Annual financial report 2020 Financial Year

Economic results

Reclassified income statement¹

* This item includes personnel costs, other administrative expenses and operating amortisation/depreciation.
(Figures in millions of euro)	31/12/2020	31/12/2019	Change	% change %
Interest margin	1,245	1,179	66	5.6%
Net commissions	657	644	13	2.0%
Dividends	2	3	(1)	(33.3%)
Net trading revenues	359	177	182	102.8%
Net interest and other banking income	2,263	2,003	260	13.0%
Net value adjustments/write-backs	(616)	(313)	(303)	96.8%
Income from financial activities	1,647	1,690	(43)	(2.5%)
Operating charges*	(1,556)	(1,575)	19	(1.2%)
Net allocations to provisions for risks and charges	(56)	(20)	(36)	n.s.
Other income (charges)	235	222	13	5.9%
Value adjustments to goodwill and other intangible assets	-	(27)	27	(100.0%)
Profit (loss) from disposal of investments and equity investments	-	(5)	5	(100.0%)
Gross current result	270	285	(15)	(5.3%)
Income tax	(25)	(60)	35	(58.3%)
Profit (loss) for the year for minority interests	-	(4)	4	(100.0%)
Net result of the Parent Company	245	221	24	10.9%

¹ In order to provide a better management representation of the results, the reclassified income statement figures differ from the layouts of the financial statements envisaged by Bank of Italy Circular no. 262 of 2005, 6th update.

Financial position aggregates

Reclassified statement of financial position¹

(Figures in millions of euro)	31/12/2020	31/12/2019	Change	% change
ASSETS
Cash and cash equivalents	614	555	59	10.6%
Exposures to banks	2,671	1,166	1,505	129.1%
Exposures to customers	43,633	41,230	2,403	5.8%
- of which at fair value	288	286	2	0.7%
Financial assets	36,813	26,689	10,124	37.9%
Equity investments	75	89	(14)	(15.7%)
Tangible and intangible assets	1,352	1,353	(1)	(0.1%)
Tax assets	849	872	(23)	(2.6%)
Other asset items	790	851	(61)	(7.2%)
Total assets	86,797	72,805	13,992	19.2%
LIABILITIES
Due to banks	17,438	7,474	9,964	133.3%
Direct funding	60,435	56,669	3,766	6.6 %
- Due to customers	55,447	50,055	5,392	10.8%
- Debt securities in issue	4,988	6,614	(1,626)	(24.6%)
Other financial liabilities	81	101	(20)	(19.8%)
Provisions (Risks, charges and personnel)	469	386	83	21.5%
Tax liabilities	81	80	1	1.3%
Other liability items	1,572	1,611	(39)	(2.4%)
Total liabilities	80,076	66,321	13,755	20.7%
Third party minority interests	1	4	(3)	(75.0%)
Group equity	6,721	6,480	241	3.7%
Consolidated equity	6,722	6,484	238	3.7%
Total liabilities and eq	86,797	72,805	13,992	19.2%

¹ In order to provide a better management representation of the results, the reclassified income statement figures differ from the layouts of the financial statements envisaged by Bank of Italy Circular no. 262 of 2005, 6th update.

AFFILIATED BANKS

The Affiliated Banks represent the most important part of the Cooperative Banking Group’s consolidated assets and the strength of the Group’s current and future development. The Affiliated Banks traditionally operate with the aim of fostering the development of communities and the local economy. The principles of mutuality, which characterise Cooperative Credit, allow Banks to play a fundamental role in the national banking industry and be an important reference point for households and small and medium-sized enterprises (hereinafter also “SMEs”).

The Group’s Strategic Plan aims to develop relationships with households and SMEs by making the most of the territorial network and exploiting synergies, the expansion of the commercial offer and economies of scale resulting from belonging to a Group of national importance.

