

Maximise Commercial Bank

Value

Capitalise on Retail client relationships potential

Leverage on "go to" bank status for Corporate clients in Western Europe

Further strengthen leadership position in CEE

Enhance cross-selling across business lines and countries

€80bn increase to reach €856bn TFA in 2019

Additional €363m joint CIB-Commercial Banking revenues (2)

Adopt Lean but Steering Center

Strong steering Group Corporate Center; KPls to drive performance and ensure accountability

Leaner support functions and transparent cost allocation

Weight of Group Corporate Center on total costs from 5.1% to 2.9% by 2019

8

5 Pillars Underlying the Business Plan UniCredit Business Plan Overview

____________________ Source: UniCredit investor presentation. Note : All 2015 and 9M2016 figure restated assuming new Group perimeter. (1) Including one off LLPs, if excluding one off LLPs cost of risk equals to 77bps. (2) Includes revenues on GTB, ECM, DCM, M&A Markets products from Commercial Banking clients and structured financing products from Corporate clients.

9 ____________________ Source: UniCredit investor presentation. (1) Pekao, Pioneer, Ukraine, 20% Fineco (10% Fineco disposal already factored in the baseline).

Credit Portfolios Adjustment

€8.1bn one-off LLPs

224bps

Additional Network

Transformation and Restructuring

€1.7bn integration costs post-tax to achieve recurring cost savings

46bps

Other Charges

Includes write down on Group participations, other provisions and net gain on card processing activities

30bps

Capital Dynamics 2017–2019

Other capital dynamics

41bps

Strengthen capital position >12.5%

CET1 ratio

c. 168bps

Announced Disposals (1)

Capital Generation

164bps

Includes:

Closed in Q4 2016: Fineco 20% ABB (12bps), Ukraine (6bps)

Closing expected in H1 2017: Pekao (61bps), Pioneer (84bps)

Rights Issue

€13bn capital increase

345bps

Sources and Uses of Capital over the Business Plan Period

Uses of Capital (-) Sources of Capital (+)

UniCredit Business Plan Overview (Cont’d)

10

Cash dividend policy of between 20-50% pay out ratio ____________________ Source: UniCredit investor presentation. (1) All 2015 and 9M2016 figures restated assuming new Group perimeter, adjusted figures include expected €8.1bn one-off LLP unless otherwise stated; plan assumes a cash dividend with 20% payout. (2) Including one-off LLP; if excluding LLP in 9M2016 cost of risk equal to 77bps. (3) Stated figure in 2015 and 9M2016.

Historical Figures (Pro-forma (1)) Business Plan Targets (1)

2015 9M2016 2017E 2019E

Revenue 2015–2019 CAGR

+0.6%

Cost/Income 61.6% <52%

Cost Base €12.2bn €11.7bn €10.6bn

Cost of Risk (2) 89bps 254bps 65bps 49bps

Net Income €1.5bn €4.7bn

RoTE 4% >9%

CET1 Ratio (3) 10.4% 10.8% 12.0% >12.5%

RWA €361bn €362bn €389bn €404bn

Group NPE Coverage

50.8% 63.0% >54% >54%

Group UTP Coverage

34.2% 40.8% >38% >38%

Group Bad loan Coverage 60.6% 74.5% >65% >63%

Non-Core Net NPE €24.8bn €15.8bn €11.4bn €8.1bn

Non-Core NPE Coverage 52.4% 68.2% >56% > 57%

Key Financial Targets UniCredit Business Plan Overview (Cont’d)

PowerPoint Table

Embed ____

11

UCG Rights Issue in Context

____________________ Source: Dealogic, as of September 2016. EMEA Rights Issues greater than $8bn or greater than $1.3bn but representing more than 50% of market cap. Italian Rights Issues greater than $1bn since 2008.

Announcement

Date

Launch

Date Company Country

Deal Size

($bn)

% Of

Market Cap Ratio

Discount to

TERP (%) Take up (%)

