PRESS RELEASE

BANCA MPS: BOARD APPROVES PRELIMINARY 2021 FY RESULTS

POSITIVE REVENUE TREND CONFIRMED FOR THE YEAR (+1.3% Y/Y1 +3.2 Q/Q)

NET INTEREST INCOME (-5.4% Y/Y2, +3.1 Q/Q, AND +3.6%3 VS. 4Q20)

ONGOING REDUCTION IN COMMERCIAL SPREAD VS. SYSTEM: COST OF DEPOSITS REDUCED BY 9 BPS OVER THE YEAR AND INTEREST RATES ON NEW LOANS HIGHER THAN ON BACKBOOK

GROWTH IN COMMISSIONS FOR THE YEAR (+3.8% Y/Y4) AND THE QUARTER (+3.6% Q/Q),

DRIVEN BY WEALTH MANAGEMENT FLOWS OF OVER EUR 14 BILLION, WELL ABOVE

PRE-COVID FIGURE (EUR +3 BILLION VS. 2019)

COST RATIONALISATION PROCESS CONTINUES:

OPERATING COSTS FALL 3.6% Y/Y, WITH PERSONNEL COSTS REMAINING STABLE

DESPITE NO RENEWAL OF TRADE UNION AGREEMENTS; SHARP REDUCTION IN OTHER

COSTS AND AMORTISATION (EUR -11.9% Y/Y, EUR -179 MILLION VS. 2019)

PRE-PROVISION PROFIT AT EUR 874 MILLION (+15.3% Y/Y)

COST OF CREDIT AT 31 BPS, IN LINE WITH THE COST OF CREDIT IN 2020 (EXCLUDING

HYDRA TRANSACTION CONTRIBUTION AND COVID-RELATEDWRITE-DOWNS)

2021 NET OPERATING PROFIT AT EUR 629 MILLION (EUR -20 MILLION5 IN 2020)

NET PROFIT FOR THE YEAR AT EUR 310 MILLION (EUR -1,687 MILLION IN 2020)

ROTE AT 5.3% DESPITE NEGATIVE IMPACT OF SYSTEMIC CHARGES OF AROUND 3

PERCENTAGE POINTS

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  1. +5.0 % proforma, net of Hydra transaction in 2020 figures.
  2. +2.2 % proforma, net of Hydra transaction in 2020 figures.
  3. +9.4 % proforma, net of Hydra transaction in 2020 figures.
  4. +5.6% net of the cost of synthetic securitisation transactions.
  5. EUR +48 millions proforma, net of Hydra transaction in 2020 figures.

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SIGNIFICANT PROGRESS MADE IN 2021 TO IMPROVE THE BANK'S RISK PROFILE:

MORATORIA: -98% VS. JUNE 2020

STAGE 2 GROSS LOANS REDUCED BY EUR 2.7 BILLION IN 2021, WITH IMPACT ON

PERFORMING LOANS IN LINE WITH PRE-COVID LEVELS

TOTAL GROSS NPE STABLE AT EUR 4 BILLION, DESPITE NO LOAN DISPOSALS AND

INTRODUCTION OF NEW DEFINITION OF DEFAULT

COVERAGE LEVELS UP 3.8 PERCENTAGE POINTS6 VS. DECEMBER 2020

"EXTRAORDINARY" LEGAL DISPUTES RELATED TO FINANCIAL DISCLOSURE DOWN 70%

VS. 2020

TOTAL ASSETS REDUCED BY OVER EUR 12 BILLION THANKS TO ASSET OPTIMISATION

EFFORTS

****

STRONGER CAPITAL LEVELS: 140 BPS OF CAPITAL GENERATION IN 2021, THANKS TO PROFIT FOR THE YEAR AND CAPITAL MANAGEMENT ACTIONS, ONLY PARTLY OFFSET BY REGULATORY IMPACTS (-30 BPS)

FULLY LOADED CET 1 RATIO AT 11.0%

(9.9% IN DECEMBER 2020)

TRANSITIONAL CET1 RATIO: 12.5%

(12.1% IN DECEMBER 2020)

****

COMPARED TO PUBLIC TARGETS7:

REVENUES: +2.9% THANKS TO IMPROVEMENT IN COMMISSIONS (+3.2%)

OPERATING COSTS: -2.3%, WITH OTHER OPERATING COSTS DOWN -14%

COST OF CREDIT AT 31 BPS COMPARED TO 87 BPS EXPECTED

HIGHER CAPITAL LEVELS8 WITH NO SHORTFALL COMPARED TO THE EUR 1.5 BILLION

EXPECTED

****

  1. Proforma figure that takes into account the impacts of calendar provisioning recognised under equity. "Stated" coverage: 47.9%.
  2. The comparison of P&L and balance sheet results refers to 2021 targets set in the 2021-2025 Plan, published on 17 January 2021 on the
    Bank's Group website.
  3. 2021 fully loaded CET1 ratio at 11% vs. a target (including capital increase of EUR 2 billion) of 10.9%.

