The document provides an executive summary and analysis of the Italian non-performing loans (NPL) market in 2018 and forecast for 2019. Some key points: - Banks' NPLs were reduced by 55 billion euros from 2017 to Q3 2018 due to large NPL portfolio disposals. - Gross NPL transactions in 2018 totaled 66 billion euros, with around 17 billion euros estimated as the total market value. Around 44% of transactions used a government guarantee scheme. - The pipeline of potential NPL transactions in 2019 is estimated at 50 billion euros, with more activity expected in the secondary market compared to 2018.

1. 2018 TRANSACTIONS
AND 2019 FORECAST
January 2019

2. 2
MARKET WATCH NPL
Executive Summary.
Banks’ NPE scenario
NPL transactions
2018
55 Bn€
reduction of banks’ NPEs
from December 2017 to
September 2018 (-21%)
-44,3%
the reduction of EU NPL ratio from
2015 YE to Q3 2018, one of the
strongest amongst the European
Countries
-49 Bn€
Gross NPLs in banks' balance
sheets from December 2017 to
November 2018 (-29%)
66 Bn€
NPL transactions in FY
2018
17 Bn€
estimated market value
of 2018 transactions
44% GACS
of total transactions 2018
NPL pipeline
2019
50 Bn€
NPL transactions
expected in FY 2019
based on current
disclosed deals
39% Secondary
Market of total 2019
transactions estimated in
pipeline
(vs 2% in 2018)
18% GACS
of total transactions in pipeline
forecasted for 2019
Big Picture on Italy
266 Bn€
in November 2018 the total Gross Bad
Loans managed by banks, funds and
servicers
45%
of the NPL transactions is
managed by 8 servicers
Page # 4 Page # 5 Page # 8
Page # 10Page # 11
Page # 10
Page # 10 Page # 10 Page # 10
Page # 19 Page # 20

3. BANKS’ NPE
SCENARIO

4. 4
MARKET WATCH NPL
12 13 21 18 12 14 12 10 10 7 7 6 6 5 5 5 5
127 125 123 120 117 116 104 99 94 91 86 83
53 58
76 94 11313 15
15
15
17
78
107
125
156
184 201 197 198 199 201 203
192
173
167 164
132
123
157
194
237
283
327
341
334 331 330 325 326
302
278
266 260
223
211
11%
13%
16%
20%
23%
24% 24% 23% 23% 23% 23%
22%
20%
20%
19%
17%
16%
0%
5%
10%
15%
20%
25%
30%
0,0
50,0
100,0
150,0
200,0
250,0
300,0
350,0
400,0
FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018
Past Due Unlikely to Pay Watchlist Restructured Bad Loans NPE RATIO
Sources: Banca d’Italia, based on Statistical Database
Banks' NPEs reduced by 55 Bn€ (-21%) from YE 2017 to Q3
2018 due increasing disposal of bigger NPL portfolios.
Strong suasion of ECB supervision.
Bank NPE - Bn€
Classification of impaired Loans updated in 2015
-21%
-35%

5. 5
MARKET WATCH NPL
78 107 125 156 184 201 197 198 199 201 203 192 173 167 164 132 123 118 105
0,0%
2,0%
4,0%
6,0%
8,0%
10,0%
12,0%
14,0%
0,0
50,0
100,0
150,0
200,0
FY
2010
FY
2011
FY
2012
FY
2013
FY
2014
FY
2015
Q1
2016
Q2
2016
Q3
2016
Q4
2016
Q1
2017
Q2
2017
Q3
2017
Q4
2017
Q1
2018
Q2
2018
Q3
2018
Nov
2018
Est
2018
Bank Gross Bad Loans % Bank Gross Bad Loans/Total Asset
Sources: Banca d’Italia, based on Statistical Database; Forecast: Banca IFIS internal analysis
Bank Gross Bad Loans showed the biggest drop (-49 Bn€) in
2018. A big share of secured and corporate loans remains on
banks’ balance sheets.
Bank Gross Bad Loans - Bn€ and Percentages
-29%
Highlights
Bank Gross Bad Loans – Percentages of Corporate and Secured loans (% on total Bad Loan)
o Bank Gross Bad Loans
dropped by 44 Bn€ in Q3 2018
and other 5 Bn€ in November
o The forecast scenario shows
a further drop in Bank Gross
Bad Loan stock of 13 Bn€ at
the end of 2018
o The breakdown of Gross Bad
Loans highlights the highests
percentage of Corporate
Loans (77%). The Secured
portion of Bad Loans is
around 50%
76%
75%
76%
78%
79%
79%
79%
79%
79%
79%
79%
79%
78%
78%
78%
77%
77%
24%
25%
24%
22%
21%
21%
21%
21%
21%
21%
21%
21%
22%
22%
22%
23%
23%
FY
2010
FY
2011
FY
2012
FY
2013
FY
2014
FY
2015
Q1
2016
Q2
2016
Q3
2016
Q4
2016
Q1
2017
Q2
2017
Q3
2017
Q4
2017
Q1
2018
Q2
2018
Q3
2018
NPL Corporate NPL Individual NPL Unsecured NPL Secured
69%
70%
69%
64%
57%
56%
57%
57%
56%
56%
53%
55%
54%
47%
47%
56%
52%
31%
30%
31%
36%
43%
44%
43%
43%
44%
44%
47%
45%
46%
53%
53%
44%
48%
-48%