In general, the structure of cooperative credit banks reflects the nature of local banks, characterised by a high level of funding from customers deriving from the historical link with the territory to which they belong, by a prevalence of loans to counterparties represented by households and small companies, by a limited loan-to-deposit ratio which, from the point of view of liquidity, reflects the structural solidity of the Group and by the investment of excess liquidity mainly in government securities.

Below is a summary representation of the main income statement and statement of financial position aggregates of the Affiliated Banks, with a focus on the individual territorial areas in which the Group operates.

(Figures in millions of euro)

	31/12/2020
LOANS TO CUSTOMERS	Trentino-Alto Adige	North East	North West	Central	South and the Islands	Total
Gross customer loans	10,448	9,780	9,923	10,045	4,529	44,725
- of which performing	9,597	9,186	9,213	9,306	4,188	41,490
- of which nonperforming	851	595	711	739	341	3,236
Value adjustments	632	504	542	540	255	2,474
Net customer loans	9,816	9,276	9,382	9,505	4,274	42,252

The total gross loans of the Affiliated Banks amounted, as at 31 December 2020, to EUR 44.7 billion, up sharply compared to the end of 2019 (+5.1%). The marked evolution of loans to customers is conditioned, at least in part, by extraordinary government and local measures, in support of an economic context strongly impacted by the Covid-19 health emergency. The growth recorded in 2020, albeit affected by non-recurring factors, confirms and strengthens the evolutionary trend underway since the establishment of the Cassa Centrale Group.

The territorial analysis of the credit disbursed confirms that the operations of the Affiliated Banks are mainly concentrated in the North of Italy, in line with the territorial distribution of the Cassa Centrale Group’s branches. A detailed analysis of the various geographical areas into which the Cassa Centrale Group is divided shows a homogeneous allocation to four of the five areas, with the exception of the South and Islands area which, despite having a large number of Affiliated Banks, has a lower incidence on total loans disbursed due to the smaller average size of the banks in that area.

Total indirect funding of the Affiliated Banks amounted to 24.7 billion9, up by 1.7 billion compared to December 2019. The incidence of indirect funding on total funding is confirmed at 29%, in line with the 2019 figure, proof of the growing ability to shift funding to indirect funding according to the guidelines of the Cassa Centrale Group, albeit in a context of strong prudence of the depositing customers. At the level of the Affiliated Banks, the incidence of indirect funding on total funding is homogeneous between the various territorial areas, with the exception of the South and Islands, where this ratio does not exceed 10%.

An analysis of the composition of indirect funding confirms the growth, in absolute and relative terms, of the incidence of asset management and insurance products, which rises to 68% of total indirect funding.

The dynamics of the Affiliated Banks’ indirect funding saw growth in both the bancassurance segment (+20% compared to December 2019) and the Asset Management and Funds segment (+10%), against a partial contraction in funding under administration, which fell to 7.9 billion (-6% compared to the end of 2019). Nonetheless, indirect funding under administration saw a partial migration of a number of positions from the Affiliated Banks to the Parent Company.

The strong boost in assets under management achieved in 2020 is part of the significant growth margins available to the Affiliated Banks compared to the rest of the banking industry, having historically favoured the placement of direct funding products. Growth has been driven and accompanied by significant investment in specialist training for the staff of the Affiliated Banks in order to increase their ability to offer shareholders and customers a high level of advisory support. These investments, supported by the careful research of the Industrial Group’s companies for products suitable for BCC-CR-RAIKAs’ shareholders and customers, are enabling the gap with the system to be progressively closed, while maintaining a high level of attention to the quality of the overall service offered to savers.

(Figures in millions of euro)

	31/12/2020
FUNDING	Trentino-Alto Adige	North East	North West	Central	South and the Islands	Total
Overall funding	21,160	18,069	19,927	17,340	7,436	83,932
Direct funding	14,347	12,474	13,467	12,263	6,661	59,212
Indirect funding*	6,813	5,595	6,460	5,077	775	24,720
- of which administrated	1,906	1,480	2,545	1,569	428	7,928
- of which managed	4,907	4,115	3,915	3,508	347	16,792

* Indirect funding is expressed at market values

The total funding of the Affiliated Banks amounted to 83.9 billion (+6.4 billion compared to December 2019), confirming the important ability of the Affiliated Banks to attract depositor customers.