22-Apr-08 22-Apr-08 RBS UK $24.3 32.8 11 / 18 34.9 95.1

05-Nov-09 5-Nov-09 Lloyds UK $22.0 54.2 1 / 1 38.6 95.3

02-Mar-09 2-Mar-09 HSBC UK $17.9 22.0 5 / 12 38.7 96.6

13-Sep-10 20-Sep-10 Deutsche Bank Germany $14.0 35.2 1 / 2 21.9 99.3

13-Dec-16 6-Feb-17 UniCredit Italy $13.9 79.1 13 / 5 38.9 99.8

30-Jul-13 13-Sep-13 Barclays UK $9.3 15.0 1 / 4 34.9 94.6

19-May-14 5-Jun-14 Deutsche Bank Germany $9.2 21.0 5 / 18 20.1 99.1

10-Nov-08 10-Nov-08 Santander Spain $9.2 13.5 1 / 4 40.6 99.5

15-May-08 4-Jun-08 Credit Agricole France $9.1 20.9 1 / 3 30.7 100.0

24-Jan-08 11-Feb-08 Societe Generale France $8.5 15.5 1 / 4 33.1 99.1

06-Apr-11 22-May-11 Commerzbank Germany $7.7 50.2 10 / 11 29.8 99.9

16-Jul-08 4-Sep-08 Natixis France $5.4 50.1 13 / 10 40.6 96.7

13-Mar-13 14-May-13 Commerzbank Germany $3.2 54.9 20 / 21 27.3 99.7

08-Oct-12 12-Nov-12 Banco Popular Spain $3.2 102.9 3 / 1 31.6 99.9

24-Jun-14 24-Jun-14 BES Portugal $3.1 71.8 7 / 4 34.3 98.8

05-Feb-09 4-Mar-09 SEB Sweden $1.8 71.0 11 / 5 39.6 98.5

09-Jan-17 9-Jan-17 Millennium BCP Portugal $1.3 135.4 15 / 1 38.6 98.4

12-Apr-12 12-Apr-12 BES Portugal $1.3 59.2 7 / 4 41.5 99.3

Average $ 8.9 50.3 - 34.2 98.3

Announcement

Date

Launch

Date Company Country

Deal Size

($bn)

% Of

Market Cap Ratio

Discount to

TERP (%) Take up (%)

13-Dec-16 6-Feb-16 UniCredit Italy $13.9 79.1 13 / 5 38.9 99.8

14-Nov-11 4-Jan-12 UniCredit Italy $10.2 60.7 2 / 1 43.3 99.8

06-Apr-11 19-May-11 Intesa Sanpaolo Italy $7.2 19.4 2 / 7 24.3 99.8

21-Jan-08 24-Apr-08 Banca Monte dei Paschi di Siena Italy $7.2 58.5 1 / 1 26.2 99.5

26-Nov-13 5-Jun-14 Banca Monte dei Paschi di Siena Italy $7.0 170.3 214 / 5 35.5 99.9

28-Sep-09 7-Jan-10 UniCredit Italy $5.8 10.2 3 / 20 29.0 98.2

05-Nov-14 21-May-15 Banca Monte dei Paschi di Siena Italy $3.8 124.7 10 / 1 38.9 99.6

11-Apr-11 16-Jun-11 Banca Monte dei Paschi di Siena Italy $3.1 43.6 18 / 25 27.9 99.9

24-Oct-10 12-Jan-11 Banco Popolare Italy $3.0 70.7 7 / 5 29.0 99.8

24-Jan-14 27-Mar-14 Banco Popolare Italy $2.0 50.7 17 / 18 31.7 99.1

23-Mar-16 2-Jun-16 Banco Popolare Italy $1.0 65.6 9 / 7 29.6 99.4

Average ITA above $3bn $ 5.9 68.5 - 32.2 99.5

Average ITA all deals $ 5.0 67.4 - 31.5 99.5 Ital

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The €13bn UniCredit capital increase implied raising 79.1% of its market cap at terms announcement and c. 100% on pre-announcement prices

Although very significant in absolute and relative terms, such metrics are not be unprecedented in the European context

12

Timetable – Execution Milestones

Deal was launched on a tight timetable, with only seven weeks between announcement and launch

This compares with a median of 11 weeks for Italian banks rights issues above €1bn

Long pre-underwriting period common in Italian rights issues due to EGM approval (requiring 30 days notice) and Consob approval process

UniCredit was the first Italian bank to launch its rights issue on the back of 3Q16 results included in the documentation then integrated with preliminary FY2016 included in a supplement

Only previously done by Saipem (€3.5bn rights issue) in 2016

Overview of Main Deal Timetable Milestones Date Event

13 December UniCredit Capital Markets Day

Rights Issue Intention announced

14 Dec – 21 Dec Investor meetings round I (on the back of ‘Transform 2019”)

9 - 10 January Investor meetings round II

12 January UniCredit EGM

16 – 29 January Investor meetings round III

23 January 10 to 1 share regrouping effective

1 February UniCredit BoD to set rights issue terms / Syndicate Banks sign UWA

Rights Issue Terms set and announced to market

2 February Consob approves Prospectus and published over the weekend

6 February Start of the subscription period Stock goes ex-rights

6 – 10 February Deal roadshow

6 – 17 February Rights trading period

9 February Preliminary FY 2016 Results and supplement to the Prospectus

6 – 23 February Subscription period

23 February Preliminary take-up announced (99.8%)

27 February Auction of unexercised rights start (up to potentially 3 March)

All rights sold on the first auction

2 March Last day to exercise the unexercised rights sold in auction

Final take up announced (100%)

