Credem, 1H24 results approved

PRESS RELEASE

Today, Credem's Board of Directors, chaired by Lucio Igino Zanon di Valgiurata, approved the consolidated results of the first half 2024, confirming the effectiveness of the business model grounded in robust revenue diversification and the ability to sustainably create value and well-being over time for customers, individuals, shareholders, and the community.

1H24 closed with a consolidated Net Profit equal to €323.8 million (+8.4%), after the disbursement of €33 million in contribution to funds to support distressed banks and more than €4 million in provisions for the Guarantee Fund for life insurance policies, loans to customers(8) reached €35.2 billion (+1.2% YoY), and more than 92,000 new clients(7), total customers' funding reached €101.2 billion (+8% YoY), Gross NPL Ratio(4) stood at 1.87%, compared to 2.72% average of significant Italian banks and to 2.31% average of European banks(5), Net NPL Ratio stood at 0.78% and annualized cost of risk(6) was equal to 5 bps. At the end of June 2024 the Banking Group Common Equity Tier 1 Ratio(2) was 17.1%, Credemholding Common Equity Tier 1 Ratio(2) was 15.7% compared to 7.6%, the minimum assigned by ECB(3), annualized ROTE(1) stood at 20.0% and annualized ROE(1) at 17.4%.

"The excellent results achieved both in terms of profitability and growth in volumes reassure, on the one hand, the soundness of the strategy and the choices adopted so far and, on the other, offer us margin to further develop support activities in favor of families, corporates and communities", Angelo Campani, Credem General Director, declared. "Our development model, based on a broad diversification of revenue sources, once again confirmed its ability to respond to a rapidly evolving context and constantly create value," Campani continued. "Our strategy therefore enables us to continue the growth path by investing in our people and innovation, to increase the quality of the offer and to support customers with relationships of trust, thus supporting the country's economy", concluded Campani.

General Director Angelo Campani will present the results to the financial community tomorrow 6 August at 11:00 AM CEST Time.

Consolidated economic results(12)(*)

At the end of June 2024 operating income stood at €1,029.7 million, compared to €947.6 million of the previous year (+8.7% YoY). Within the aggregate, net interest income(13) was equal to €570.2 million compared to €504.3 million of the first half 2023 (+13.1% YoY). Non Interest Margin(14)(15) stood at €459.4 million compared to €443.3 million in the same period of the previous year (+3.6% YoY). In detail, net commission reached €356.4 million (+5.6% YoY) of which €251.4 million in AUM fees (+9.3% YoY) and €105 million in banking fees (-2.1% YoY). Contribution from financial activities reached €46 million (-15.1% YoY). Insurance income was €41.8 million (-8.8% YoY).

Operating costs(15) were €444.6 million compared to €413.1 million at the end of June 2023 (+7.6% YoY). In detail, the administrative expenses amounted to €142.8 million, +11.8% YoY, while staff costs were €301.8 million (+5.8% YoY).

Cost/income(16) stood at 43.2% compared to 43.6% in the first half of 2023.

Gross operating profit was €585.1 million compared to €534.4 million in the same period of the previous year (+9.5%). D&A amounted to €53 million compared to €51.5 million at the end of June 2023 (+2.9% YoY).

Net Operating profit was €532.1 million compared to €483 million in the first half 2023 (+10.2% YoY).

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Provisions for risks and charges(15) were €2.3 million compared to €9.4 million in the same period of the previous year. Loan loss provisions(15) were €9.4 million compared to €4.9 million at the end of June 2023 (+92.5% YoY). Annualized cost of risk(6) was equal to 5 bps.

Net extraordinary income/charges(15) was -€39.9 million (-€28.3 million at the end of June 2023) including €33 million, gross of the tax effect, of the contribution to funds to support distressed banks.

Profit before taxes was €480.5 million compared to €440.4 million in the first half 2023 (+9.1% YoY), while taxes for the period amounted to €156.7 million (€141.6 million at the end of June 2023, +10.7% YoY). Consolidated net profit stood at €323.8 million, +8.4% YoY, after the disbursement of €33 million in contributions to funds to support distressed banks and more than €4 million in provisions for the Guarantee Fund for life insurance policies.