Direct funding amounted to 59.2 billion, up by 4.7 billion compared to the end of 2019 (equal to +8.6%), a figure that reflects at least in part the growing share of savings held by households as a result of the economic uncertainty linked to the health emergency.

The distribution of direct deposits among the territorial areas proportionally respects the trend described above for the volumes of credit, showing generalised growth in all territorial areas in 2020 with a more marked trend in the South and Islands (+16%) and North East (+10%).

The various territorial areas show a structural surplus of resources in the ratio of lending to funding, resulting in a high degree of liquidity for the Affiliated Banks and the Cassa Centrale Group. The prudent approach to the investment of resources collected by depositors has historically characterised the operations of the BCC-CR-RAIKAs.

Total indirect funding of the Affiliated Banks amounted to 24.7 billion¹, up by 1.7 billion compared to December 2019. The incidence of indirect funding on total funding is confirmed at 29%, in line with the 2019 figure, proof of the growing ability to shift funding to indirect funding according to the guidelines of the Cassa Centrale Group, albeit in a context of strong prudence of the depositing customers. At the level of the Affiliated Banks, the incidence of indirect funding on total funding is homogeneous between the various territorial areas, with the exception of the South and Islands, where this ratio does not exceed 10%.

An analysis of the composition of indirect funding confirms the growth, in absolute and relative terms, of the incidence of asset management and insurance products, which rises to 68% of total indirect funding.

The dynamics of the Affiliated Banks’ indirect funding saw growth in both the bancassurance segment (+20% compared to December 2019) and the Asset Management and Funds segment (+10%), against a partial contraction in funding under administration, which fell to 7.9 billion (-6% compared to the end of 2019). Nonetheless, indirect funding under administration saw a partial migration of a number of positions from the Affiliated Banks to the Parent Company.

The strong boost in assets under management achieved in 2020 is part of the significant growth margins available to the Affiliated Banks compared to the rest of the banking industry, having historically favoured the placement of direct funding products. Growth has been driven and accompanied by significant investment in specialist training for the staff of the Affiliated Banks in order to increase their ability to offer shareholders and customers a high level of advisory support. These investments, supported by the careful research of the Industrial Group’s companies for products suitable for BCC-CR-RAIKAs’ shareholders and customers, are enabling the gap with the system to be progressively closed, while maintaining a high level of attention to the quality of the overall service offered to savers.

(Figures in millions of euro)

	31/12/2020
MARGINS AND COMMISSIONS	Trentino-Alto Adige	North East	North West	Central	South and the Islands	Total
Interest margin	283	249	234	271	156	1,193
Net commissions	114	126	133	129	56	557
Net interest and other banking income	471	438	489	459	252	2,109

The economic contribution deriving from the net interest income for the Affiliated Banks amounted to 1,193 million, equal to 57% of the net interest and other banking income. Despite a context characterised by interest rates at historic lows and high commercial pressure, the interest margin was up compared to 2019 (+5.1%), thanks to the growing volumes of lending and the growth of the portfolio of own securities as an effect of the new Group strategy, which has seen an increasing use of ECB refinancing operations.

The contribution of net interest income to comprehensive income is therefore confirmed as high, in line with the predominantly traditional banking operations that characterise the Affiliated Banks and therefore the Group as a whole. The main source of income remains the traditional activity of collection of savings and lending in the territories where the Affiliated Banks are located.

The net commissions of the Affiliated Banks totalled 557 million, up by 2% compared to December 2019, albeit in a context strongly affected by the ongoing health emergency that had a negative impact, especially in the months of the lockdown.

The commission margin of the Affiliated Banks shows an average contribution to the net interest and other banking income of around 26%, with a geographical impact that falls from 29% in the North East to 22% in the South and Islands, also in line with the lower volumes of indirect funding located in this geographical area.