Underwriting dates Offering Dates

12

We

eks

7 W

ee

ks 4

We

eks

Pre

-Un

der

wri

tin

g P

erio

d

Un

der

wri

tin

g P

erio

d

# Banks Role Underwriters Pre U/W U/W

6 Joint Global Coordinators

€1,146m U/W each

5 Co-Global Coordinators

€557m U/W each

10 Joint Bookrunners

€388m U/W each

11

Junior Members Co-Bookrunners, Co-Lead Managers

and Co-Managers

From

€200m to €40m U/W

32

€13bn €13bn

13

Overview of Syndicate Structure

UCG CIB not underwriting

ABN Amro, Banca Akros, Caixa, Danske, Equita,

Haitong, Jefferies, KBW, Macquarie, RBC, SMBC

Underwriting Syndicate

Banca IMI, BBVA, BNP, Barclays, Commerzbank,

Crédit Agricole, Natixis, Santander, Société Générale

majority of €13bn Pre-UW

@ Dec. 13th

minority of €13bn Pre-UW

@ Dec. 13th

Important signaling effect with a core group of banks providing pre-undewriting for full €13bn at announcement, then syndicate to a further group of more junior banks for the full undewriting

Further Pre-UW

@ End Dec

____________________ Source: Offering Circular, press releases.

UniCredit’s €13bn rights issue was the largest ever done in Italy and required a wide underwriting syndicate with a total of 32 banks included

Similarly in 2012, the €7.5bn UniCredit rights issue included 27 banks with a similar syndicate structure

Only the most senior banks provided pre-underwriting at announcement of the transaction up for the full €13bn amount with the Joint Bookrunners added later ahead year end

Junior bookrunners added only at the underwriting stage of terms setting

0

20

40

60

80

100

120

140

9

10

11

12

13

14

15

16

07-nov-16 22-nov-16 07-dic-16 22-dic-16 09-gen-17 24-gen-17 08-feb-17 23-feb-17

14

Share Price Performance Overview

Post Referendum and into the Capital Markets Day (‘CMD’), UCG’s strongly outperformed Italian market and European Banks

Strong underweight positioning by investors in Italian financials supported performance once Referendum overhang removed

UCG’s strategic plan and Rights Issue intention announced at CMD were very well received and stock had the largest 1 day gain since May 2010

€13bn RI perceived as a “once and for all” clean-up supporting share price action

Post terms setting, stock traded within tight range as usual for rights issues

Post some initial weakness, share price recovered to above ex-rights date by the middle of the subscription period, touched a low around delivery of new shares (post preliminary take-up) and rallied into the final take up

Volume (m) EuroStoxx Banks

09-Mar-17

€ per share Volumes (m) Underwriting Period Pre-Underwriting Period

+1%↑

13 Dec 2 Mar Key Events Impacting Performance:

4 Dec: Italian Referendum

13 Dec: UCG CMD / RI Announ.

26 Dec: BMPS recap fails

1 Feb: Terms setting for UCG RI

6 Feb: UCG goes ex-rights

6-17 Feb: Rights trading period

6-23 Feb: Subscription period

23 Feb: Preliminary take-up

3 Mar: Final take-up

4th Dec Italian Referendum

+16%↑

+10%↑

26th December BMPS Recap Fails

1 Feb

8th Nov US

Elections

-6%↓

Date Closing Price Performance

08/11/2016 11.0949

02/12/2016 10.4435 -5.9%

12/12/2016 12.1473 16.3%

01/02/2017 13.33 9.7%

23/02/2017 12.44 -6.7%

02/03/2017 13.50 1.3%

UCG lagged the broader sector recovery which followed US elections’ result

Market was pricing in highly expected and sizeable capital increase, as well as a negative, although uncertain, outcome of the Italian Referendum