Annualized ROTE(1) was 20.0%, annualized ROE(1) was 17.4%.

Consolidated balance sheet aggregates (8)(*)

Group Customer Funding at the end of June 2024 stood at €101,151 million compared to €93,672 million in the same period of the previous year (+8% YoY). Group Total Funding amounted to €117,011 million compared to €107,432 million at the end of June 2023 (+8.9% YoY). In detail, Direct Deposits from customers reached €38,262 million compared to €36,779 million in the first half of the previous year (+4% YoY). Group Direct Deposits amounted to €42,831 million compared to €40,665 million at the end of June 2023 (+5.3% YoY). Insurance reserves stood at €8.801 million, +8.6% compared to €8,102 million in the same period of the previous year. Premiums of life and non-lifeprotection products amounted to €45.2 million, (-2.4% YoY). Indirect Customer Deposit amounted to €54,088 million compared to €48,791 million at the end of June 2023 (+10.9% YoY). In detail, AUM amounted to €32,727 million compared to €31,406 million in the same period of the previous year (+4.2% YoY). Within the aggregate portfolio management accounts amounted to €6,110 million (+3.8% YoY), mutual funds and Sicav amounted to €14,296 million (+4.2% YoY), third-party products and other assets under management amounted to €12,320 million (+4.4% YoY).

The Group's liquidity reserves amounted to nearly €17 billion (€17.2 billion as of 31 March 2024) thanks to approximately €4.1 billion in deposits with central banks (€5.3 billion as of March 2024) and €7.1 billion in ECB eligible unencumbered assets (€5.7 billion as of March 2024).

Loans to customers stood at €35,178 million compared to €34,761 million in the same period of 2023, growing by 1.2% YoY (compared to the Industry(9) down by 2.4% in the same period) preserving a strong focus on asset quality. In detail, Residential Mortgages inflows amounted to €598 million (-45.6% compared to the end of June 2023) with a total stock of €10,676 million (+2.3% YoY).

At the end of June 2024, the securities portfolio reached €11,965 million with an average maturity of 4.5 years. Total Italian government bonds amounted to €4 billion (approximately 33% of the portfolio), of which 98% in the HTC accounting category, thus reducing further volatility risks deriving from the Btp-Bund spread.

Net NPL ratio was 0.78% (compared to 0.94% at the end of June 2023) significantly lower than the industry average(9) equal to 1.43%. Gross bad loans amounted to €266.3 million and the bad loans coverage was 79.9% (74.4% in the same period of the previous year). Net NPL was €276.1 million, down by 15.8% compared to €328 million at the end of June 2023. Gross NPL amounted to €667.3 million, down by 7.4% compared to

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€720.7 million in the same period of the previous year. Coverage of total gross non performing loans was 58.6% (54.5% at the end of June 2023); the figure, including the shortfall(17), goes up to 59.7%. Gross NPL Ratio(4) stood at 1.87% (2.04% at the end of June 2023) vs an average of significant Italian banks(5) of 2.72%, and a EU average(5) of 2.31%.

Capital Ratios

Credemholding CET1 ratio(2) stood at 15.7%, at the highest levels of the industry with €1.7 billion of margin on regulatory capital requirements; 2024 minimum requirement CET1 Ratio (SREP)(3) assigned to the Group is equal to 7.6%, the lowest among banks directly supervised by ECB. Tier 1 capital ratio(2) was 16.0% and Total capital ratio(2) was 18.5%. Credem is the most solid institution at European level based on the data published in December 2023 by the European Central Bank relating to the capital requirements (SREP) of the banks directly supervised by the Frankfurt authority, with the confirmation of the Pillar 2 Requirement (P2R) at 1%, affirming the effectiveness of the business model and risk management measures(3).