6. 6
MARKET WATCH NPL
37
52
65
80 84 89
83 84 85 87
77
71
66 64
53
43 40 38
0,0
10,0
20,0
30,0
40,0
50,0
60,0
70,0
80,0
90,0
FY
2010
FY
2011
FY
2012
FY
2013
FY
2014
FY
2015
Q1
2016
Q2
2016
Q3
2016
Q4
2016
Q1
2017
Q2
2017
Q3
2017
Q4
2017
Q1
2018
Q2
2018
Q3
2018
Nov
2018
-41%
Sources: Banca d’Italia, based on Statistical Database
o The Bank Net Bad Loan
shows a significant
downtrend in the last 2 years
o The november 2018 value
was 38 Bn€ at the same level
of 2010
Highlights
Net Bank Bad Loans showed a significant downtrend reaching
38 Bn€ at November 2018 as combined result of portfolio
disposal and an increase in Bad Loan Coverage.
Bank Net Bad Loans - Bn€
68,1%
40,0%
45,0%
50,0%
55,0%
60,0%
65,0%
70,0%
FY
2010
FY
2011
FY
2012
FY
2013
FY
2014
FY
2015
Q1
2016
Q2
2016
Q3
2016
Q4
2016
Q1
2017
Q2
2017
Q3
2017
Q4
2017
Q1
2018
Q2
2018
Q3
2018
Nov
2018
Est
2018
o the Bank Bad Gross Loan
Coverage increased to 68,1%
from 61,7% at Year End 2017
Bank Bad Loan Coverage - Percentages
-56%

7. 7
MARKET WATCH NPL Sources: Banca IFIS estimate based on Bank of Italy report “Rapporto di stabilità finanziaria 2/2018”
o The net UTPs show a
continuing declining trend
Highlights
The Net Unlikely to Pay shows a declining trend since 2015
due to a strong increase of UTP Coverage ratio.
Net Bank Unlikely to Pay and Past Due - Bn€
11,9%
22,4%
18,9%
37,7%
10,0%
14,0%
18,0%
22,0%
26,0%
30,0%
34,0%
38,0%
FY
2010
FY
2011
FY
2012
FY
2013
FY
2014
FY
2015
Q1
2016
Q2
2016
Q3
2016
Q4
2016
Q1
2017
Q2
2017
Q3
2017
Q4
2017
Q1
2018
Q2
2018
Q3
2018
Coverage Past Due Coverage Unlikely to Pay
o The coverage ratio at Q3 2018
is double that of YE 2010
Bank Unlikely to Pay and Past Due Coverage - Percentages
11 12 18 16 10 12 9 8 8 6 6 5 5 4 4 4 4
54 60
71 83 96 92
84 83 81 79 77
69 65 62 57 54 52
65
72
90
99
106 104
93 91 89 84 82
74 70 66
61 58 56
FY
2010
FY
2011
FY
2012
FY
2013
FY
2014
FY
2015
Q1
2016
Q2
2016
Q3
2016
Q4
2016
Q1
2017
Q2
2017
Q3
2017
Q4
2017
Q1
2018
Q2
2018
Q3
2018
Net Past Due Net Unlikely to Pay