Speculation on early Italian

elections

FTSEMIB UCG Share Price

____________________ (1) Bloomberg, as of 9 March 2017.

-5

20

45

70

95

120

145

170

195

no

v-0

7

apr-

08

ott

-08

mar

-09

set-

09

mar

-10

ago

-10

feb

-11

lug-

11

gen

-12

lug-

12

dic

-12

giu

-13

no

v-1

3

mag

-14

ott

-14

apr-

15

ott

-15

mar

-16

set-

16

mar

-17

15

Main Terms in Setting Discount to TERP

Attractive Valuation

Size vs. Percentage of Pre-Money Market Cap % of Pre-Money

Market Cap

Avg. Size: $7.5bn Avg. Mkt Cap: 17%

Avg. % of Mkt Cap: 147% Avg. % Take-up: 99.7%

MPS

MPS

CBK DB

LLOY MPS

ISP DB CS

Italy Germany France, Switzerland and Netherlands Spain UK & Ireland Size of Deal ($bn)

BARC SC DB

Supportive Investor Feedback

“Likely subscribe as they think UniCredit is very investible and the restructuring will have great benefits for their competitiveness” Asian Long Only

“Impressive management team, think they will deliver so will subscribe”

European Long Only

“Looking to subscribe to their rights in full so effectively doubling their position”

European Long Only

Normalising Volatility Equity markets volatility normalised and compressed, UniCredit’s implied volatility also stabilizing

0

50

100

150

200

250

5

10

15

20

25

30

35

40

45

Jan-16 Mar-16 Jun-16 Aug-16 Nov-16 Feb-17

VIX Index V2X Index

US Elections

15.1%

11.0

Italian Referendum

Brexit Referendum

%

86.6%

Important parameters when setting discount to TERP:

Absolute and relative size of capital raise

Pro-forma valuation on a stand-alone basis and versus sector

Market and stock volatility

Supportive investor feedback

0.59x

0.99x

UCG Peers

P/TBV Prior to Launch (1 Feb)

1

2 3 4

0.53x

0.97x

UCG Peers

P/TBV Prior to Announcement (12-Dec)

UCG valuation pro-forma for announced disposals and €13bn rights issue

1

2

3

4

62.8%

%

UCG 30D Implied Volatility

____________________ Source: FactSet, company data. UCG Pro forma for €13bn capital increase and disposals of Pekao and Pioneer. Peers set includes: SAN, BNP, UBS, ING, BBVA, ISP, SocGen, CASA, DBK, CS, StaCha, KBC, ABN, Erste, CBK.

Native Excel

Link _ _ _

16

Rights Trading Period - Trading in Rights & Shares

Market Share in Ord. Market Share in Rights

Overall, c. 45% of total rights offered were traded, with the trading peak reached during the last day of subscription, as customary

Relatively lower trading of rights signal of support from shareholders in the deal

Average rights traded in Italian banks rights issues is approx. 70%

In the 2012 UniCredit’s rights issue c.82% of rights outstanding were traded over the two weeks

Overview of Rights Trading

30

23

18

22 22

22

27 26

34

50

31

39

28

35 36 35

41

46

38

58

4,8%

8,6%

11,5%

15,0%

18,6%

22,1%

26,5%

30,8%

36,4%

44,4%

0

10

20

30

40

50

60

70

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

06 Feb 07 Feb 08 Feb 09 Feb 10 Feb 13 Feb 14 Feb 15 Feb 16 Feb 17 Feb

Rights Volumes Ordinary Shares Volumes % Traded of Total Rights Oustanding

____________________ (1) Bloomberg, as of 17 February 2017.

-3,0%

-2,5%

-2,0%

-1,5%

-1,0%

-0,5%

0,0%

Cost of Subscription Spread Average

-7,0%

-6,0%

-5,0%

-4,0%

-3,0%

-2,0%

-1,0%

0,0%

Theoretical Rights vs. Rights Price Spread Average

17

Rights Trading Period – Arbitrage in Rights

Rights Value Spread Cost of Subscription Spread

Rights Price = Trading Price

Theoretical Rights Price = (Last Price – Subscription Price) * Ratio

Spread = (Cost of Subscription via Rights / Cost of Subscription via Shares) – 1

Cost of Subscription via Rights = (Last Price of Rights*# of Rights) + (Subscription Price*# of New Shares)

Cost of Subscription via Shares = (# of New Shares*Share Price)

Note: 1 right for every 1 existing share

For every 5 rights a shareholder is entitled to subscribe to 13 new shares

Spread = (Theoretical Rights price / Rights Price ) – 1

UniCredit’s rights issue was characterized by a narrow arbitrage gap on both the rights value and the cost of subscription, implying a healthy trading dynamic throughout the rights issue

(1.3%)

(2.8%)

(0.5%)