Businesses and activities of the Group

• COMMERCIAL BANKING(10)
• Commercial Banking counts 412 retail branches, 46 corporate centers, and the network of 528 financial advisors, it reached €56.9 billion of funding (+6.8% compared to the end of June 2023) and 26.4 billion of loans (-0.1%YoY). In detail, the network of financial advisors achieved €9.2 billion of funding (+10% YoY), €774 million of loans (-3%YoY) and hired 26 professionals;
• the strategy of accelerated customer growth continued also in the first half of the year with the network of branches and company centers of Credem Banca which has acquired approximately 53,000 new customers, with an acquisition rate of 4.2%;
• the constant strengthening of the offer in a complementary and integrated way has allowed the development of all services, in particular credit and debit cards and contracts for access to banking services through the use of Internet.
• EXTENDED BANKING SERVICES, CONSUMER CREDIT & TECHNOLOGY
• Credemleasing reached €547 million of total contracts and 1H24 closed with €20.1 million of net profit (€19.2 million compared to the same period of 2023);
• Credemfactor recorded €2.5 billion of new gross receivables sold (turnover) and 1H24 closed with a net profit of €7 million (€7.4 million in the same period of the previous year);
• Avvera, the company specialized in mortgages, salary and pension-backed loans and consumer credit, reached €9.7 million of net profit (+79% YoY) and €1.1 billion of total business volume in 1H24. In detail, in the first half of 2024, Avvera brokered €323 million in mortgages, disbursed special purpose loans for about €337 million, disbursed Salary-backed loans in terms of principal for €237 million and disbursed personal loans for €165 million. The contribution of the company to the acquisition of new clientele for the Group

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remained relevant with approximately 35,000 new customers. Furthermore, on January 2024, the company launched a new 'buy now pay later' loan called 'Splittypay by Avvera', with which it is possible to make purchases in partner physical stores and pay for them in a series of installments;

• Credemtel, the company active in the offer of digital services to businesses and the Public Administration, has maintained and strengthened its strategic focus as a tech company for businesses, and as a digital company for the Group's innovation, acting as a center of expertise on the Bank's digital services. As at 30
  June 2024 Credemtel recorded a positive growth trend with total revenues (revenues and income) of €18.9 million (+9% YoY) and a net profit of €2.8 million (+1% YoY). With effect from 1 April 2024, the merger by incorporation of Blue Eye Solutions Srl and S.A.T.A Srl was completed, two companies with which Credemtel had been collaborating for some time, operating on the market through technological/operational synergies and sharing of know-how in order to satisfy the most advanced needs of customers.
• PRIVATE BANKING
• Credem Euromobiliare Private Banking (CEPB), the Private Bank of Credem Group, at the end of June 2024 had 74 branches and financial centers present throughout the national footprint. 1H24 Net Profit was €35.4 million and total business (AUM, AUC, direct funding and loans) reached €43.2 billion, with a positive market effect of approximately +2.8% and a very positive contribution from net inflows (AUM, AUC and direct funding), equal to €1.3 billion;
• the recruitment of figures with a high professional profile and per-capita portfolio continued. At the end of June the company had 361 private bankers and 293 financial advisors.
• WEALTH MANAGEMENT
• Wealth management area of the Group, which includes Euromobiliare Asset Management SGR, Euromobiliare Advisory Sim, Credem Private Equity SGR, Euromobiliare Fiduciaria, Credemvita and
  Credemassicurazioni, in the first half of the year they generated overall profits of €67.1 million (+19.2% compared to €56.3 million in the first half of 2023). Furthermore, at the end of June 2024, over 55% of the
  Group's managed and insurance collection was promoted by companies that are part of the area;
• ongoing development of a wide and diversified range of investment solutions also with a focus on sustainability. At the end of June 2024, thanks also to an evolution of the investment processes of insurance products, total assets of the Group relating to investment products and services with ESG characteristics(11) reached €13.4 billion (+67.2% compared to the same period of 2023);
• the program of stable collaborations with international asset managers continues to strengthen the training and communication aspects towards distribution networks and customers and for the development of the range of offers.
• INNOVATION AND DIGITAL TRANSFORMATION
• Digital services: in 1H24, more than 27 million operations were made by clients through remote channels (96% of the total) and more than 430 virtual interactions through customer care (mail, chat, messages and other instruments such as chatbot and voicebot which use artificial intelligence).

