Credito Valtellinese Group: approval of half-yearly statement as at 30/06/2005
Approval of the Group restructuring plan for the credit division.

Consolidated figures for the Group

(in thousands of euros)	1st half 2005	1st half 2004	var.
Net profit for the period	17,320	9,285	+86.54%
Interest margin	143,122	130,518	+9.66%
Brokerage margin	261,307	233,236	+12.04%
Gross operating profit	74,343	57,026	+30.37%
Gross profit on ordinary operations	51,725	32,546	+58.93%

(in thousands of euros)	30.6.2005	31.12.2004	var.
Direct deposits	10,188,544	9,656,006	+5.52%
Indirect deposits	11,203,119	10,455,668	+7.15%
Total deposits	21,391,663	20,111,674	+6.36%
Loans	9,095,943	8,240,218	+10.38%

Credito Valtellinese s.c.

(in thousands of euros)	1st half 2005	1st half 2004	var.
Net profit for the period	31,421	28,009	+12.18%
Interest margin	49,597	45,562	+8.86%
Brokerage margin	100,840	90,501	+11.42%
Gross operating profit	47,728	42,482	+12.35%
Gross profit on ordinary operations	40,919	36,104	+13.34%

(in thousands of euros)	30.6.2005	31.12.2004	var.
Direct deposits	3,996,826	3,838,965	+4.11%
Indirect deposits	4,043,077	3,753,139	+7.73%
Total deposits	8,039,902	7,592,104	+5.90%
Loans	3,714,234	3,303,920	+12.42%

Sondrio, 13 September 2005 - The Board of Directors of Credito Valtellinese, the parent company of the banking group of the same name, today examined and approved the half-yearly statement as at 30 June 2005; figures for the first half of the year confirm the positive development of economic results and a steady growth trend in primary assets, both individual and consolidated, in keeping with established projections.

CONSOLIDATED FINANCIAL STATEMENT

As at 30 June 2005, direct deposits from customers stood at 10,188.5 million euros, showing an increase of 5.5% compared to the figure of 9,656 million euros as at 31 December 2004, and confirming the growth trend that was already seen in previous financial years.
Indirect deposits reached 11,203.1 million euros, up 747.5 million euros (+7.1% compared to the figure at the end of last year). From the analysis of components, one can observe that managed assets totalled 4,571.2 million euros (+8.6%), administrated assets totalled 5,560.6 million euros (+6%), and insurance savings totalled 1,071.3 million euros (+7.2%).
The total assets administered on behalf of customers, represented by overall indirect and direct deposits, amount to 21,391.6 million euros, up 6.4% compared to 20,111.7 million euros at the end of December 2004.
Loans to customers stood at 9.095,9 million euros, up 855.7 million euros (+10.4%) over the figure of 8,240.2 million euros as at 31 December 2004; financing activities were targeted in particular at small and medium-sized enterprises, artisans, and families, in keeping with the local outlook that distinguishes the Group. In the concession process, a strong focus was placed on area and sector specifics.
Net bad debt at the end of the first half of 2005 totalled 248,9 million euros, essentially unchanged from the figure of 249,1 million euros as at 31 December 2004. The ratio between this figure and total net loans amounts to 2.7% (3% when calculated on figures at the end of last year).
Hedging of bad debt amounts to 62.2% of gross exposure, a slight increase compared to 61.1% as at 31 December 2004, demonstrating the ongoing attention paid during assessment of credit risk.
As at 30 June 2005, consolidated net equity totalled 601.6 million euros, compared to 532.2 million euros as at 31 December 2004 (+13%); the increase can for the most part be traced to the increase in share capital of the parent company, due to the conversion of the first tranche of the "Credito Valtellinese 2.80% 2004-2007" convertible bond, which involved the issue of 12,457,831 new shares for a total sum of 86.9 million euros.
Moving on to the income statement, the interest margin saw growth of 9.7%, reaching 143.1 million euros (130.5 million euros in the first half of 2004), primarily due to the positive trend in brokerage volume.
Progress is also seen in the brokerage margin, which stands at 261.3 million euros, compared to 233.2 million euros in the first half of 2004 (+12%). This increase was partly due to the positive trend in the margin on services (total net commissions and other net income), which rose 9.8% from the figure for the first half of 2004, reaching 101.2 million euros.
The margin on financial operations was 9.6 million euros, compared to 4.8 million euros for the same period in 2004.
Operating expenses, made up of personnel costs, other administrative expenses, and adjustments to tangible and intangible assets, net of recovered value, passed from 176.2 million euros in the first half of 2004 to 187 million euros in the first half of 2005 (+6.1%).
As a result of the trends in the components described, the operating profit grew by 30.4%, coming in at 74.3 million euros (57 million euros in the first half of 2004).
In the first half of the year underway, 22.6 million euros were posted to the income statement as net adjustments to receivables and provisions (-7.6% compared to the first half of 2004), divided as follows:
-  net adjustments to receivables and provisions amounting to 18 million euros;
-  provisions for risks and charges amounting to 4.6 million euros.
The first half of 2005 came to a close with a consolidated profit on ordinary operations of 51.7 million euros, up 58.9% over the corresponding figure for the first half of the previous year, which amounted to 32.5 million euros.
Taking into account a profit on extraordinary operations of 1.7 million euros, income tax for the period of 29.9 million euros, an increase in the general banking risk provision of 2.2 million euros, and minority interest of 4 million euros, the consolidated net profit for the first half of 2005 is 17.3 million euros, as compared to 9.3 million euros in the corresponding period of 2004 (+86.5%).
These positive results have been the combined achievement of all the operating divisions in the Credito Valtellinese group, and the 3254 staff members employed by the group as at 30 June 2005. The group's distribution network at the end of the period was divided into 336 branches, providing extensive coverage in the areas where it has its strongest local presence. The traditional branches are supplemented by an efficient network of alternative channels for providing banking services, particularly on-line applications; there is a steady increase in users of internet services, currently totalling over 210,000.