(1.0%)

% %

____________________ (1) Bloomberg, as of 17 February 2017.

11.0

11.5

12.0

12.5

13.0

13.5

14.0

14.5

15.0

01-Feb 04-Feb 07-Feb 10-Feb 13-Feb 16-Feb 19-Feb 22-Feb 25-Feb 28-Feb 03-Mar 06-Mar 09-Mar

18 ____________________ Source: FactSet, company data. UCG Pro forma for €13bn capital increase and disposals of Pekao and Pioneer. DB pro forma for the announced €8.0bn capital increase. Peers set includes: SAN, BNP, UBS, ING, BBVA, ISP, SocGen, CASA, DBK, CS, StaCha, KBC, ABN, Erste, CBK. (1) Prices as at 1 February 2017. (2) Prices as at 6 February 2017. (3) Prices as at 10 March 2017.

14.3

13.3

0.59x

0.99x

UCG Peers

0.63x

1.03x

UCG Peers

0.54x

0.98x

UCG Peers

P/TBV Prior to Launch (1)

P/TBV Post Technical Discounting (2)

P/TBV Post Rights Issue (3)

UCG Share Price (€)

UCG Market Valuation Since Setting of Rights Issue Terms Share Price and P/TBV Multiple Evolution

Banco Popolare €1bn Case Study

19

Banco Popolare €1bn Rights Issue – Transaction Summary

Issuer Banco Popolare Società Cooperativa

Listing / Ticker

Milan Stock Exchange

BP IM Equity

c. Offer Type Fully underwritten rights offering

Offer Size / Statistics

Gross proceeds of €996m / $1,134m

166.5m new ordinary shares issued

Ratio: 9 new shares for every 7 existing

Subscription price: €2.14

Discount to TERP: 29.3% (vs. previous day closing price)

Use of Proceeds

Primarily to strengthen BP’s capital structure as requested by the ECB in evaluating the merger between BP and BPM and, in the medium term, in the event that the merger will not be consummated, to improve BP’s regulatory capital (specifically, the Common Equity Tier 1 Ratio with a view to enhancing the coverage ratio for total non-performing loans) to enable the Bank to strategically position itself in the market and take those opportunities that might arise from future economic growth

Take-up

99.4% before auction of unexercised rights

All unexercised rights sold by second day of auction

Key Dates

Announcement: 23 March 2016

BoD Approval and Announcement of Terms: 2 June 2016

Rights Trading Period: 6 June – 16 June

Subscription Period: 6 June – 22 June

First Take-Up Announcement: 22 June

Final Take-Up Announcement: 30 June

20

Banco Popolare €1bn Rights Issue – Transaction Summary (Cont’d) “Documento di Registrazione”

AVVERTENZE PER L’INVESTITORE ............................................................................................................... 1

DEFINIZIONI .............................................................................................................................................. 13

GLOSSARIO ............................................................................................................................................... 19

1. PERSONE RESPONSABILI ....................................................................................................................... 27

2. REVISORI LEGALI DEI CONTI .................................................................................................................. 28

3. INFORMAZIONI FINANZIARIE SELEZIONATE ......................................................................................... 29

4. FATTORI DI RISCHIO .............................................................................................................................. 58

5. INFORMAZIONI SULLA SOCIETÀ ......................................................................................................... 136

6. PANORAMICA DELLE ATTIVITÀ ........................................................................................................... 153

7. STRUTTURA ORGANIZZATIVA ............................................................................................................. 189

8. IMMOBILI, IMPIANTI E MACCHINARI ................................................................................................. 193

9. RESOCONTO DELLA SITUAZIONE GESTIONALE E FINANZIARIA .......................................................... 194

10. RISORSE FINANZIARIE ....................................................................................................................... 225

11. RICERCA E SVILUPPO, BREVETTI E LICENZE ...................................................................................... 232

12. INFORMAZIONI SULLE TENDENZE PREVISTE .................................................................................... 233

13. PREVISIONI O STIME DEGLI UTILI ..................................................................................................... 239

14. ORGANI DI AMMINISTRAZIONE, DI DIREZIONE E DI VIGILANZA ...................................................... 256

15. REMUNERAZIONI E BENEFICI ........................................................................................................... 295

16. PRASSI DEL CONSIGLIO DI AMMINISTRAZIONE ............................................................................... 310

17. DIPENDENTI ...................................................................................................................................... 321

18. PRINCIPALI AZIONISTI ....................................................................................................................... 325

19. OPERAZIONI CON PARTI CORRELATE ............................................................................................... 326