8. 8
MARKET WATCH NPL Sources: Banca d’Italia, based on Statistical Database; EBA “Risk Dashboard” report, NPL ratios based on weighted average
Highlights
Italy shows one of the strongest reductions in Gross NPL ratio
amongst the European Countries.
European Landscape at 2018 - Bank NPL ratios - Percentages
o The corporate Bank NPL ratio
is 3 p.p. higher than total
ratio
o In the last 2 years the reduction
of Italian NPL ratio was among
the highest (-44,3%)
o Despite progress, EU NPL ratio
is 6 p.p. lower than the Italian
one as of Q3 2018
o In the same period Italy Net Bad
Loan dropped from 89 Bn€ to 40
Bn€
Bank Gross Bad Loan/Total Asset by debtor type - Percentages
43,4% 2,9% 4,1% 12,0% 9,4% 1,6% 6,8% 3,4%
GR FR ES PT IT DE IE EU
46,7% 4,0% 6,4% 19,1% 16,8% 3,0% 18,5% 5,8%
Q3 2018
Q4 2015
-7,2%
-28,2% -36,6% -37,2% -44,3% -45,9%
-63,1%
-41,2%
9,4%
8,8%
11,6%
5,0%
0,0%
2,0%
4,0%
6,0%
8,0%
10,0%
12,0%
14,0%
16,0%
18,0%
FY
2010
FY
2011
FY
2012
FY
2013
FY
2014
FY
2015
Q1
2016
Q2
2016
Q3
2016
Q4
2016
Q1
2017
Q2
2017
Q3
2017
Q4
2017
Q1
2018
Q2
2018
Q3
2018
Nov
2018
NPL Ratio NPL Corporate NPL Individual

9. NPL TRANSACTIONS
AND PIPELINE

10. 10
MARKET WATCH NPL
19 17
71
66
50
2015 2016 2017 2018 2019
Pipeline
Actual
Sources: Banca IFIS NPL Market Database – Press releases and news
2018 NPL transactions reached 66 Bn€ and the 2019 pipeline
has already reached 50 Bn€ of potential volume.
Included 24,1 Bn€
of MPS disposal based
on the transfer
date of the portfolio
to the SPV.
NPL Transactions - Bn€
Included 7,8 Bn€
of BPM disposal
announced on Dec’18
% Secondary
43 50 64 73 30
0% 3% 38% 44% 18%
Highlights
o The 2018 NPL transactions
amounted to 66 Bn€, almost
half of which were through
securitization with GACS
scheme (44% of total amount)
31% 51% 4% 2% 39%
# Deals
% GACS

11. 11
MARKET WATCH NPL Sources: Banca IFIS NPL Market Database – Press releases and news - Prices and market value based on Banca IFIS internal estimate
The average market value of 2018 transactions is around 17
Bn€.
Estimated avg
price %
Estimated market
value - Bn€
28% 33% 6% 5%
13,5 3,3 0,3 0,2
2018 NPL Transactions by portfolio type - Bn€
48,6
10,0
4,8
3,1
Mixed Secured Unsecured Consumer
Highlights
o The market value of total
2018 transactions can be
estimated at around 17 Bn€
17 Bn€
66 Bn€

12. 12
MARKET WATCH NPL Sources: Banca IFIS NPL Market Database – Press releases and news
2018 Transaction prices of mixed deals are closed to
secured level and higher than 2017 average price (28% vs
19%).
19%
31%
5%
10%
28%
33%
6% 5%
Mixed Secured Unsecured Consumer
2017 2018
+9
+2
+1
-5
NPL Transactions: Estimated avg prices - Percentages

13. 13
MARKET WATCH NPL
7%
19%
11% 8%
12%
55%
49%
14%
12%
8%
36%
13%
4% 16%
57%
0%
5%
42%
45%
22%
2% 14%
30%
19%
0%
2015 2016 2017 2018 2019 Pipeline
Secured Unsecured Mixed Mixed mostly Secured Mixed mostly Unsecured
Sources: Banca IFIS NPL Market Database – Press releases and news and Banca IFIS internal estimate
The highest percentage of Secured plus Mixed mostly
Secured portfolios in 2018 was driven by the use of GACS
scheme. So far we expect a lower percentage in 2019.
NPL Transactions by portfolio type - Bn€ and Percentages
10%
19 17 71 66 50

