Banca Popolare di Sondrio : Board of Directors' approval of solo and consolidated results; proposed dividend; Annual General Meeting

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Società cooperativa per azioni - founded in 1871

Head office: Piazza Garibaldi 16, 23100 Sondrio, Italy

Sondrio Companies Register no. 00053810149.

Official List of Banks no. 842.

Parent Company of the Banca Popolare di Sondrio Group - Official List of Banking Groups no. 5696.0.

Official List of Cooperative Banks no. A160536.

Member of the Interbank Deposits Protection Fund

Fiscal code and VAT number: 00053810149

Share capital: € 1,360,157,331 - Reserves: € 1,034,954,284

(figures approved at the shareholders' meeting held on 28/4/2018)

Press release

Board of Directors' meeting of 22 March 2019: approval of the 2018 separate and consolidated financial statements; proposed dividend of € 0.05 per share; notice of calling to the Shareholders' Meeting.

Positive results support the growth process.

The Board of Directors of Banca Popolare di Sondrio today examined and approved the consolidated and separate financial statements for 2018, expressing their appreciation for the results achieved. The preliminary consolidated balance sheet and income statement, approved on 11 February 2019 and published on the same date with a press release, to which reference is made, have not been subject to any changes.

In a complex and volatile economic and financial context that is difficult to read, the Group reaffirmed its peculiar qualities of operating capacity, profitability, solidity and prudence through the growth and diversification of loans. The profitability, supported by abundant liquidity and adequate capital, has allowed to increase the self-financing and, therefore, to improve the capital ratios. The volumes of NPEs have diminished, albeit in limited manner given the absence of sales to third parties. There was a significant increase in coverage levels which, as far as bad loans are concerned, are close to 70%.

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Banca Popolare di Sondrio

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CONSOLIDATED FINANCIAL STATEMENTS of the Banca Popolare di Sondrio Banking Group for 2018

• -Today, an amending and supplementary agreement between BPS, Fondazione CR Cento and the Holding CR CENTO S.p.A. to finalise the acquisition by BPS on the controlling interest of the share capital of Cassa di Risparmio di Cento S.p.A. has been signed.

• -Agreement for the acquisition of 70.77% of Farbanca S.p.A. for a maximum amount of € 30 million, signed on 7 March.

• -The consolidated profit of € 110.8 million, even if down on last year, shows the Group's resilience and its ongoing capacity to produce value over time and self-finance its growth. The result, which is significantly affected by the negative performance of financial markets, and is, among other things, positively influenced by NEXI spa's extraordinary dividend of € 20.8 million, was penalised by € 32.2 million from contributions towards stabilising the banking system.

• -Return on equity (ROE) comes to 4.4%.

• -As regards capital adequacy, the CET1 ratio (phased in) comes to 12.03%, up 43 basis points compared with 11.60% in 2017. The weighting of assets is done according to the standardised approach.

• -Short and medium-term liquidity indicators are at levels well above 100%.

• -The result of the core banking activity, the sum of net interest income (+3.7%) and net fee and commission income from services (+3.5%), increased by 3.6%.

• -The net profit from securities, given the adverse market condition, showed a substantial decrease (-91.7%) compared with 2017. It is, in fact, well known the increase in the perception of sovereign risk by national and international investors.

• -Traditional proximity to customers and reference communities: households and businesses were able to take advantage of new finance for more than € 2,500 million.

• -Direct deposits amount to € 31,063 million, compared with € 31,634 million in the comparative period (-1.8%); indirect deposits have seen a slight increase (+0.2%) to € 30,182 million compared with € 30,119 million in the comparative period.

• -Direct funding from insurance premiums comes to € 1,410 million, an increase of 5.6% compared with the previous year's volumes.

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Banca Popolare di Sondrio

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• -Gross impaired loans have decreased by € 53 million. Gross and net NPL ratios stand at 14.75% and 7.16% respectively, compared with 15.08% and 7.93% at the end of 2017.

• -Adjustments for credit risk amount to € 237.3 million compared with € 267.5 million in 2017. The cost of credit is 0.93% versus 0.90% in 2017. It has also taken into account the observations made by the ECB inspection team during the on-site inspection activities (Credit File Review) on the corporate and SMEs Corporate portfolios, representative, at the end of june 2018, reference date of the verification, of 48% of the loans to customers.

• -The coverage ratio for bad loans comes to 69.36%, while for impaired loans, taken as a whole, it stands at 55.64%.

• -The Texas Ratio, which is the ratio between total net impaired loans and tangible equity, has improved yet again, from 77.99% to 70.71%.

• -The phased in Leverage Ratio is positioned at 5.85%.

• -The net liquidity position at 3 months comes to € 9,595 million at 31 December 2018.

• -The staff, who are the company's main asset, number 3,254, thanks to 206 new hires with an average age of 28 years.

  SEPARATE FINANCIAL STATEMENTS of the parent company, Banca Popolare di Sondrio S.C.p.A, for 2018

• -Profit of € 83,623 million, the result of ordinary operations alone, with a reduction of 29.4% compared with the previous year.