20. INFORMAZIONI FINANZIARIE RIGUARDANTI LE ATTIVITÀ E LE PASSIVITÀ, LA SITUAZIONE FINANZIARIA E I PROFITTI E LE PERDITE DELLA SOCIETÀ ....................................................................... 331

21. INFORMAZIONI SUPPLEMENTARI ..................................................................................................... 377

22. CONTRATTI IMPORTANTI ................................................................................................................. 397

23. INFORMAZIONI PROVENIENTI DA TERZI, PARERI DI ESPERTI E DICHIARAZIONI DI INTERESSI …...... 406

24. DOCUMENTI ACCESSIBILI AL PUBBLICO ........................................................................................... 407

25. INFORMAZIONI SULLE PARTECIPAZIONI .......................................................................................... 408

Table of Contents “Documento di Registrazione”

21

Transaction Structure

Exchange Ratio

Capital Increase

Merger between Banco Popolare and BPM through the incorporation of a new banking holding in the form of joint stock company (the

“NewCo”)

The NewCo, established in the form of joint stock company, to operate as both a bank and a holding company with operating functions as

well as responsibilities of coordination and management of all the companies being part of the New Group

Through the Merger, Banco Popolare and BPM to transform from cooperative banks into joint stock companies in line with the provisions

envisaged in the Italian Government’s reform of the cooperative banks

Capital increase carried out by Banco Popolare for a total amount of €1bn ahead of the approval of the Merger by the Extraordinary

General Meetings

Exchange ratio set according to the following equity shareholdings in the New Combined Entity:

54.6% of the share capital to the shareholders of BP

45.4% of the share capital to the shareholders of BPM

Above-mentioned exchange ratios already accounting for Banco Popolare €1bn capital increase

Capital strengthening process by Banco Popolare in order to provide the New Group with an adequate capital base in light of its

prospective role and relevance within the Italian and European banking sector

Capital increase for €1.0bn to be executed ahead of the merger

Pre-underwriting commitments of Bank of America Merrill Lynch and Mediobanca – Banca di Credito Finanziario S.p.A.

____________________ Source: Company data.

Merger Between Banco Popolare and BPM Transaction Overview

22

Clear Mission

Critical Mass

Strong Competitive Positioning

A Banking Group with national size, leader in the wealthiest areas of Italy

Solid capital base and excellent liquidity profile, coupled with a growing and sustainable profitability

Value creation through improved efficiency, significant synergies, rationalization of product offering and development of a multi-channel network

4 million customers and c.2,500 branches

Total assets of €171bn

Direct funding of €120bn and customer loans of €113bn

Indirect funding of €105bn, of which c.€56bn of assets under management

3rd banking group in Italy, with a market share above 8% by number of branches

Focus on Northern Italy: 3rd player with 11% market share

Leadership in the wealthiest regions of the country: Lombardy (1st – 15.5% m.s.), Piedmont (3rd – 12.5% m.s.), Veneto (3rd – 9.5% m.s.), Tuscany (3rd – 9.7% m.s.), Emilia Romagna (4th – 7.6% m.s.), Liguria (2nd – 14.7% m.s.)

Market leader in the wealthy provinces including: Verona, Milan, Novara, Bergamo, Lodi and Lucca

Merger Between Banco Popolare and BPM (Cont’d)

Diversified Revenue Drivers

Strong potential to expand customer base

Excellent positioning in:

Asset Management

Private Banking

Corporate & Investment Banking

Bancassurance

Consumer Finance

Significant Value Creation Potential

Fully phased pre-tax synergies preliminarily estimated in euro ~460 million per year

Cost synergies = c.€320m (equal to ca. 10% of the 2015 combined cost base of the two Groups)

Revenue synergies = c.€138m (equal to almost 3% of the 2015 revenue base of the two Groups)

One-off integration costs estimated at approximately 150% of cost synergies, in line with previous comparable transactions

____________________ Source: Company data, investor presentation.

Merger Rationale

23

Among other things, the ECB as a pre-requisite for the Merger requested that the New Group immediately has coverage ratios for

bad loans and NPEs at least equal to 62% and 49% respectively (i.e. the average coverage ratios of the three largest banks in Italy)

In this respect, as of December 31, 2015, and as of March 31, 2016, Banco Popolare’s coverage ratios for bad loans and NPEs were

lower than the average coverage ratio of the three largest banks in Italy

The targeted coverage ratios for bad loans and NPEs of the New Group, Banco BPM, were planned to be progressively achieved

during 2016 and in any case before the date of the merger (1st January 2017) (1)


____________________ Source: Company data, Banco Popolare’s Documento di Registrazione disclosure. (1) Targets achieved as at year end 2016 foreseeing the application of IFRS 3, i.e. fair value valuation due with the opening of the FY 2017 financial statements (1st January 2017) of ex BPM loans acquired in the merger. (2) Figures including write-offs.