14. 14
MARKET WATCH NPL Sources: Banca IFIS NPL Market Database - Press releases and news
2018 Transactions Top Buyers - Bn€
12,9
10,8
9,0
3,4 3,0 2,7 2,4 2,3 2,3 2,1
Banco BPM Intesa
Sanpaolo
Veneto Banks Unicredit Iccrea Banca UBI Creval MPS BPER Gruppo Delta
Secured
Unsecured
Mixed
Mixed mostly Secured
Mixed mostly Unsecured
2018 Transactions Top Sellers - Bn€
10,8
9,0
7,8
3,6
2,1 1,7 1,5 1,4
Intrum SGA Credito Fondiario,
Elliot
Banca IFIS Cerberus MB Finance MBCredit Solution Varde, Barclays,
Guber Banca
Secured
Unsecured
Mixed
Mixed mostly Secured
Mixed mostly Unsecured
The top 10 Sellers account for 77% of the 2018 total NPL
disposals and the top 8 Buyers account for 57%.

15. 15
MARKET WATCH NPL
Securitization
w/GACS %
Servicer SPV Bn€ GBV Seller
Price
(% of GBV)
Prelios Aqui SPV 2,1 BPER 30%
Prelios Maior SPV 2,7 UBI 26%
Prelios Maggese 0,7 CR Asti, Biverbanca 30%
Prelios Bcc Npls 2018 1,0 Iccrea Banca 31%
Prelios 4Mori Sardegna 1,0 Banco di Sardegna 24%
Prelios Red Sea SPV 5,1 Banco BPM 36%
Prelios Juno 1,0 Bnl Bnp Paribas 17%
Credito Fondiario N.D. 7,8 Banco BPM* 25%
Cerved POP NPLs 2018 1,6 Pop Luigi Luzzatti 31%
Cerved 2Worlds 1,0 Banco Desio 33%
Cerved Aragorn NPL 2018 1,7 Creval 35%
Italfondiario BCC NPLS 2018-2 2,0 Iccrea Banca 28%
Italfondiario Ibla 0,3 BAPR 28%
Credito Fondiario,
Italfondiario
RIVIERA NPL 1,0 Carige 22%
44% Total
Sources: Banca IFIS NPL Market Database – Press releases and news
44% of the total volume of NPL sales in 2018 were through GACS
securitization scheme.
2018 NPL Transactions by disposal methodology - Bn€ and Percentages
66 Bn€
Securitization w/o
GACS
Disposal w/o
Securitization
Securitization with
GACS
37%
19%
44%
* Possible Securitization via GACS
20%
12%
6%
4%
1%
29,0

16. 16
MARKET WATCH NPL Sources: Banca IFIS NPL Market Database – Press releases and news
2019 pipeline estimate to date, shows an amount of 50 Bn€,
of which 9,1Bn€ could be GACS-related.
2019 Pipeline - NPL deals details - Bn€
-
50,1
9,1
41,0
Pipeline
2019
GACS
requested**
Deal without
GACS
* Portfolio contains NPL and UTP
** The GACS scheme runs out on 6 March 2019
Seller Project name Ongoing On plan Announced Bn€ GBV
Credit Agricole Poppy - 6,0 - 6,0
Intesa Sanpaolo Rep - 1,4 - 1,4
Intesa Sanpaolo n.a. - 4,2 - 4,2
Unicredit Milano 0,8 - - 0,8
Unicredit Sandokan II* - - 3,0 3,0
Unicredit Amalfi 0,6 - - 0,6
BPER n.a. 2,3 - - 2,3
Banca Popolare di Sondrio n.a. - - 2,0 2,0
Christofferson Robb; Bayview n.a. - - 2,0 2,0
REV Gestione Crediti n.a. - 1,5 - 1,5
UBI n.a. - 1,5 - 1,5
Banche Popolari n.a. - 1,0 - 1,0
Gruppo Carige n.a. 1,0 - - 1,0
Cariparma n.a. - 1,0 - 1,0
Hypo Alpe Adria Bank Terzo - - 0,8 0,8
Cassa Centrale Banca n.a. - 0,7 - 0,7
Banco Desio n.a. - 0,5 - 0,5
Unipol n.a. - - 0,4 0,4
Banca Agricola Popolare di Ragusa n.a. - 0,4 - 0,4
Banca del Fucino n.a.* - 0,3 - 0,3
Banca Centro Lazio n.a. - - 0,0 0,0
Confidential n.a. 1,5 0,4 16,9 18,8
6,2 18,9 25,1 50,1