An analysis of the primary revenues of the Affiliated Banks shows that the ability to offer members and customers services that complete the commercial offer and increase margins is becoming increasingly decisive. This development is carried out with a strong focus on the protection of shareholders and customers and in accordance with the cooperative principles that underpin the operations of the Affiliated Banks.

The growth in net interest and other banking income in 2020 (+15.1% compared to the end of 2019) reflects the important contribution deriving from the trading activity of the securities portfolio owned by the Affiliated Banks.

1 Indirect funding is expressed at market values.

Industrial group

The Industrial Group is represented by the Parent Company and the subsidiaries and associates that operate in different areas of activity, namely:

ICT and back office services, with the subsidiary Allitude S.p.A. (hereinafter also referred to as “Allitude”). Effective as of 1 July 2020, the last step in streamlining the ICT and back office offer was completed with the merger of Cesve S.p.A. and Bologna Servizi Bancari S.r.l. (hereinafter also “CESVE” and “BSB”) into Allitude;
leasing services, with the subsidiary Claris Leasing S.p.A. (hereinafter also referred to as “Claris Leasing” or “Claris”);
insurance services, with the subsidiaries Assicura Agenzia S.r.l. and Assicura Broker S.r.l. (hereinafter also referred to as “Assicura Agenzia” and “Assicura Broker”);
collective asset management services, with the subsidiary Nord Est Asset Management S.A. (hereinafter also “NEAM”);
other ancillary services, with the subsidiaries Centrale Credit Solutions S.r.l., Centrale Soluzioni Immobiliari S.r.l., Centrale Casa S.r.l., Claris Rent S.p.a. and the associate Centrale Trading S.r.l.

The main income statement and balance sheet aggregates referring to the Industrial Group as at 31 December 2020 are shown below.

(Figures in millions of euro)

LOANS TO CUSTOMERS*	31/12/2020	31/12/2019	Change	% change
Gross customer loans	1,479	1,294	185	14.3%
- of which performing	1,378	1,169	209	17.9%
- of which non-performing	101	125	(24)	(19.2%)
Value adjustments	98	97	1	0.0%
Net customer loans	1,381	1,197	184	15.3%

* Management data including all intra-group eliminations.

With regard to the Industrial Group, loans disbursed to customers mainly refer to brokerage activities carried out by the Parent Company and by the subsidiary Claris Leasing.

The contribution of the Industrial Group to the results of the Cassa Centrale Group, in terms of gross loans, amounted to a total of 1.5 billion, net of 0.6 billion referring to intercompany transactions between the various entities of the Cassa Centrale Group, an upward trend compared to the figures at the end of 2019 (+14.3%). Compared to the end of the previous year, there was an increase in performing loans of 209 million (+17.9%), with a total volume of 1.4 billion, mainly as a result of the growth in the Parent Company’s loan portfolio.

The downtrend of the impaired loan portfolio continued, which, thanks to careful and prudent management, decreased by a total of 24 million (-19.2%).

Provisions on total gross loans to customers amounted to 98 million, guaranteeing high average coverage on impaired positions, which stood at around 74%.

(Figures in millions of euro)

FUNDING*	31/12/2020	31/12/2019	Change	% change
Overall funding	7,802	6,776	954	14.1%
Direct funding	1,219	2,152	(933)	(43.4%)
Indirect funding**	6,583	4,623	1,960	42.4%
- of which administrated	4,165	2,757	1,408	51.1%
- of which managed	2,418	1,866	552	29.6%

* Management data including all intra-group eliminations.

** Indirect funding is expressed at market values; as at 31 December 2020, the ETF financial products are included in the administered segment and the figures as at 31 December 2019 are restated on a like-for-like basis.