INDIVIDUAL FINANCIAL STATEMENT

In the first half of 2005, Credito Valtellinese operations were characterised by economic and equity results that were fully in keeping with budget objectives.
As regards combined assets, at the end of the first half of 2005, direct deposits from customers reached 3,996.8 million euros, compared to 3,839.0 million euros as at 31 December 2004 (+4.1%).
There was also a considerable increase in indirect deposits, which amounted to 4,043.1 million euros (+7.7% compared to the end of 2004). Specifically, securities under administration, which account for 50.2% of combined assets, reached 2,028.7 million euros (+8.2%; asset management, which includes both managed assets and mutual funds, increased by 7.7% over 31 December 2004, coming in at 1,588.1 million euros, whereas insurance savings stood at 426.3 million euros, an increase of 5.6% over 31/12/2004.
The parent company's overall deposits at the end of the first half of 2005 totalled 8,039.9 million euros, with a variation of + 5.9 % compared to the end of December 2004.
As at 30 June 2005, loans to customers, including receivables deriving from financial leasing contracts amounting to 409.5 million euros, totalled 3,714.2 million euros, showing strong growth (12.4%) compared to the end of 2004.
The total includes bad debt amounting to 24 million euros, as compared with 19.2 million euros at the end of December 2004; the ratio of net bad debt to net loans is 0.6%, essentially unchanged compared to the end of last year.
Moving on to income statement figures, the interest margin stood at 49.6 (7.1 million euros of which regarded active interest on financial leasing operations), showing an 8.9% increase compared to the first half of 2004. The sizeable increase in volume has effectively compensated for what is still an unfavourable trend in spreads.
The margin on services stood at 26.8 million euros, up 12.1% from the corresponding period in 2004, in part due to the positive contribution of both net commissions (+12.3%) and other net operating revenue (+8%).
Net revenues from financial operations showed a sizeable increase (+ 35.7% compared to the first half of 2004), coming in at 2.2 million euros.
Considering the trends described above and the considerable contribution of dividends, which increased by 14.6%, the brokerage margin for the first half of 2005 totalled 100.8 million euros (+ 11.4% compared to the figure for the first half of 2004).
Operating expenses, made up of personnel costs, other administrative expenses, and adjustments to tangible and intangible assets, grew by 10.6% in the first half of 2005, coming in at 53.1 million euros. Net personnel costs, including costs for contracted personnel and net of costs for employees on secondment, totalled 24 million euros (11.6%); other administrative expenses, net of recoveries and costs for contracted staff, showed an increase of 10%, whereas adjustments to tangible and intangible assets reached 3.8 million euros. As a result, the ratio of operating costs to the brokerage margin improved, falling to 52.7%, compared to 53.1% as calculated on figures from the first half of 2004.
The gross operating profit amounts to 47,7 million euros, showing a 12,3% increase over the figure of 42.5 million euros as at June 2004.
Deducting from the gross operating profit the net adjustments to receivables and financial assets, as well as provisions for risks and charges amounting to a total of 6.8 million euros, the profit on ordinary operations showed an increase of 13.3% compared to the corresponding period last year, reaching almost 41 million euros.
The profit on extraordinary operations - primarily deriving from the sale of shareholdings - contributed 0.6 million euros to the period's positive economic results.
After calculating taxes for the period (10 million euros), one arrives at a net profit for the period of 31.4 million euros, 12.2% higher than the figure of 28 million euros seen at the end of the first half of 2004.
In the first six months of the year, Credito Valtellinese carried out business through 96 branches (which reached 99 after 30 June 2005), all concentrated in the provinces of Sondrio, Como, Lecco, Bergamo, and Varese and serving the needs of families and local business. In addition to its local network, for years the bank has been offering customers the option of internet banking; at present, 59,404 users are registered for internet banking services; this total is up 10.28% compared to the figure of 53,867 as at 31 December 2004.
As at 30 June 2005, there were 852 staff members entered in the employee register of Credito Valtellinese, a figure which remained essentially unchanged from the end of last year.