• -Direct deposits amount to € 28,290 million (-2.6%).

• -Net loans to customers total € 21,484 million (-1.2%).

• -Assets under management amount to € 4,982 million.

• -Net fee and commission income from services has increased by 5%.

• -The cost of credit falls from 1.07% to 1.06%.

• -The cost-income ratio stands at 55.73%, from 47.51%.

• -The level of coverage of non-performing loans, calculated on the total of non-performing loans, increased from 51.18% to 55.76%, while on bad loans positions it rose from 65.67% to 68.95%.

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Banca Popolare di Sondrio

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The comparative income statement figures at 31/12/2017 are shown without any adjustments to the balances resulting from application of the accounting standards in force at the time. In other words, they cannot be compared on a like-for-like basis with the figures at 31/12/2018, which reflect the application of the accounting principle IFRS 9 introduced from 1 January 2018.

The comparative balance sheet figures at 31/12/2017, on the other hand, have been restated by incorporating the adjustments made by applying the accounting principl IFRS 9 introduced from 1 January 2018.

Separate figures (in millions of euro)

Financial year 2018	Financial year 2017	Change
Net interest income	437.3	425.7	+2.7%
Net fee and commission income	275.8	262.7	+5.0%
Overall result from securities trading	-4.2	137.4	n/a
Total income	754.3	844.5	-10.7%
Writedowns of loans and financial assets	222.8	267.8	-16.8%
Operating costs	420.4	401.2	+4.8%
Profit before tax	108.8	174.9	-37.8%
Profit	83.6	118.4	-29.4%

31 December 2018	1 January 2018	Change
Direct funding from customers	28,290	29,029	-2.5%
Indirect funding from customers	28,619	28,550	+0.2%
Insurance deposits from customers	1,410	1,336	+5.6%
Total funding from customers	58,320	58,915	-1.0%
Loans to customers	21,484	21,752	-1.2%

Theprofitat 31 December 2018 amounts to € 83.6 million, down by 29.4% compared with € 118.4 million in 2017, which was affected by a particularly favourable trend in financial markets.

Direct depositstotal € 28,290 million, -2.5% on 31 December 2017.Indirect fundingat market values, stands at € 28,619 million, +0.2% on 31 December 2017, whiledirect funding from insurance premiumsamounts to € 1,410 million, +5.6% on 31 December 2017.Total funding from customerstherefore comes to € 58,320 million, -1% on 31 December 2017.

Loans to customers, consisting of loans to customers measured at amortised cost and those at fair value through profit or loss, total € 21,484 million, down 1.2%

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in comparison with loans to customers at the end of 2017, written down by € 67 million on the first time adoption of IFRS 9 and equal to € 21,752 million.

Netimpaired loansamount to € 1,788 million, down 9.34%, and represent 8.32% of total loans compared with 9.07% at the beginning of 2018, with a coverage of 55.76% compared with 52.00% at the beginning of 2018. Within impaired loans, netbad loansamount to € 760 million, +1.9%; their incidence on total loans to customers comes to 3.54% compared with 3.43% at the beginning of 2018. The coverage of bad loans comes to 68.95% compared with 67.13% at the beginning of 2018.Unlikely to payloans amount to € 969 million (-14.9%), with an increase in coverage from 34.61% at the beginning of 2018 to 36.28% and an incidence on total loans of 4.51%.Past due exposures and/or impaired overdrawn accounts, always net of impairment,amount to € 59 million, down 32.4%, with a coverage ratio of 19.48% and an incidence on total loans of 0.28%.

The decline, even though limited, of non performing loans with the increase in coverage levels, the latter being in a position of pre-eminence in the Italian banking system, testify to the Group's historical prudence in credit management.

Financial assets,represented by own securities and derivatives, amount to € 11,109 million, -6.5% on 1 January 2018. The portfolio of financial assets measured at amortised cost (+42.1%) has increased significantly year on year; the portfolio of financial assets measured at fair value through other comprehensive income, on the other hand, has decreased (-35.8%).

Equity investmentsamount to € 562 million, an increase of 10.9% compared with 31 December 2017.

With regard to the components of the income statement, compared with the results at 31 December 2017,net interest incomecame to € 437.3 million, +2.7% on last year's € 425.7 million.

Net fee and commission income from serviceshas been showing a positive trend, coming in at € 275.8 million, +5%, thanks in particular to the positive trend in fees and commissions on the sale of asset management and insurance products, as well as those related to current account management and collection and payment services.

Thedividendscollected amount to € 45.4 million, a significant increase from € 18.6 million in 2017, thanks above all to an extraordinary dividend of € 20.8 million.

Thenet profit from securities, foreign exchange, derivatives and loans measured at fair value(the sum of income statement line items 80, 100 and 110) was negative for € 4.2 million, compared with a positive figure of € 137.4 million in the comparative period. In addition to discounting the negative effects of the higher volatility on financial markets during the 2018, this trend was also

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