Total funding of the Industrial Group amounted to 7.8 billion and is mainly attributable to the Parent Company’s operations. Total funding consists of 1.2 billion in direct funding, a figure that is down compared to the end of 2019 as a result of fewer funding transactions, at the end of 2020, with the counterparty Cassa di Compensazione e Garanzia.

Indirect funding¹ amounted to 6.6 billion, up by approximately 2 billion compared to the end of 2019. Assets under management and insurance represent 37% of total indirect funding, with operations mainly attributable to products linked to asset management. Indirect funding under administration amounted to 4.2 billion and represents 63% of total volumes, with operations mainly focused on the bond market (69% of funding under administration). The growth in funding under administration, compared to 2019, is partly due to the centralisation of some positions of the Affiliated Banks with the Parent Company.

(Figures in millions of euro)

MARGINS AND COMMISSIONS*	31/12/2020	31/12/2019	Change	% change
Interest margin	52	43	9	21.5%
Net commissions	100	97	3	3.1%
Net interest and other banking income	154	169	(15)	(8.8%)

* Operating figures that include all intragroup eliminations and residual economic results of fully consolidated entities other than the cohesion contract.

The breakdown of revenues highlights the nature of the Industrial Group, with a prevailing orientation towards the provision of services. Net fee and commission income amounted to 100 million, with an incidence of 65% in the breakdown of net interest and other banking income, while the net interest income stood at 52 million.

Compared to the same period of the previous year, the net interest income increased by a total of 9 million, while the margin for services was substantially stable (+3.1%). Overall, net interest and other banking income decreased due to the lower contribution deriving from the trading/valuation of the own securities portfolio of the Parent Company and the higher eliminations related to intercompany transactions between the various entities of the Cassa Centrale Group.

¹ The indirect funding represented refers to the component placed by Cassa Centrale Banca directly with customers and does not include the component placed through Banks.

The operating context following the Covid-19 pandemic in the Cassa Centrale Group

Business continuity, security and internal and external communication

The health emergency and the consequent restrictive measures chosen by the Government to protect public health had a significant impact on the management of the Cooperative Banking Group. Through the establishment of an emergency management operating unit, the Parent Company immediately activated measures to contain the risk of contagion, identifying specific procedures to ensure the operational continuity of critical processes and the safeguarding and protection of the health of workers, customers and suppliers, providing for guidance and coordination mechanisms for the Group.

In order to ensure homogeneous and coordinated interventions and measures at Group level, Cassa Centrale Banca sent guidance, guidelines, communications and circulars, both informational and dispositive, to the Group Banks and Companies, in compliance with the restrictions and government provisions gradually issued. Periodic and constant information flows were provided to the corporate bodies, also maintaining a dialogue with the CODISE, internal body of the Bank of Italy dedicated to the management of the emergency, and with the Joint Supervisory Group (GVC). Since the beginning of the state of emergency, Cassa Centrale Banca has envisaged numerous initiatives to implement the government DPCMs and the protocols shared with the social partners. The main measures concerned:

widespread information on the Covid-19 emergency, on risks and prevention measures through the issue of circulars to employees, infographics and posters at the workplace;
implementing provisions on risk mitigation with disclosure to all employees;
preparation of an appropriate Biological Risk Assessment Document relating to Covid-19;
massive activation of smart working methods for workers, with appropriate information on the risks of agile work and on security in terms of IT risk (for more details, refer to the chapter “Human Resources”);
regulation of entry into the company for workers and external personnel, access to company common areas, adoption of specific company hygiene and sanitation protocols, distribution of certified masks as personal protective equipment and disinfectant gel;
regulation of the procedures for opening branches and related access by customers, providing for the appointment to carry out transactions that cannot be carried out remotely and that are of an urgent nature, in line with government measures;
dialogue with the company doctor for the continuity of health surveillance and the identification of fragile subjects to be observed in particular, also providing dedicated insurance coverage for employees;
establishment in the company, with the company’s union representative (hereinafter also “RSA” - Rappresentanza Sindacale Aziendale) and with the workers’ representatives for safety (hereinafter also “RLS” - Rappresentanti dei Lavoratori per la Sicurezza) of a committee for the application and verification of the regulatory protocols;
preparation of a specific company Regulation for the methods of return of workers, with particular attention to the measures relating to physical distancing in the offices and the numerical monitoring of personnel returning from smart working based on pre-established parameters. This regulation was constantly adapted and updated in line with the government measures gradually issued and with the external context in relation to the level of spread of the virus.

