Statement of financial position items

MAIN STATEMENT OF FINANCIAL POSITION ITEMS

(in thousands of Euro)

BALANCES

ABSOLUTE CHANGE

31.12.2011

30.06.2011

31.12.2010

12.11-06.11

06.11-12.10

Available for sale financial assets

1.685.163

1.160.834

818.507

524.329

342.327

Due from banks

315.897

317.091

228.013

(1.194)

89.078

Due from customers

1.722.481

1.844.204

1.571.592

(121.723)

272.612

Property, plant and equipment and investment property and intangible assets

45.320

44.844

37.995

476

6.849

Other assets

145.310

134.293

146.012

11.017

(11.719)

Total assets

3.914.171

3.501.266

2.802.119

412.905

699.147

Due to banks

2.001.734

867.517

752.457

1.134.217

115.060

Due to customers

1.657.224

2.339.634

1.802.011

(682.410)

537.623

Financial liabilities held for trading

600

209

-

391

209

Other liabilities

58.331

65.091

41.038

(6.760)

24.053

Equity

196.282

228.815

206.613

(32.533)

22.202

Total liabilities and equity

3.914.171

3.501.266

2.802.119

 

412.905

699.147

Available for sale financial assets

Available for sale financial assets include debt and equity securities and at the end of the year stood at 1,685,163 Euro, up by 105.9% compared to 818,507 Euro in the prior year. This securities portfolio is held for the purposes described in the following section “Securities portfolio”.

Receivables due from banks

At 31 December 2011 receivables due from banks totalled 315,897 thousand Euro compared to 228,013 thousand Euro at 31 December 2010 (+38.5%).

Some securities not listed on an active market and eligible with the Eurosystem were classified under this item for an amount of 110,790 thousand Euro (+14.8% compared to 31 December 2010). The securities portfolio is held for the purposes described in the following section “Securities portfolio”.

The item includes 205.107 thousand Euro for treasury loans with other lenders (+56% compared to 31 December 2010) largely connected to maintaining excess liquidity on year-end maturities.

Securities portfolio

In order to provide a complete analysis of the Group’s securities portfolio, the debt securities portfolio, represented by several asset items in the statement of financial position, and the equity portfolio are commented on below.

Debt securities portfolio

Securities trading reached significant levels at year end, coming in at 1,781.9 million Euro, +97.6% compared to 31 December 2010, also due to operations carried out towards the end of the period. Purchasing focused on Italian government bonds, at fixed rate for very short-term bonds and at floating rate for medium-term ones. Currently the portfolio's average return is high, considering the period in which most bonds were purchased.

This significant resource allowed Banca IFIS to access funding at reasonable costs during the entire year through repurchase agreements on the MTS platform or the Eurosystem.

These securities were classified, on the basis of their characteristics and in compliance with the provisions of IAS 39, under available for sale financial assets or under receivables due from banks.

DEBT SECURITIES PORTFOLIO

(in thousands of Euro)

BALANCES

CHANGE

31.12.2011

31.12.2010

ABSOLUTE

%

DEBT SECURITIES INCLUDED UNDER:

 

 

 

 

Available for sale financial assets

1.670.895

805.039

865.856

107,6%

Receivables due from banks - bonds

110.790

96.520

14.270

14,8%

Other assets

188

293

(105)

(35,8)%

Total securities held

1.781.873

901.852

880.021

97,6%

At year-end securities which had been purchased and not settled had a nominal value of 570 million Euro.

Breaking down the debt securities portfolio by investments and guarantees, as the Bank used to do, has gradually been losing its meaning, as a result of both the evolution in size and composition of retail funding, which has grown remarkably overall and rests on a growing fixed-term element, and the greater funding possibilities arising from the extraordinary interventions decided by the monetary authorities.

Here below is the division by issuer and by maturity of the debt securities held.

