Verbatim Excerpts From The Banca MPS FY 2012 Press Release

In 2012, the Montepaschi Group operated in an extraordinarily complex market environment characterised by a progressive slowdown in the economic growth and an exacerbation of the sovereign debt crisis in the Eurozone which caused an abrupt increase in credit spreads and restricted access to interbank and institutional markets, triggering at the same time a negative spiral for both stock prices and Italian government bonds.

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The unfavourable economic cycle, combined with persisting financial instability and a reduced confidence level of businesses and households led to an exceptional deterioration in credit quality.

Loan loss provisions grew to EUR 2.7 bn with a provisioning rate of 188 bp under a provisioning policy in line with the current economic context.
Net impairment losses (reversals) on loans totalled approx. EUR 2,672 mln (vs. EUR 1,297 mln as at 31/12/2011), with Q4 2012 contributing roughly EUR 1,372 mln.

The impairment test on the Group's goodwill did not result in any losses other than those posted in the 2012 half-year report, when goodwill impairment losses were recognised in the consolidated accounts for an aggregate amount of EUR 1,528 mln.

Net profit: -EUR 3.17 bn after total impairment charges of EUR 1.6 bn, of which EUR 1.5 bn on goodwill and approximately EUR 110 mln on Intangibles.

The trend in direct funding was affected by the downturn in funding with institutional counterparties. Wholesale funding conditions for Italian banks continued to be very difficult for most of the year.;