In addition, with the aim of ensuring the services provided by branches, which had to be accessible to customers in any case, in compliance with government measures, which in some cases also affected the way in which relationships are managed, which cannot always be expressed through traditional physical presence, a solution was developed to allow Group banks to have existing retail customers subscribe to the Inbank product remotely, consistent with the constraints and related regulatory provisions. This intervention represents the first fully dematerialised and digitalised service for remote selling offered by the Cassa Centrale Group, through the use of the digital signature tool on both the bank and the customer side and the identification of the customer through video recognition.

In the initial phase of the Covid-19 epidemic, the Operations Department of the Parent Company defined the supplies necessary to overcome the difficulties encountered by the Banks in the procurement of products and materials necessary for the protection of employees and customers and for disinfection.

Moreover, as a result of the prolonged Covid-19 emergency and with the primary objective of protecting the health of personnel, the Operations Department, together with Allitude, deemed it appropriate to review the migration calendar of the Banks that use the Gesbank information system, defining a new model for the migration of the information system based on a minimum monitoring on site to respond to the current health emergency and the limitations imposed by this in terms of mobility and proximity allowed between people. This defined operating method allowed for the regular performance of the activities and the completion of the planned migrations during 2020.

In continuity with the control and protection actions linked to the spread of the Covid-19 epidemic, Cassa Centrale Banca also deemed it appropriate to verify its prevention plan through a voluntary and independent assessment process, commissioning Bureau Veritas for this purpose, a global leader in the assessment and analysis of risks related to quality, environment, health, safety and social responsibility.

With this initiative, undertaken on a voluntary basis, Cassa Centrale Banca underwent an external audit, demonstrating that it implemented the security and contagion prevention protocols through adequate regulation and the definition of specific procedures for the safeguarding and protection of the health of workers, customers, suppliers and all those who interact within the organisation.

Following the audits, Cassa Centrale Banca obtained the “Safe Guard” certification, demonstrating that it had managed the specific risks linked to the Covid-19 emergency in compliance with the regulatory provisions issued by the Authorities.

Initiatives in favour of businesses, households and the community

In the difficult context of the Covid-19 emergency, while the strict containment measures adopted were effective in slowing the spread of the infection, they caused a real shock to the country’s economy, affecting both the supply of and demand for goods and services. Closure of activities, interruption of the supply channels of raw materials or intermediate goods, fall in consumption, reduction in income, postponement of investment plans and drop in exports are just some of the symptoms exposed by the current recession. Our country was among the first to be affected by the epidemic, but the contagion quickly and progressively spread to many other countries with negative repercussions on production activities, consumption and demand on a global scale.

To counter the negative effects of the crisis, the Central Banks intervened repeatedly with extraordinary measures to support demand and injected massive amounts of liquidity into the economic system. At the same time, many governments approved fiscal stimulus packages to support household and business income and credit to the economy, with significant repercussions on public accounts. The awareness that the impacts would have affected all the participating countries led to the need to activate EU instruments to support national budget policies in the European Union. The agreement reached on 9 April 2020 within the Eurogroup provides for the allocation of resources of EUR 540 billion to deal with the health emergency, support employment and encourage loans to businesses through the issue of EUR 200 billion guarantees from the European Investment Bank (EIB).

In order to mitigate the effects due to the closure of economic activities during the lockdown period, the Italian Government has also passed important legislative measures (as previously mentioned) and the Cassa Centrale Group has promptly taken all actions to favour the concession. The benefits provided by these measures to its customers in addition to adhering to specific conventions or agreements including the Addendum to the 2019 Credit Agreement promoted by the Italian Banking Association (Associazione Bancaria Italiana - ABI). The economic support measures and agreements based on moratoria and new state-guaranteed financing were initially designed for a limited duration in 2020, i.e. 30.09.2020.