Issuer

up to 3 months

Over 3-6 months

Over 6 months to 1 year

1 to 5 years

over 5 years up to 10 years

Total

Government securities

316.127

381.685

497.423

272.861

58.562

1.526.658

% of total

17,7%

21,4%

27,9%

15,3%

3,3%

85,6%

Banks

55.920

47.001

18.204

122.189

-

243.314

% of total

3,1%

2,7%

1,0%

6,9%

0,0%

13,7%

Other issuers

10.943

-

-

958

-

11.901

% of total

0,7%

0,0%

0,0%

0,0%

0,0%

0,7%

Total

382.990

428.686

515.627

396.008

58.562

1.781.873

% of total

21,5%

24,1%

28,9%

22,2%

3,3%

100%

Equity portfolio

Among the available for sale financial assets are equity securities relating to non-controlling interests in unlisted companies for 14,268 thousand Euro, which are considered strategic for Banca IFIS.

Receivables due from customers

At 31 December 2010 total due from customers reached 1,722.5 million Euro, an increase of 9.6% compared to 1,571.6 million Euro at the end of 2010.

This increase was largely due to the acquisition on 30 June 2011 of the Toscana Finanza Group. Trade receivables arising from the business combination consist of non-performing loans and tax receivables totalling 161,472 thousand Euro at 31 December 2011.

Receivables due from customers are composed as follows: 27.8% from the Public Administration (compared to 18.6% at 31 December 2010) and 72.2% from the private sector (compared to 81.4% at 31 December 2010).

Geographically, the item is broken down as follows: 98.2 % from customers resident in Italy (93.6% in 2010) and 1.8% from customers resident abroad (6.4% in 2010).

Finally, it should be noted that the item includes 4 positions, for a total of 85,518 thousand Euro, which fall within the category of major risks.

Receivables due from customers, excluding non-performing loans for 74 million Euro, totalled 1,648.5 million Euro, an increase of 7.5% compared to the end of 2010.

BANKING PRODUCTS(in thousands of Euro)

BALANCES

CHANGE

31.12.2011

31.12.2010

ABSOLUTE

%

Current accounts

90.520

117.502

(26.982)

(23,0)%

Advance accounts for future receivable transfers and other financing

35.307

41.207

(5.900)

(14,3)%

Factoring advance accounts

1.344.675

1.361.059

(16.384)

(1,2)%

Non-performing loans

94.383

-

94.383

n.a.

Tax receivables

67.089

-

67.089

n.a.

Mortgages

5.911

3.712

2.199

59,2%

Other operations

10.575

9.691

884

9,1%

Total net current loans (1)

1.648.460

1.533.171

115.289

7,5%

Net non-performing loans

74.021

38.421

35.600

92,7%

Total due from customers

1.722.481

1.571.592

 

150.889

9,6%

(1) Total net current loans include substandard, restructured and past due loans classified, as per Bank of italy’s provisions, as impaired loans (please see table 7.1 in the Notes to the financial statements)

Impaired assets

Total net impaired assets for the year totalled 277.7 million Euro, against 220.9 million Euro at the end of 2010 (+25.7%). This increase was largely due to non-performing loans arising from the acquisition of the Toscana Finanza Group which were classified under impaired assets for a total of 86,735 thousand Euro, consisting of non-performing loans for 7,822 thousand Euro and substandard loans for 78,913 thousand Euro. These loans were recognised during the business combination at their fair value and subsequently valued at amortised cost.

On a like-for-like basis, impaired assets totalled 190,965 thousand Euro, sharply down compared to 31 December 2010 (-13.6%).Toscana Finanza’s business is by nature closely associated with recovering impaired assets. Therefore, though most loans in the NPL sector are recognised under non-performing or substandard loans pursuant to regulatory requirements, this classification is the logical consequence of the business model and does not represent the credit quality of the assets in this operating segment, based on how to measure those assets in the best possible way.