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• in the first six months of activity Officine Credem, the new physical space dedicated to innovation inaugurated by the bank within the Parco Innovazione di Reggio Emilia (Reggio Emilia Innovation Park) to encourage interaction between corporates, startups, universities, customers and the territory following a distributed innovation model (open innovation), hosted over 15,500 people as part of initiatives both internal to the Group and external;
• Ongoing development of the Corporate Venture Capital (CVC) initiative launched in April 2021. In this context, the Credem Group participates with the role of investor in "Fin+Tech", the path to support the development of new technological corporates in the financial and insurance industry born from an initiative by CDP Venture Capital Sgr, which saw 12 new innovative corporates enter the program in 2024, bringing the total investments in startups to 39. The objective of this initiative is to identify innovative technologies and models to strengthen the Group's core business, support its evolution and generate value for the Group itself.
• VALUE FOR THE PEOPLE OF THE GROUP
• At the end of June 2024, nearly 84% of employees have a smart working contract with the aim of improve the balance between personal and professional life and further valorizing individuals' organizational skills and initiative;
• approximately 16,800 training days were provided in the first half of the year to all staff, with a view to fostering professional growth and expanding skills, focusing on regulatory (including cybersecurity), technical, and personal development training;
• furthermore, the hiring process continues with 167 individuals joining the Group as of 30 June 2024. Specifically, these new recruits will bolster the network of branches across the national territory, the virtual contact center providing assistance and consultancy via remote channels to clients, and the corporate area dedicated to the development of digital solutions and innovation.
• SUSTAINABILITY, VALUE AND WELFARE FOR THE COMMUNITY
• In January 2024 Credem joined the Net-ZeroBanking Alliance (NZBA), the initiative promoted by the United Nations which aims to accelerate the sustainable transition of the main banking institutions at an international level. As part of this initiative, Credem is committed to aligning its loan and proprietary investment portfolios to achieve the goal of net zero emissions by 2050, in line with the targets set by the Paris Climate Agreement. In this context, in particular, the decarbonisation objectives relating to the electricity, oil and gas production sectors are being defined;
• the installation of approximately 2 thousand photovoltaic modules was completed at the Magazzini Generali delle Tagliate in Montecavolo di Quattro Castella (Reggio Emilia), a Group company active in supporting the dairy supply chain, on a surface area of approximately 8 thousand square meters and with a power of peak of 850 kW which will allow the production of 950 MWh per year, avoiding the emission of approximately 110 tonnes of CO2 equivalent;
• an online portal dedicated to sustainability has been activated which will allow all the Group's people to deepen their ESG (Environmental, Social, Governance) knowledge through video-pills and training modules. Training relating to aspects linked to sustainability is also correlated to the Group's remuneration policies through a dedicated indicator;

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• it was created the corporate figure called "ESG link". These are over 30 people who have the objective of promoting synergies and coherence of information flows within the Group (strategies, risk management, metrics and data, communication and reporting) relating to sustainability issues. At the same time, a control room was created to encourage moments of information, training and planning discussion between the team dedicated to sustainability and the liaison figures identified in the various corporate areas and companies of the Group.

Predictable evolution of management

The expected evolution of the context, although challenging and with expectations of further rate revisions, allows the Group to confirm the main strategic guidelines, in particular a commercial development of banking aggregates above the market average. The balance between operational efficiency and the project activities will have to be calibrated, together with the maintenance of a solid capital and risk profile. From this aspect, the group will be able to benefit from the traditional propensity towards wealth management, with further possibility of developing fee revenues, through the ability to attract new customers and masses, exploiting a complete and diversified business model with specialized networks, factories, wide range of offerings, strong synergies within the Group. In relation to the profile of operating costs, in addition to the impacts of the renewal of the collective agreement, it will be received an acceleration of project activities in omnichannels, digitalisation, development of the application of artificial intelligence, prosecution of the ESG integration path, while the the cost of credit should remain low.