While during the summer, partly thanks to expectations of the imminent launch of vaccination plans at national and European level, the health emergency seemed to be gradually easing, during the autumn there was a resurgence of infections, resulting in a new worsening of the figures in relation to both hospital admissions and the percentage of deaths. From the economic point of view, this flare-up of the pandemic did not lead to periods of complete interruption of economic activities, but to geographically variable slowdowns, with restrictive measures applied in a diversified and alternating manner on a regional basis.

In consequence of these developments, the measures for suspending payments contained in the main legislative intervention to support economic activities (Law Decree no. 18 of 17 March 2020, converted into Law no. 27 of 24 April 2020) were extended for the first time until 31 January 2021 by Law Decree no. 104 of 14 August 2020, converted into Law no. 126 of 13 October 2020, and then until 30 June 2021 by the 2021 Budget Law (Law no. 178 of 30 December 2020). The measures aimed at ensuring new liquidity to companies through access to loans guaranteed by the State (Law Decree no. 23 of 8 April 2020, converted into Law no. 40 of 5 June 2020) after an initial period of validity limited to 2020 for the same reasons extended until 30.06.2021.

MORATORIA GRANTED AS AT 31/12/2020	Quantity	Amount (figures in millions of EUR)
BY CUSTOMER TYPE:
Companies	61,554	9,339
Households	59,911	4,569
BY REFERENCE SOURCE:
Law Decree 18/2020	47,007	7,902
ABI agreements	1,561	345
Group initiatives	72,897	5,662
Total moratoria	121,465	13,908

In relation to Law Decree no. 18 of 17 March 2020 (known as the “Cura Italia” Decree), as at 31 December 2020, the Group granted a total of 47,007 moratoria for a residual debt subject to suspension of EUR 7,902 million¹.

All other types of moratoria, based on ABI agreements or on support initiatives promoted by the Group, had a total of 74,458 beneficiary relationships at the end of 2020, for a residual debt of EUR 6,007 million.

Therefore, overall, in 2020 the Cassa Centrale Group granted moratoria on 121,465 contracts, for a residual debt subject to suspension of EUR 13,908 million. Of these, EUR 9,339 million relate to debts contracted by companies, while the remaining EUR 4,569 million refer to mortgages with households.

LOANS GRANTED WITH THE STATE GUARANTEE AS AT 31/12/2020	Quantity	Amount (figures in millions of EUR)
GUARANTOR:
Guarantee fund 100%	46,743	1,178
Guarantee fund 80-90%	9,519	2,133
SACE	15	29
Total loans	56,277	3,340

With regard to new loans guaranteed by the State to varying degrees, but on average higher than 80%, as at 31 December 2020 the Cassa Centrale Group granted loans to micro-enterprises, SMEs and small caps for EUR 3,311 million, of which EUR 1,178 million referring to mortgages up to EUR 30 thousand guaranteed 100% by the Guarantee Fund managed by Microcredito Centrale. In addition to these new disbursements, there are 15 larger additional subsidised transactions for larger companies, supported by the SACE guarantee, for a further amount of EUR 29 million.

In addition to the initiatives coordinated by the Parent Company, there have been specific loans proposed by many Affiliated Banks, with dedicated ceilings on preferential terms, direct donations, fundraising activities and other initiatives, generating a number of interventions that represent the Group’s contribution to the requirements that have arisen in the area.