CREDIT QUALITY (in thousands of Euro)

BALANCES

CHANGE

31.12.2011

31.12.2010

ABSOLUTE

%

TRADE RECEIVABLES

NPL

TAX RECEI-VABLES

GOVER-NANCE AND SERVICES

ELIMINATIONS AND ADJUSTMENTS

CONSOLIDATED TOTAL

CONSOLIDATED TOTAL

Non-performing loans

66.199

7.822

-

-

-

74.021

38.421

35.600

92,7%

Substandard loans

79.184

78.913

-

-

-

158.097

76.810

81.287

105,8%

Restructured loans

3.897

-

-

-

-

3.897

7.251

(3.354)

(46,3)%

Past due loans

41.685

-

-

-

-

41.685

98.446

(56.761)

(57,7)%

Total impaired assets to customers

190.965

86.735

-

-

-

277.700

220.928

56.772

25,7%

Net performing loans

1.439.827

7.648

67.089

16.046

(85.829)

1.446.248

1.350.664

94.117

7,0%

Total due from customers (cash)

1.630.792

94.383

67.089

16.046

(85.829)

1.722.481

1.571.592

150.889

9,6%

Total non-performing loans due from customers, net of adjustments, were 74 million Euro at 31 December 2011, compared to 38.4 million Euro, of which 7.8 million Euro in the NPL sector, at 31 December 2010. Non-performing loans in the trade receivables sector as at 31 December 2011 included Banca IFIS's cash loan to Fondazione San Raffaele, which applied for composition proceedings, equal to approximately 15 million Euro gross of adjustments and 10 million Euro in net value. They also included a loan due from an insolvent local public body equal to approximately 10.5 million Euro in gross value and 8.2 million Euro in net value.

At December 2011 substandard loans totalled 158.1 million Euro, compared to 76.8 million Euro in 2010, of which 78.9 million Euro relating to the NPL segment, net of which the increase was equal to 3.1%.As envisaged by Bank of Italy’s instructions, the item substandard loans also includes the so-called “objective substandard loans with recourse” which, due to the particular business undertaken by the Bank, do not represent particular problems. Specifically, “objective substandard loans with recourse” relate to loans to invoice sellers, whose account debtors show strong delays in payments. The Bank believes these positions are not particularly problematic, as payment delays on the part of the account debtor do not necessarily correspond to an objective financial difficulty of the invoice seller. If the Bank finds out that the invoice seller is also facing difficulties in fulfilling its commitments, the position is automatically recorded under substandard loans.

Past due loans totalled 41.7 million Euro, compared with 98.4 million Euro for the previous financial year. Achieving such a reduction, despite the difficulties of the current economic situation entailing delays in payments and in the fulfilment of commitments taken on by debtors, is the result of several structural initiatives undertaken by the Bank to improve its portfolio’s overall quality and solidity; we refer in particular to the reorganisation of the commercial and operational areas, which began some time ago and is still underway, progressively bearing its first tangible fruits.

The new organisation, besides consolidating these positions, will bring several benefits aimed at innovating operating processes and procedures in relation to the bank's increasing size, with special attention to the facilities that are crucial for the operations resulting from new customers, as well as from the retention of existing ones.

Lastly, it should be noted that net past due loans refer for 27.1 million Euro to receivables due from the Public Administration, purchased outright within the factoring activity. Given the quality of credit and debtors, we believe these positions are not subject to impairment.

The ratio of total net impaired assets to loans, including newly acquired segments, goes from 14.1% to 16.1%; on a like-for-like basis, the indicator goes from 14.1% to 11.6%.

IMPAIRED ASSETS

(in thousands of Euro)

NON-PERFORMING (1)

SUBSTANDARD

RESTRUCTURED

PAST DUE

TOTAL

BALANCE AT 31.12.2011

 

Gross amount

169.497

160.508

4.423

41.762

376.190

Incidence on gross total receivables

9,3%

8,8%

0,2%

2,3%

20,6%

Adjustments

95.476

2.411

526

77

98.490

Incidence on gross value

56,3%

1,5%

11,9%

0,2%

26,2%

Net amount

74.021

158.097

3.897

41.685

277.700

Incidence on net total receivables

4,3%

9,2%

0,2%

2,4%

16,1%

BALANCE AT 31.12.2010

 

Nominal value of impaired assets

105.481

79.270

7.818

98.724

291.293

Incidence on gross total receivables

6,4%

4,8%

0,5%

6,0%

17,7%

Adjustment

67.060

2.460

567

278

70.365

Incidence on nominal value

63,6%

3,1%

7,3%

0,3%

24,2%

Carrying amount

38.421

76.810

7.251

98.446

220.928

Incidence on net total receivables

2,4%

4,9%

0,5%

6,3%

14,1%

(1) As for non-performing loans, it should be noted that Banca IFIS enters its gross non-performing loans, recognised in the financial statements net of the related specific value adjustment funds, up to the point in which all legal credit collection procedures have been entirely completed.