APPLICATION OF NEW IAS/IFRS TO THE CONSOLIDATED FINANCIAL STATEMENT

figures in millions	30 June 2005
	National accounting standards	Primary international standards: IAS/IFRS	Difference
Net consolidated assets	601.6	682.7	+ 81.1
Net consolidated profit	17.3	30.7	+ 13.4

The primary IAS/IFRS accounting standards will be applied to the consolidated budget of the Credito Valtellinese group starting with the third quarter report. As required by art. 81-bis of Consob regulation no. 11971/99, along with the consolidated half-yearly statement, special reconciliation schedules will be presented to illustrate how the transition from the previous accounting standards to the new ones has affected the group's equity situation and economic results.
The application of new accounting standards has led to an increase of 81.1 million euros in net consolidated assets as at 30 June 2005. The profit for the first half of 2005 passed from 17.3 to 30.7 million euros.
As at 30 June 2005, the primary effects on the Group's net assets are the following:

• based on the provisions of IFRS 1, the group has entered real estate at fair value as opposed to the previous book value. The determination of fair value resulted in the entry of 137.1 million euros as net assets.
• land, which is separated from the value of buildings, given that its useful life is of indefinite duration, will no longer be subject to depreciation. Previous depreciation has been reversed, with a positive effect on net assets amounting to 17.9 million euros;
• in keeping with the provisions of the new standards, goodwill is entered at recoverable value and is no longer subject to amortisation, with a consequent recovery of previous amortisation amounting to 28 million euros.
• Doubtful debt is subject to discounting under IAS 39, which requires that in the assessment process, one take into account not only the estimated recoverable value, but also the time necessary for collection. The discount has led to a reduction of 75.3 million euros in net assets;
• securities are reclassified in portfolios established and assessed according to the provisions of IAS 39. The new accounting rules regarding hedging operations have required the entry at fair value of all derivatives, and that some of these be reclassified as trading instruments rather than hedging instruments. Bond issues are shown at amortised cost. Shareholdings in affiliates are assessed using the net equity method, as laid out by IAS 28;
• The new standards require actuarial methods to be used in the assessment of social security plans with defined benefits. The severance pay provision and the retirement provision, falling into this category, have been entered based on a actuarial calculation that takes into account the time at which the expense will actually be incurred. Use of this method (the Projected Unit Credit Method) caused a reduction in these provisions, with a positive effect on net assets amounting to 8 million euros.

SIGNIFICANT EVENTS AFTER 30 JUNE 2005 AND FORESEEABLE EVOLUTION OF OPERATIONS

It is believed that in the second half of the year, the activity of Credito Valtellinese and the group it heads, despite lasting signs of uncertainty regarding the prospects for an economic recovery in Europe and specifically in Italy, will develop in keeping with budget predictions, achieving the objective of balanced, harmonious growth in all the primary accounting entries. The group's strategies - which are subject to ongoing evaluation and updates, in order to incisively seize the competitive advantages to be found in a corporate philosophy based on the principle of constant innovation - will be oriented, first and foremost, to placing an even greater value on the distinctive skills of its specialised divisions, which, in its unified business structure, represent the nodes in a corporate network; from the market standpoint, it will continue its commitment to providing customers with increasingly professional, personalised service, by strengthening its traditional distribution structure, progressively introducing non-traditional physical channels, and implementing remote banking applications. One should note that after the close of the period, and up to the date of approval of the half-yearly statement, no significant events have occurred which could have an economic effect on the results shown.

APPROVAL OF THE GROUP RESTRUCTURING PLAN FOR THE CREDIT DIVISION.

Also in today's session, the Board of Directors of the Credito Valtellinese group approved a project aimed at rationalising operations in the sector of medium- to long-term financing, in a framework of strategies to improve customer satisfaction, and with the goal of further establishing the group's position as a preferred reference for products and services aimed at businesses.
Specifically, the project - whose implementation is subject to obtaining the necessary authorisations from Banca d'Italia, and the necessary resolutions from the companies in the group which would be involved - envisions the following:

• reorienting the mission of Cassa San Giacomo SpA (a bank in the group, currently owned by Credito Valtellinese, Credito Artigiano SpA, and Credito Siciliano SpA, with respective shareholdings of 37.41%, 31.29%, 31.23%, dedicated to the management of non-performing loans, credit assessment, and service leasing) attributing it the role of a bank specialised in the management and provision of medium and long-term loans;
• the foundation of a new-co, entirely owned by Cassa San Giacomo, which will become the transferee of non-performing receivables currently owned by the latter, and future ones owned by the group's local banks.

The plan which has been approved envisions the recapitalisation of Cassa San Giacomo for a sum of approximately 50 million euros, to be carried out through a share capital increase offered in options to shareholders in multiple tranches, in order to allow the foundation of a new-co to which portfolio of non-performing receivables will be transferred, absorbing the impact on equity resulting from the first application of IAS, and ensuring optimal operating flexibility in the area of asset liability management for the bank; because of its new specialised role, the name Cassa San Giacomo would be changed to Mediocreval S.p.A.