Conference call

The General Director of Credem, Angelo Campani, will present the results tomorrow 6 August 2024 at 11:00 AM CEST Time during a conference call which can be followed in webcast mode, with synchronized advancement of the slides, by connecting to the website www.credem.it section Investor Relations. Alternatively it will be possible to call the following numbers: +39028020911 (from Italy or other countries), +441212818004 (from UK), +17187058796 and +18552656958 (from USA).

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In accordance with paragraph 2 of Article 154-bis of the Consolidated Law on Finance (D. Lgs. 58/98 "Testo Unico delle disposizioni in materia di intermediazione finanziaria"), the Financial Reporting Manager Giuseppe Malato declares that the accounting information, both individual and consolidated, contained in this press release corresponds to document results, books and accounting records.

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Attached are the individual and consolidated balance sheet and income statement and the reclassified consolidated income statement. The financial report as at 30 June 2024, including the interim report and half-yearly condensed consolidated financial statements, subject to limited audit, will be available to the public within the legal deadlines. It should also be noted that, to date, the external auditor has not yet completed its review. A presentation commenting on the consolidated results as at 30 June 2024 will be available in the 'Investor Relations' section of the website www.credem.it.

(*) ALTERNATIVE PERFORMANCE INDICATORS

Credem Group adopts a set of Alternative Performance Measures ("APMs") in order to enhance a deeper comprehension of the information regarding the economic and financial trends. At this linkis available a table illustrating the definition and the calculation of each APM used by the Group, as well as a reconciliation with the lines in the financial reports and related comments.

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NOTE:

1. Annualized figures. ROE for the period equal to 8.6%. ROE= net profit/[(previous year's equity + equity)/ 2]. Equity: algebraic sum of valuation reserves (item 120 + item 125), redeemable shares (item 130), reserves (item 150), share premiums (item 160), capital (item 170) - treasury shares (item 180), consolidated profit net of dividends distributed (or approved) by the parent company or in any case by the consolidation company (item 200); ROTE for a period equal to 9.9%. ROTE calculated as net profit/[(tangible equity previous year + tangible equity)/2]. Tangible equity: algebraic sum of valuation reserves (item 120 + item 125), redeemable shares (item 130), reserves (item 150), share premiums (item 160), capital (item 170) - treasury shares (item 180) , consolidated profit net of dividends distributed (or approved) by the parent company or in any case by the consolidation company (item 200) - intangible assets (item 100);
2. by article 11(2), 11(3), and 13(2) of the EU Regulation No. 575/2013 (CRR), banks controlled by a financial holding shall meet the requirements set by such Regulation on the basis of the consolidated statements of the financial holding. In light of these rules on capital ratios, the consolidation perimeter of the Group changed, within the framework set by the prudential supervision. Therefore, capital ratios were calculated on Credemholding, which holds 79.47% of Credem Spa share capital. Pursuant to art. 26(2) of EU Regulation No. 575/2013(CRR), the inclusion of interim or year-end profits in the Common Equity Tier1 Capital (CET1) is subject to the prior permission of the competent authority (ECB), for which it is required that they shall be audited by the External Auditors. It should be noted that the auditing company is completing the limited audit for the purpose of issuing the attestation required by Article 26 (2) of European Union Regulation No. 575/2013 and European Central Bank Decision
   2015/656. Without including the "Net Income for the period" in the calculation of CET1 Capital, the CET1 Ratio would have been 14.783%;
3. see press releaseCredem, the soundest Bank in Europe;
4. calculated as a ratio between Total Gross NPLs, €667.3 million, and Gross Loans to Customers, €35,654.2 million;
5. source:Supervisory Banking Statistics - First quarter 2024,NPL Ratio calculated excluding cash at central banks and other sight deposits;
6. calculated as Net value adjustments/write-backs due to impairment of Loans / Loans to customers (without considering the securities component);
7. the figure refers to new customers acquired by Credem, Credem Euromobiliare Private Banking and Avvera;
8. loans do not include repos, in the technical form of repurchase agreements, to the Compensation and Guarantee Fund, and at June 2024 the securities valued at amortized cost, equal to €6,261.1 million. Repurchase agreements are excluded from total direct deposits, while the contribution of the companies belonging to the banking group is included. Insurance deposits include technical provisions and financial liabilities valued at the fair value of Credemvita. For customer deposits, bonds issued on institutional markets and indirect funding of a financial nature are deducted for all reference periods. Insurance reserves are also included in total customer deposits; finally the counterpart to the capitalization of properties and cars for rent (IFRS16) is excluded for approximately €136.0 million. Total net inflows include direct and indirect funding from customer;
9. sourceABI Monthly Outlook June 2024- Summary; Industry net NPL on net loans is updated as at May 2024;
10. management data relating to Credem's Commercial Banking Business Unit (412 retail branches, 46 business centers and the network of 528 financial advisors). The figure for loans does not include leasing and factoring;
11. included in the Art. 8 and 9 of the European directive that regulates sustainable investments (SFDR);
12. P&L reclassified figures. The reclassification was performed also considering management accounting figures that could not be directly taken from the financial statements and from the explanatory note. Some reclassifications for the year 2023 related to the introduction of IFRS17 were removed; these reclassifications had been made on the non-interest margin and operating expenses to allow for a consistent comparison with 2022;
13. includes cash-flows from assets at fair value and "Profit/Loss from Equity Investments"and the profits/losses of equity investments valued using the equity method;
14. includes Credemvita Operating Income and "Other operating income/charges" net of extraordinary income/expenses;
15. The recovery of indirect taxes charged to clientele (€66.3 million at June 2024; €64.7 million at June 2023, €126.0 million at the end of 2023) was deducted both from Non Interest Margin and from Operating Costs. The contribution of the national funds of €33 million at June 2024 (€19.6 million at June 2023, €51.5 million at December 2023) was deducted from Other Administrative Costs. The fee paid to the Single Resolution Fund (€0 million at June 2024, €5.6 million at June 2023, €5.6 million at December 2023) and initially accounted in the Provisions for Risk and Charges, was included in "Extraordinary charges" (portion potentially recoverable and recorded in assets under 'security deposits'). In June 2024, the estimate of the contribution to the Life insurance guarantee fund, established by the 2023 Budget Law, amounted to €4.3 million, was accounted for the Fund for Risks and Charges, and was included among extraordinary charges. Net result from impairment related to financial assets valued at amortized cost and referred to securities (€0.9 million at June 2024, €1.1 million at June 2023, -€2.0 million at December 2023) and those relating to financial assets measured at fair value with an impact on comprehensive income (-€0.4 million at June 2024; -€0.8 million at June 2023, -€2.7 million at December 2023) were included in the Non Interest Margin. The result deriving from bad loans and utp disposals was included in "Net adjustments to loans and other financial transactions" (€1.6 million in June 2024; €1.4 million in June 2023, €4.4 million in December 2023);
16. calculated as the ratio between operating costs and operating income, without including the value of depreciation. Calculating the figure as the ratio between (operating costs + depreciation and amortization) and operating income the ratio would be equal to 48.3%.
17. shortfall is calculated as the difference between ELBE - Expected Loss Best Estimate (which represents the best estimate of the expected loss for each credit exposure, given its stage and the current economic environment) and Net Adjustments to Loans. The shortfall amount is considered in the calculation of comprehensive coverages on Non Performing Loans both in the "Addendum to the ECB Guidance to banks on Non Performing Loans" and in the draft law proposed by the European Commission aimed at introducing minimum coverage on Non Performing Loans.

Reggio Emilia, 5 August 2024

CREDITO EMILIANO SPA

(Chairman)

Lucio Igino Zanon di Valgiurata

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CREDEM - CONSOLIDATED BALANCE SHEET (€,000)

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