The table below shows the aforementioned comparison of credit quality on a like-for-like basis:

CREDIT QUALITY ON A LIKE-FOR-LIKE BASIS

(in thousands of Euro)

BALANCES

CHANGE

31.12.2011

31.12.2010

ABSOLUTE

%

Non-performing loans

66.199

38.421

 

27.778

72,3%

Substandard loans

79.184

76.810

2.374

3,1%

Restructured loans

3.897

7.251

(3.354)

(46,3)%

Past due loans

41.685

98.446

(56.761)

(57,7)%

Total net impaired loans due from customers

190.965

220.928

(29.963)

(13,6)%

Net performing loans

1.455.873

1.350.664

105.209

7,8%

Totale cash loans due from customers

1.646.838

1.571.592

 

75.246

4,8%

Net non-performing loans/Due from customers

4,0%

2,4%

n.a.

1,6%

Impaired assets/Due from customers

11,6%

14,1%

n.a.

(2,5)%

Intangible assets and property, plant and equipment and investment property

Intangible assets totalled 6,096 thousand Euro compared to 3,686 thousand Euro at 31 December 2010 (+65.4%). The item refers to software (4,731 thousand Euro) and goodwill (792 thousand Euro) arising from the consolidation process of the investment in IFIS Finance Sp. Z o.o.

Property, plant and equipment and investment property increased by 14.3% to 39,224 thousand Euro.

The property included under property, plant and equipment and investment property mainly includes: the important historical building, Villa Marocco, located in Mestre (Venice) and housing Banca IFIS’s registered office and the property in Mestre (Venice), partly sub-leased to the parent company, the Scogliera S.p.A.

The carrying amount of the property above has been confirmed by the report of experts specialising in the measurement of luxury property. Villa Marocco is not depreciated as its estimated residual value at the end of its useful life is expected to be higher than its carrying amount.

Following the acquisition of the Toscana Finanza Group, the Florence head office of the acquired company Toscana Finanza, which was acquired under a finance lease, was recorded at 4,972 thousand Euro.

Some property of minor value is also recorded.

Funding

Total funding, which at 31 December 2011 totalled 3,658,958 thousand Euro, an increase of 43.2% compared to 31 December 2010, is represented for 45.3% by Payables due to customers and for 54.7% by Payables due to banks.

Payables due to customers at 31 December 2011 totalled 1,657,224 thousand Euro, (-8% compared to 31 December 2010). Two opposite trends caused this reduction: on the one hand, the successful retail funding from the online rendimax savings account, which continues to grows quarter on quarter and even more so since the launch of the new rendimax Like product on December 1, with deposits at year end totalling 1,555,862 thousand Euro (+22.8% compared to 2010 year end); on the other, the dramatic reduction in funding through repurchase agreements with underlying government bonds and the Cassa di Compensazione e Garanzia (the Italian central counterparty) as counterparty, amounting to 49,127 thousand Euro (-89.5%).

Payables due to banks, which totalled 2,001,734 thousand Euro (+166% compared to December 2010), mainly consisted of funding from refinancing operations on Eurosystem for 1,861,665 thousand Euro. These operations were carried out using part of the debt securities held, as well as the securities obtained from the self-securitisation operation of trade receivables called “Ifis Collection Service”. The remainder of the payables due to banks consist of interbank deposits for 140,069 thousand Euro (-65.2% compared to the end of 2010).