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Siena, 7 February 2022 - The Board of Directors of Banca Monte dei Paschi di Siena S.p.A. has reviewed and approved the results as at 31 December 2021.

Group profit and loss results as at 31 December 2021

The Group's total revenues as at 31 December 2021 stand at EUR 2,980 million, up 1.3% Y/Y. Excluding the estimated contribution of the Hydra transaction, revenue growth would stand at 5%.

This increase is largely due to the rise in net fees and commissions, mainly as a result of higher income from wealth management, especially product placements and an increase in other income from banking business due to higher profits from the sale of securities and the greater contribution from the bancassurance partnership with AXA. In contrast, net interest income registers a downturn Y/Y, mainly owing to the lower contribution (approximately EUR 106 million) of the non-performing portfolio as a result, in particular, of the deconsolidation of the Hydra transaction portfolio at the end of 2020, as well as to the decline in asset yields caused by the trend in interest rates and a shift in the composition of exposures with a decrease in sight and short-term components and an increase in the medium/long term component. Net interest income, on the other hand, benefitted from the lower cost of commercial funding and from the positive effects of access to TLTRO3 auctions, albeit partly offset by the cost of increased deposits with central banks. Excluding the estimated contribution of the Hydra portfolio, net interest income would register a year-on-year increase of 2.2%.

Revenues in 4Q21 are up 3. 2% from the previous quarter. More specifically, there is a rise in net interest income (+3.1%), which benefitted from the ongoing cost of funding optimisation measures, as well as net fees and commissions (+3.6%), especially fees and commissions on payment services. The quarter-on-quarter comparison shows a decrease in other income from banking business, which was affected by the decline in the trading/hedging result. On the other hand, the contribution from bancassurance partnership with AXA has increased.

Net interest income as at 31 December 2021 stands at EUR 1,222 million, down 5.4% Y/Y. The decrease is mainly driven (i) by the lower contribution (approximately EUR 106 million) of the non- performing portfolio, particularly as a result of the deconsolidation of the Hydra transaction portfolio at the end of 2020, and also (ii) by the higher cost of institutional funding linked to the issues in the second half of 2020, (iii) by the lower contribution from BMPS' securities portfolio, partly as a consequence of sales carried out in 2020 and 2021, iv) by the negative contribution from hedging derivatives, and v) by the decline in asset yields caused by interest rate trends and a shift in the composition of exposures with a decrease in sight and short-term components and an increase in the medium/long term component. Net interest income, on the other hand, benefitted from the lower cost of commercial funding and from the positive effects, totalling EUR 279 million, of access to the TLTRO3 auctions, albeit partly offset by the cost, amounting to approximately EUR 93 million, of increased deposits with central banks. Excluding the estimated contribution of the Hydra transaction portfolio, net interest income would register a year-on-year increase of 2.2%

Net interest income in 4Q21 is up compared to the previous quarter (+3.1%), mainly thanks to the ongoing measures put in place by the Parent Company to optimise the cost of customer funding, the

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higher contribution from the MPS Capital Services portfolio as well as the lower cost of deposits with central banks as result of a decrease in average volumes.

Net fees and commissions as at 31 December 2021, amounting to EUR 1,484 million, are up compared to the previous year (+3.8%). The increase is attributable to the higher income from wealth management (+17.3%), driven both by higher commissions from product placements and higher continuing fees, which benefitted from an increase in average managed volumes and average yields. In contrast, commissions from traditional banking services register a downturn owing to the decline in commissions on loans (-5.3%), partly as a result of the shift in loans towards longer-term forms.

The 4Q21 result is up from the previous quarter (+3.6%) mainly due to the increase in commissions from traditional banking services (EUR +16.0 million), driven by income from payment services.