17. 17
MARKET WATCH NPL
10
3
2018 2019
Sources: Banca IFIS NPL Market Database – Press releases and news
UTP transactions reached 10 Bn€ mainly driven by Veneto
Banks assets. So far in 2019 the disposal of 3 Bn€ UTPs is
planned.
# Deals
UTP Transactions and Pipeline - Bn€
5 6
o Intesa Sanpaolo
o Intesa Sanpaolo
o MPS
o MPS
o Gruppo Carige
o Gruppo Carige
o Veneto Banks
o Gruppo Carige
o MPS
o MPS
o Credit Agricole -
Cariparma
0,3
0,3
0,8
0,0
0,1
1,8
Pipeline
Actual
o SGA
o Bain Capital Credit
o Algebris
o GWM and Farallon
o Bain Capital Credit
9,0
0,4
0,3
0,1
0,5
SELLER GBVBUYERPROJECT
o Levante
o Luce
o Morgana
o n.a.
o n.a.
o Isabella
o n.a.
o n.a.
o Alfa 2
o Alfa 2
o Valery
o Bain, Bayview
o n.a.
o n.a.
o n.a.
o n.a.
o n.a.

18. THE SHIFT ON
CREDIT SERVICING

19. 19
MARKET WATCH NPL
Italy has 266 Bn€ of Gross NPLs to manage. Of these, 118
Bn€ is the amount on banks' balance sheets as of November
2018.
Sources: Banca IFIS internal estimation based on Banca IFIS NPL Market Database and Bank of Italy data
Italy Gross Bad Loan
at 2018
NPL transactions
from 2015 to 2018
(only primary market)
Recovery and final
write-off on recovery
7
Bank Gross Bad Loans
as of November 2018
118 155 266
Total Gross Bad Loan in Italy - Bn€
Highlights
o 118 Bn€ is the amount of Gross Bad Loans on banks’ balance sheets
o 155 Bn€ is the amount of NPL transactions (only primary market) from 2015 to November 2018
o 7 Bn€ is the estimated recovery and final write-off on recovery related on NPLs transactions
o 266 Bn€ is the net balance of NPL transactions, net secondary market and recoveries, plus Bank Gross Bad Loans and it represents the total NPL portfolios to
be managed

20. 20
MARKET WATCH NPL
44%
11%
45%
44%
11% 11%
8%
6%
6%
4%
4%
3%
2%
11% DoBank
(Italfondiario)
8% Cerved
6% Banca IFIS/FBS
6% Prelios
4% Credito Fondiario
4% Tersia
3% SGA
2% MBCredit Solution
Other small players
Sources: Banca IFIS NPL Market Database
Dimension makes the difference in achieving servicing
performance.
266
Bn€
NPL Transactions: Bank Gross Bad Loans, NPL deals closed from 2015 to 2018 - Bn€ and Percentages
o Top 8 Servicers manage
around 45% of the total NPL
market assets generated
from 2015 to 2018
o Collection/recovery activity
requires relevant IT
investment
o Small players could merge
into bigger entities to survive
in the market
Highlights
118 Bn€ Bank
Gross Bad Loans

21. 21
MARKET WATCH NPL
Banche
Venete
Intesa
Sanpaolo
BPM
Unicredit
(Fino)
MPS
SGA
Tersia
Credito
Fondiario
Prelios
PAM
DoBank
(Italfondiario)
Cerved Juliet
9,0
10,8
7,8
5,1
3,4
14,3
8,0
14,1
Fewer servicers will manage the largest Italian NPL deals.
Sources: Banca IFIS NPL Market Database – Press releases and news
Large Deals 2015 - 2018 ServicersSize - Bn€

22. 22
MARKET WATCH NPL
General statement
This publication is edited by Banca IFIS.
The information contained herein, obtained from sources believed to be reliable by Banca IFIS,
are not necessarily complete, and their accuracy cannot be guaranteed.
This publication is provided merely for purposes of illustration and information and
does not in any way represent financial and investment advice.