Capital adequacy and solvency ratios

In the absence of non-controlling interests, equity attributable to the parent company at 31 December 2011 was 196,282 thousand Euro compared to 206,613 thousand Euro at the end of the previous year. The changes in equity are explained in detail in the following table:

EQUITY: CHANGES

(in thousands of Euro)

YEAR2011

Equity at 31/12/2010

206.613

Increases:

46.963

Profit for the year

26.535

Sale/allocation of treasury instruments

18.867

Other changes

1.561

Decreases:

(57.294)

Dividends distributed

(10.486)

Purchase of treasury instruments

(12.316)

Change in valuation reserve:

(34.492)

- AFS securities

(31.439)

- exchange differences

(3.053)

Equity at 31/12/2011

196.282

Other changes refer for 1,422 thousand Euro to the difference between the value of the non-controlling interest on the business combination date and the price effectively paid for the acquisition of the non-controlling interest while carrying out the merger of Toscana Finanza.

Dividends distributed were paid as cash dividends (3,131 thousand Euro) and scrip dividends of Banca IFIS shares entirely taken from treasury shares (7,355 thousand Euro) (the relevant change in treasury shares was included in the item “sale/allocation of treasury instruments”).

The change in the currency translation reserve refers mainly to exchange differences deriving from the consolidation of the subsidiary IFIS Finance Sp. Z o.o.

CAPITAL RATIOS

(in thousands of Euro)

YEAR

31.12.2011

31.12.2010

Regulatory capital

 

 

Tier 1 capital

214.527 

206.510

Tier 2 capital

(6.752) 

(3.784)

Deductibles

-

Total capital

207.775 

202.726

Prudential regulatory requirement

 

 

Credit risk

136.829 

129.716

Market risk

1.930 

1.893

Operating risk

14.835 

12.144

Total prudential requirements

153.594 

143.753

Solvency ratios

 

 

Tier 1 capital/Total weighted assets

11,17% 

11,50%

Total capital/Total weighted assets

10,82% 

11,30%

Capital surplus in excess of minimum requirements

54.181 

58.973

Pursuant to Bank of Italy’s Regulation dated 18 May 2010, the Banca IFIS Group calculated its regulatory capital at 31 December 2011 by adopting the so-called “symmetric filter”, which allows to neutralize both gains and losses on securities issued by the Central Administrations of EU Member States included under available for sale financial assets, as if they were valued at cost.

Income statement items

The comparison of income statement items with to the previous year was influenced by the acquisition of the Toscana Finanza Group which contributed to the results for 2011 as from 1 July 2011, since the record date for the business combination was 30 June 2011.

The consolidated income statement includes, under “Other operating income”, the net profit arising from the low-cost purchase of the equity investment in Toscana Finanza S.p.A. (bargain purchase), resulting from the Purchase Price Allocation.

Formation of net banking income

Net banking income increased from 94,430 thousand Euro to 121,453 thousand Euro (+28.6%). Net banking income is made up of commission income (64.9%), interest income (34.84%) and other components (0.34%).

The increase is partly due to the NPL and tax receivables sectors, which contributed 11,313 thousand Euro to net banking income.

The development of products with high-value related services, income from which is represented by commission income only, leads to marked volatility between net interest income and commission income, such as to make comparisons between periods meaningless. For information purposes, however, a detailed analysis is provided below.

NET BANKING INCOME

(in thousands of Euro)

YEAR

CHANGE

2011

2010

ABSOLUTE

%

Net interest income

42.245

27.293

14.952

54,8%

Total net commission income

78.788

66.844

11.944

17,9%

Dividends and similar income

161

17

144

847,1%

Net result from trading

(245)

(218)

(27)

12,4%

Profit from sale or buyback of financial assets

504

494

10

2,0%

Net banking income

121.453

94.430

 

27.023

28,6%

Net interest income fell from 27,293 thousand Euro at 31 December 2010 to 42,245 thousand Euro at 31 December 2011 (+54.8%).

The increase was in part due to the acquisition of the Toscana Finanza Group which contributed 11,507 thousand Euro to net interest income.

In addition, the rising contribution from profits deriving from the securities portfolio due to its increased volumes, totalling 17,529 thousand euro (+86.3% compared to 31 December 2010), had a positive impact.

Interest income includes interest for late payment, which are likely to be recovered for around 1 million Euro, relating to outright purchases of receivables due from the Public Administration.