Dividends, similar income and profit (loss) on investments amount to EUR 113 million and are up from 31 December 2020 (EUR +12 million) thanks to the growth in income from the Bancassurance partnership with AXA9, which led to a higher contribution in the fourth quarter 2021 compared to the previous quarter.

Net profit (loss) from trading, financial assets/liabilities measured at fair value and gains from disposals/repurchases as at 31 December 2021 amounts to EUR 185 million, up EUR 16 million from the figures recorded in the same period of the previous year. The 4Q21 contribution, however, registers a downturn of EUR 20 million compared to the previous quarter. An analysis of the main aggregates shows the following:

  • Net profit from trading positive for EUR 25 million, down by EUR 11 million from the previous year owing to the lower contribution from MPS Capital Services, which also resulted in a 4Q21 result lower compared to previous quarter (EUR -18million).
  • Net profit from other financial assets and liabilities measured at fair value through profit and loss shows a positive balance of EUR 19 million, up from the positive contribution of EUR 15 million recorded in the previous year, also due to the capital gains registered on UCITS. The 4Q21 result amounts to EUR +5 million; essentially no contribution for 3Q21 affected by capital losses on debt securities.
  • Gains on disposals/repurchases (excluding customer loans at amortised cost) show a positive balance of EUR 141 million, up 19.6% year-on-year thanks to the higher profits from the sale of securities. The 4Q21 result is down EUR 7 million from the previous quarter owing to the lower profits from the sale of securities.

The following items also contribute to revenues:

  • Net income from hedging, in the amount of EUR +13 million, up from 31 December 2020 (at EUR +3.0 million) and with a lower contribution in 4Q21 compared to the previous quarter.

9 AXA-MPS is consolidated at net equity in the Group's financial accounts.

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  • Other operating expenses/income show a negative balance of EUR 36 million, an improvement on the result recorded in 2020 (at EUR -51 million) and with the 4Q21 contribution (EUR -11 million) registering an upturn from the previous quarter (EUR -13 million).

As at 31 December 2021, operating expenses amount to EUR 2,106 million, down from the previous year (-3.6%) and with the 4Q21 result rising against the previous quarter (+1.1%). An analysis of the individual aggregates shows that:

  • Administrative expenses stand at EUR 1,926 million and are down 2.6% Y/Y, with the 4Q21 contribution remaining largely steady against the previous quarter. Within the aggregate:
    o Personnel expenses, amounting to EUR 1,428 million, are up 0.9% Y/Y despite the downward headcount trend (due, first and foremost, to the 560 Solidarity Fund exits registered between 1 November 2020 and 1 January 2021), related to the contractual salary increases resulting from the renewed National Collective Labour Agreement and to the absence of savings resulting from the non-renewal of the company trade union agreement. The result in 4Q21 is down 2% from the previous quarter.
    o Other administrative expenses, amounting to EUR 498 million, are down compared to the previous year (-11.6%) thanks to the cost efficiency measures put in place. The 4Q21 rises against the previous quarter (+7.4%) following the typical year-end increase in expenditure.
  • Net value adjustments to tangible and intangible assets as at 31 December 2021 stand at EUR 180 million, down from the previous year (-12.7%), partly due to the introduction of the fair value measurement of real estate. The aggregate registers an increase from the previous quarter (+10.1%).

As a result of the above trends, the Group's 758 million as at 31 December 2020) with approximately EUR 16 million compared to

pre-provisionprofit amounts to EUR 874 million (EUR the 4Q21 result amounting to EUR 201 million, up by the previous quarter.

The cost of customer loans booked by the Group as at 31 December 2021 amounts to EUR -250million, compared to EUR -773 million in the previous year. The 2021 figure includes:

  • a positive effect of approximately EUR 124 million of lower provisioning resulting from the updated macroeconomic scenarios.
  • a negative impact of EUR 136 million deriving from the update of statistical valuation models (including EUR -99 million and EUR -37 million from the update of LGD and PD models respectively).
  • A negative impact of EUR -75 million as a result of methodological refinements relating to the valuation of government-backed exposures and unsecured UTPs with a certain vintage.

The figure for 2020 included a negative effect of around EUR 348 million linked to the changed macroeconomic scenario that emerged following the outbreak of the COVID-19 pandemic.

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Banca Monte dei Paschi di Siena S.p.A. published this content on 07 February 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 07 February 2022 16:59:06 UTC.