Monitoring of risk profiles

In order to monitor the impact of the Covid-19 crisis on the Group’s risk profiles, the Risk Management Department has undertaken initiatives aimed at ensuring adequate monitoring of both the impacts deriving from the evolution of the scenario (from a current and future perspective), as well as the evolution of all risks relevant to the Group. In particular, the main initiatives adopted in this area concerned:

updating of the impacts of the macroeconomic scenario: with the aim of constantly monitoring the possible effects of the pandemic on the macroeconomic and banking landscape, the Group periodically monitors the evolution of the reference scenarios, in order to acknowledge and assess the evolutionary effects of the economic-operating context following the outbreak of the Covid-19 health emergency. The scenario analysis focuses not only on the typically most significant variables (such as exchange rates, national GDP and those of the EMU and the US, the BTP-BUND spread, the unemployment rate, the propensity to consume and the most relevant banking variables, such as, for example, short- and medium/long-term loans and deposits), but also on the effects of the pandemic on credit quality by means of forecasts with decay rates for the main economic sectors. The results of the information described above are reported in the Group’s integrated risk reporting, so as to submit to the management body the data relating to the impacts on the evolution of the scenarios;
monitoring of risk profiles: together with monitoring the evolution of the scenario, the Group constantly monitors the evolution of the risk profile in the context of the pandemic. Monitoring takes place both as part of the ordinary integrated reporting of risks (with the aim of providing a complete representation of the monitoring activities carried out at consolidated and individual level), and through reports dedicated to the evolution of the loan portfolio (with particular focus on the Covid-19 moratoria, and on the results of the “AQR” checks carried out by the Parent Company, aimed at the overall assessment of the status of the loan portfolio).

¹All the figures relating to the moratoria granted are taken from the weekly survey for the Bank of Italy regarding the implementation of government measures to support credit and the liquidity of businesses and households. These figures also include the measures envisaged by Art. 56, paragraph 2, letter a) of Law Decree 18/2020, applicable to revocable credit facilities and loans granted against advances on receivables.

Business outlook

The year 2020 was affected by the ongoing health emergency that generated significant impacts from a health perspective on the social, economic and financial fabric of large areas of the world.

As a result of this epidemic, the banking sector is also facing a complicated situation, having to manage the repercussions of the expected effects of the recessionary scenario. In this context, the measures of the European Authorities together with the governmental interventions (in particular the so-called “Cura Italia”, “Liquidit ” and “Rilancio” decrees) are helping to contain the recessionary effects.

Impaired loans reduction strategies aimed at a progressive improvement in asset quality will remain an option pursued by the banking industry, but will essentially have to take into account the changed economic environment and its impact on banks’ profitability. Bank lending and borrowing interest rates are expected to decrease, leading to the erosion of primary margins.

The volatility of the markets in the first part of the year did not bring with it a greater aversion to risk of households, so that investments of liquidity in asset management instruments remained at the usual levels and continue to support revenues. A lower contribution to profitability is coming from payment and liquidity management services, also due to the increased competitive pressure, especially from non-bank operators, and the digital transformation process. Within a context of weakness in traditional banking activity, improving operating efficiency, cost reduction and new business strategies are confirmed as the main levers for the recovery of profitability in the sector.

The current health crisis situation is also having an impact on the operations of the Cassa Centrale Group, given that the activities of the Affiliated Banks are mainly focused on traditional lending to households and small and medium-sized businesses in the areas where they are located.

In this new economic and social context, the Group continues to focus its attention on the one hand on strongly supporting the economic fabric of the reference territories, which are facing a crisis never experienced in the past, and on the other on overseeing the overall risk profile.

Activities related to the Group’s organisational and operational structure continue, also considering that the new context will require further investments in technology and human capital.

Given the sudden development of the external scenario, resulting from the current emergency and the possible economic repercussions, the Group is monitoring the situation in order to promptly identify potential impacts on the coming years.

Reclassified statement

Consolidated Non-Financial statement 2020

Economic results

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Financial position aggregates

Reclassified statement of financial position1

AFFILIATED BANKS

Industrial group

Business continuity, security and internal and external communication

Initiatives in favour of businesses, households and the community

Monitoring of risk profiles

Reclassified income statement¹

Reclassified statement of financial position¹