Please note that at 31 December 2011, interests on arrears accrued on amounts due from the Public Administration relate to already collected debts (12.5 million Euro) and non collected debts (26.8 million Euro). Such amounts, which are calculated based on current regulations and contract law, were not recorded in the financial statements, because, as of today, the Bank does not have the necessary information to ascertain their recoverability.

Passive interest relating to the rendimax savings accounts amount to 39,329 thousand Euro overall.

Net commission income performed well and was up by 17.9% compared to the previous year. This result is due in particular to the higher charges for the factoring service offered by the Group, owing to the management complexity involved and offsetting the increase in credit risk.

Commission income, totalling 82,624 thousand Euro compared to 70,543 thousand Euro at the end of 2010, came primarily from factoring commission on the turnover generated by individual customers (with or without recourse, in a flat or monthly formula) as well as other fees usually charged to customers for services.

Commission expense, totalling 3,836 thousand Euro compared to 3,699 thousand Euro at 31 December 2010, came primarily from approved banks’ brokering, the work of other credit brokers, and commissions paid to correspondent factors.

NET COMMISSION INCOME(in thousands of Euro)

YEAR

CHANGE

2011

2010

ABSOLUTE

%

Endorsement loans

(100)

(115)

15

(13,0)%

Management and brokerage services

(119)

(149)

30

(20,1)%

Collection and payment services

826

1.076

(250)

(23,2)%

Factoring services

78.695

66.677

12.018

18,0%

Other services

(514)

(645)

131

(20,3)%

Total net commission income

78.788

66.844

 

11.944

17,9%

Formation of net profit from financial activities

Net profit from financial activities of the Group totalled 88,977 thousand Euro compared to 69.986 thousand Euro at 31 December 2010, up by 27.1%. This positive result confirms that the higher charges to customers adequately support the increased risk in loan commitments, even in an extremely difficult economic and financial period.

The increase is partly due to the NPL and tax receivables segments, which contributed 9,685 thousand Euro to this result.

FORMATION OF NET PROFIT FROM FINANCIAL ACTIVITIES

(in thousands of Euro)

YEAR

CHANGE

2011

2010

ABSOLUTE

%

Net banking income

121.453

94.430

27.023

28,6%

Net impairment losses on:

loans and receivables

(32.143)

(24.209)

(7.934)

32,8%

available for sale financial assets

-

(235)

235

(100,0)%

Net profit from financial activities

89.310

69.986

 

19.324

27,6%

Net value adjustments due to impairment of receivables totalled 32,143 thousand Euro, compared to 24,209 thousand Euro at 31 December 2010 (+32.8%), given an economic situation in which the recovery remains uncertain with unstable financial conditions. The adjustments, in line with the large number of customers, were mainly fragmented and of limited amount.

The Banca IFIS Group continues to be rigorous in its assessment of assets, also given the still difficult general economic conditions, recognising value adjustments in the income statement in a timely manner as soon as conditions to do so arise.

Formation of profit for the year

The table below shows the formation of the Group’s profit for the period starting from the previously mentioned profit from financial activities, compared with the same period of the previous year.

FORMATION OF PROFIT FOR THE YEAR(in thousands of Euro)

YEAR

CHANGE

2011

2010

ABSOLUTE

%

Net profit from financial activities

89.310

69.986

19.324

27,6%

Operating costs

(47.475)

(40.125)

(7.350)

18,3%

Profit from continuing operations gross of taxes

41.835

29.861

11.974

40,1%

Income tax expense

(15.300)

(11.235)

(4.065)

36,2%

Profit for the year

26.535

18.626

 

7.909

42,5%

The trend in operating costs was affected by the expansion of the business and the acquisition of the Toscana Finanza Group.

Total operating costs reached 47,475 thousand Euro, up by 18.3% compared to 31 December 2010.

The item includes 1,587 thousand Euro in costs incurred for the acquisition of the Toscana Finanza Group and 1,887 thousand Euro in profit arising from the equity investment in Toscana Finanza S.p.A. at a favourable price.

The cost/income ratio stood at 39.1%, down from 42.5% at 31 December 2010.