ECB Request for the Coverage Ratios for Non-Performing Loans of the New Group

ISP MPS UCG Average BP (2) Banco BPM (2)

Average coverage ratio for bad loans 61.8% 63.4% 60.5% 61.9% 56.3% 57.2%

Average coverage ratio for non-performing loans

47.6% 48.5% 50.9% 49.0% 43.7% 43.8%

Figures as of December 31, 2015

ECB Request

24


____________________ Source: Company data, Banco BPM investor presentation. (1) Data as of June 2015. (2) For BNL customer loans as of December 2015 as reported by the parent company BNPP; direct funding as of December 2014.

4.144 3.873

2.467

2.133 1.813

1.554

1.216

834 812 654 636

ISP UCI NewGroup

BMPS BP UBI BPER CARPR BNL BPM CRED

298

215

113 111 85 78 77

44 37 34 25

ISP UCI NewGroup

BMPS UBI BP BNL BPER CARPR BPM BPVi

311

278

120 119

92 82

47 45 38 37 30

ISP UCG NewGroup

BMPS UBI BP BPER BNL BPM CARPR BPSo

(1)

#3 #9 #4 #1 #2 #3 #5 #6 #7 #8 #10 #3 #9 #4 #1 #2 #3 #5 #6 #7 #8 #10

#3 #9 #4 #1 #2 #3 #5 #6 #7 #8 #10

Distribution Network (# of Branches in Italy, 2015YE) Net Customer Loans in Italy (€bn, 2015YE)

Direct Funding in Italy (€bn, 2015YE) Total Indirect Funding (€bn, 2015YE)

(1)

(1)

(2)

(2)

Creation of a New Top Player in the Italian Banking Landscape

144

289

56 56 49 35 25 30 21 18 28

525 494

106 105 80 71 59 49

34 34 33

UCG ISP BMPS NewGroup

UBI BP CARPR BNL BPM BPER CRED

#3 #9 #4 #1 #2 #4 #5 #6 #7 #8 #10

Early June

Mid June

Banco Popolare EGM

Signing of Pre-Underwriting Agreement and announcement of Capital Increase by Banco Popolare BoD

Announcement of Q1 2016 Results

Company BoD set the terms of the rights issue Consob approved the Prospectus

Start of the offer period Stock went ex-rights

Rights trading (6-16 June) and subscription period (6-22 June)

Preliminary take-up announcement

Final Take-Up Announcement (99.4%)

Brexit referendum

End of June Early July

Half May

25

M&A and Rights Issue Timelines

M&A Process Rights Issue

23 March Banco Popolare BoD and BPM Management and Supervisory Board approved and signed MoU

ECB and BankIT released the relevant authorisations

Banco Popolare BoD and BPM Management and Supervisory Board approved the Merger Plan

Merger was effective / Set-up of the New Group

10 May

23 May

8-9 Sep

7 May

1 Jan 17

2-3 June

6 June

6-22 June

22 June

30 June

Presentation to the investor community of the joint BP-BPM business plan for 2016-2019

EGMs of BP and BPM approved: (i) the Merger and conversion into Joint Stock Company

(ii) the articles of association of the NewCo 15 Oct

23 June

16 May

____________________ Source: Company data.

26

Announcement of the capital raise well expected on the back of the ECB letter highlighting need of strong capital position

Actual structure of capital raise left open for both a pre-emptive offer and in combination with an equity linked instrument

Although a 99.4% take-up was achieved, the stock failed to fully recover in the wake of Brexit driven uncertainty

Potential for merger not going through Shareholders’ vote also held stock back until vote on 15 October 2016

BP announced the merger with Popolare Milano on 23 March

Since the start of 2016 the stock heavily suffered the European macro uncertainty as well as the deteriorating sentiment towards Italian banks and the NPL situation

0,0

10,0

20,0

30,0

40,0

50,0

60,0

1,5

2,5

3,5

4,5

5,5

6,5

feb-16 mar-16 apr-16 mag-16 giu-16 lug-16

Banco Popolare Share Price Performance Overview

€ per share Volumes (m)

(40%)↓ YTD 23 Mar 2 Jun 1 Jul

23rd June Brexit Referendum

Key Events Impacting Performance:

23 Mar: RI Announcement

02 Jun Announcement of terms

6-16 Jun: Rights trading period

6-22 Jun: Subscription period

22 Jun: Final take-up

23 Jun Brexit Referendum

(41%)↓

Volume Traded Banco BPM Share Price

Underwriting Period Pre-Underwriting Period

(30%)↓

Notwithstanding the good feedback and shareholder’s support in the deal, BP’s shares suffered on a performance basis due to upcoming Brexit uncertainty

During subscription period, share price always remained above subscription, although with a thin buffer post the Brexit vote

____________________ (1) Bloomberg, as of July 2016.

Appendix A – Additional Materials on Rights Issues

Rationale for a

Discount

Discount used to mitigate the risk of an excessive

stock price fall during the offer period

As long as rights have a positive value (i.e. that the

stock doesn’t trade below subscription price), the

market has an economic incentive to subscribe

Discount

Neutrality

From a portfolio point of view, the level of discount

is theoretically irrelevant, as this is a ‘zero-sum

game’ to existing shareholders

Discount impacts value of shares vs. value of rights;

but the sum is not affected

27

The TERP

The TERP Discount The Theoretical Ex Rights Price (“TERP”)

Theoretical price at which the shares should trade, once the rights are detached

TERP =

(Current Shares Outstanding * Current Share Price) + (Newly Issued Shares * Subscription Price)

(Current Shares Outstanding + Newly Issued Shares)

Current Share Price

TERP Subscription Price

Theoretical Value of Detached Rights

Discount to TERP

The discount to TERP represents the difference in % between the subscription price and the TERP

Share Price Pre - Rights Issue = Rights Value + TERP

A weighted average of the old share price and the subscription price for the new shares

28

A Numerical Example

Shareholder Options ─ Illustrative Examples

Rights issue discount does not create or destroy any value for the issuer or its shareholders

Options Available to Shareholder

Investor X Subscribes Status Quo

Investor X Initial Shareholding

Investor X Sell Rights

Investor X Tail-Swallows

Share Subscribed (m) 25

Rights Sold (m) -

Cost of Subscription (€m) (125)

Cash In from Rights Sold (€m) -

Final No. Of Shares Held (m) 50

Value of Final No. Of Shares Held (€m) 375

Final % of Capital 1.25%

Cash Investment (€m) (125)

Total Value of Portfolio Net of Cash Investment (€m) 250

-

25

-

63

25

188

0.63%

63

250

8

17

(42)

42

33

250

0.83%

-

250

1 2 3

Initial Share Price (€) 10.00

Shares O/S (m) 2,000

Market Cap (€m) 20,000

New Shares Issued (m) 2,000

Issue Price (€) 5.00

Capital Increase Amount (€m) 10,000

TERP (€) 7.50

Value of Right (€m) 2.50

Discount to TERP (%) 33.3%

Position in Shares (m) 25

Value of Position (€m) 250

% of Capital (%) 1.25%

Value of Ex-Right Shares (€m) 188

Value of Rights (€m) 63

New Shares X is Entitled to (m) 25

29

The Underwriting Process

Role of Investment Banks in Rights Issues

Underwriting

Rights issues are typically underwritten at subscription price when terms are set

Banks guarantee to buy any shares offered to shareholders but declined by them and not sold into the market

Economics of underwriting arrangements involve the assumption of risk and transaction management by the

underwriter(s) against payment of fees by the issuer

Stand-by

Underwriting

When issuers announce capital increases a few months ahead of the start of the offer, banks usually provide

stand-by underwriting agreements to ensure the issuer will be able to raise the announced proceeds

These agreements are normally not based on a firm price, but only on volume

Sub-Underwriting

Banks might decide to decrease their underwriting exposure shifting part of their risk to other banks or

institutional investors

Syndicate members typically profiting from different fee levels

Joint Global Coordinators

Joint Bookrunners

Co-Lead Managers

Sub-Underwriters

Manage execution process and lead pricing discussions Typically take 50-60% of the economics

Involved in process and pricing discussions Take c. 20-30% of the economics

Junior layers considered for relationships purposes Lower underwriting quota and fees

Often hedge funds Not officially part of the banking syndicate (do not face the issuer)

Take the bulk of risk / fees

Deal Syndicate

Appendix B – Table of Contents of UniCredit’s “Documento di Registrazione”

30

____________________ Source: company data.

UniCredit’s “Documento di Registrazione” Detailed ToC

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UniCredit’s “Documento di Registrazione” (Cont’d) Detailed ToC

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