OPERATING COSTS

(in thousands of Euro)

YEAR

CHANGE

2011

2010

ABSOLUTE

%

Personnel expenses

27.235

25.176

2.059

8,2%

Other administrative expenses

21.527

13.902

7.625

54,8%

Allocation to provisions for risks and charges

17

-

17

n.a.

Value adjustments

on tangible and intangible assets

2.948

2.483

465

18,7%

Other operating charges (income)

(4.252)

(1.436)

(2.816)

196,1%

Total operating costs

47.475

40.125

 

7.350

18,3%

Personnel expenses of 27,235 thousand Euro rose by 8.2% compared to 31 December 2010, also due to the acquisition of the Toscana Finanza Group: the number of Group employees, also thanks to this acquisition, rose at year-end to 422 (compared to 345 at the end of 2010).

Other administrative expenses at 31 December 2011 reached 21,527 thousand Euro, compared to 13,902 thousand Euro in the prior year period (+54.8%).

The increase was caused, among other things, by the higher organisational complexity following the Toscana Finanza Group acquisition.

This item includes some entries relating to the management of the rendimax account, especially costs for the stamp duty on account statements, which rise in direct correlation to the number of operating customers and, as a result of a commercial policy decision, are not charged back to customers.

Please note that part of the expenses included in this item (in particular legal expenses and indirect taxes) is charged back to customers and the relevant revenue is recognised under other operating income. Net of this component, other administrative expenses totalled 19,198 thousand Euro at 31 December 2011, compared to 12,355 thousand Euro at 31 December 2010 (+55.4%).

OTHER ADMINISTRATIVE EXPENSES

(in thousands of Euro)

YEAR

CHANGE

2011

2010

ABSOLUTE

%

Expenses for professional services

7.221

2.433

4.788

196,8%

Legal and consulting services

4.688

1.577

3.111

197,3%

Auditing

394

308

86

27,9%

Outsourcing services

2.139

548

1.591

290,3%

Direct and indirect taxes

3.344

2.361

983

41,6%

Expenses for purchasing goods and other services

10.962

9.108

1.854

20,4%

Property expenses

2.832

2.430

402

16,5%

Postage of documents

1.097

725

372

51,3%

Advertising and inserts

938

698

240

34,4%

Customer information

910

971

(61)

(6,3)%

Telephone and data transmission expenses

898

835

63

7,5%

Software assistance and leasing

529

491

38

7,7%

Other sundry expenses

3.758

2.958

800

27,0%

Total administrative expenses

21.527

13.902

 

7.625

54,8%

Expense recoveries

(2.329)

(1.547)

 

(782)

50,5%

Total other administrative expenses, net

19.198

12.355

 

6.843

55,4%

Other sundry expenses include for 207 thousand Euro the costs of managing the special purpose vehicles set up for the purposes of the ongoing securitisation operation, which are commented on in Part E, Section 1.3, of the Notes.

Value adjustments on intangible assets largely refer to IT devices, and as of 31 December 2011 stood at 1,573 thousand Euro, up 36.4% compared to 2010.

Value adjustments on property, plant and equipment and investment property totalled 1,375 thousand Euro compared to 1,330 thousand Euro at 31 December 2010 (+3.4%).

Other operating income of 4,252 thousand Euro includes profits arising from the acquisition of Toscana Finanza Group S.p.A. at a favourable price of 1,887 thousand Euro. The item also includes revenues arising from cost recoveries from third parties; the relevant cost item is included under other administrative expenses, in particular under legal expenses and indirect taxes.

Pre-tax profit for the period stood at 41,385 thousand Euro, an increase of 40.1% compared to 31 December 2010.

Income tax expense amounted to 15,300 thousand Euro, compared to 11,235 thousand Euro at 31 December 2010 (+36.2%). The regional business tax (IRAP) rate applied to calculate current and deferred income taxes takes into account the 0.75% increase of the base rate pursuant to Legislative Decree 98/2011 converted into Law 111/2011.

Profit for the period totalled 26,535 thousand Euro compared to 18,626 thousand Euro in 2010 (+42.5%). In the absence of profit attributable to non-controlling interests, these results refer entirely to the Group.