Statement of financial positions items

MAIN STATEMENT OF FINANCIAL POSITION ITEMS
(in thousands of Euro)
AMOUNTS AT CHANGE
  2015 2014 ABSOLUTE %
Available for sale financial assets 3.221.533 243.325 2.978.208 1224,0%
Held to maturity financial assets  - 4.827.363 (4.827.363) (100,0)%
Due from banks 95.352 274.858 (179.506) (65,3)%
Loans to customers 3.437.136 2.814.330 622.806 22,1%
Property, plant and equipment and intangible assets 59.333 57.238 2.095 3,7%
Other assets 144.366 92.180 52.186 56,6%
Total assets 6.957.720 8.309.294 (1.351.574) (16,3)%
Due to banks 662.985 2.258.967 (1.595.982) (70,7)%
Due to customers 5.487.476 5.483.474 4.002 0,1%
Other liabilities 233.792 129.003 104.789 81,2%
Equity 573.467 437.850 135.617 31,0%
Total liabilities and equity 6.957.720 8.309.294 (1.351.574) (16,3)%

Available for sale (AFS) financial assets

Available for sale (AFS) financial assets include debt and equity securities and stood at 3.221,5 million Euro at 31 December 2015, compared to 243,3 million Euro at the end of 2014. This was largely attributable to the reclassification of the government bond portfolio from HTM to AFS following the rebalancing completed in April 2015: see the comments under significant events occurred during the year. The relevant valuation reserve, net of taxes, was positive to the tune of 11,7 million Euro at 31 December 2015 (6,0 million Euro at 31 December 2014).

Held to maturity (HTM) financial assets

The portfolio of held to maturity financial assets, which totalled 4.827,4 million Euro at the end of 2014, amounted to zero due to the reclassification of all HTM assets to AFS following the mentioned rebalancing of the government bond portfolio. See the comments under significant events occurred during the year.

Receivables due from banks

At 31 December 2015, receivables due from banks totalled 95,4 million Euro, compared to 274,9 million Euro at 31 December 2014 (-65,3%). This item includes some securities not listed on an active market with banking counterparties, totalling 5,0 million Euro (-54,6% compared to 31 December 2014), and treasury loans with other lenders, amounting to 90,3 million Euro (-65,8% compared to 31 December 2014), largely related to maintaining excess liquidity in the system.

Securities portfolio

In order to provide a comprehensive 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

At 31 December 2015, the debt securities portfolio amounted to 3.221,8 million Euro, down 36,4% from 31 December 2014 (5.068,3 million Euro), largely because of the redemption of bonds that reached maturity as well as some sales completed in the final quarter of 2015, which resulted in a 1,2 million euro profit. This significant resource allowed and continues to allow Banca IFIS to access funding at reasonable costs through repurchase agreements on the MTS platform or refinancing operations on the Eurosystem.

These securities have been classified as shown in the following table on the basis of their characteristics and in compliance with the provisions of IAS 39.

DEBIT SECURITIES PORTFOLIO
(in thousands of Euro)
AMOUNTS AT CHANGE
  31.12.2015 31.12.2014 ABSOLUTE %
DEBIT SECURITIES INCLUDED UNDER:        
Available for sale financial assets 3.216.832 229.868 2.986.964 1299,4%
Held to maturity financial assets - 4.827.363 (4.827.363) (100,0)%
Receivables due from banks - bonds 5.010 11.025 (6.015) (54,6)%
Total securities held 3.221.842 5.068.256 (1.846.414) (36,4)%

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

Issuer/Maturity  Within 31.03.2016 Between 1.04.2016 and 30.06.2016  Between 1.07.2016 and 30.09.2016   Between 1.10.2016 and 31.12.2016   Between 1.01.2017 and 31.12.2017   Between 1.01.2018 and 31.12.2020  Total
Government securities 15.178 25.410 - 712.837 270.032 2.193.375 3.216.832
% of total 0,5% 0,8% 0,0% 22,1% 8,4% 68,0% 99,8%
Banks - - 5.010 - - - 5.010
% of total 0,0% 0,0% 0,2% 0,0% 0,0% 0,0% 0,2%
Total 15.178 25.410 5.010 712.837 270.032 2.193.375 3.221.842
% of total 0,5% 0,8% 0,2% 22,1% 8,4% 68,1% 100,0%

Equity portfolio

Available for sale financial assets include equity securities relating to non-controlling interests in unlisted companies, amounting to 4,7 million Euro (-65,1% compared to 31 December 2014), which are considered strategic for Banca IFIS. This change was largely attributable to the 9,0 million Euro write-down of the equity interests in three investees after they were tested for impairment.

Loans to customers

Total loans to customers totalled 3.437,1 million Euro, up 22,1% from 2.814,3 million Euro at the end of 2014. Specifically, trade receivables rose 393,1 million Euro to 2.848,1 at 31 December 2015 (+16,0%). Receivables due from Italy's Public Administration at 31 December 2015 accounted for 32,1% of total receivables in the segment, compared to 27,1% at 31 December 2014, while receivables due from the private sector accounted for 67,9% (compared to 72,9% at 31 December 2014). DRL receivables rose to 354,4 million Euro (+161,7%) from 135,4 million Euro at the end 2014, reaching a nominal 8,2 billion Euro. This increase was made possible by the several acquisitions of portfolios completed during the year (nominal 4,1 billion Euro). Tax receivables totalled 130,7 million Euro, compared to 119,5 million Euro in 2014 (+9,4 %). As for the Governance and Services segment, loans to customers amounted to 104,0 million Euro (-0,4%) and largely referred to margin lending with Cassa Compensazione e Garanzia (CCG) related to repurchase agreements in government bonds on the MTS platform.

LOANS TO CUSTOMERS:BREAKDOWN BY SEGMENT (in thousands of Euro) AMOUNTS AT CHANGE
  31.12.2015 31.12.2014 ABSOLUTE %
Trade receivables 2.848.124 2.455.052 393.072 16,0%
- of which impaired 128.715 112.628 16.087 14,3%
Distressed retail loans 354.352 135.429 218.923 161,7%
- of which impaired 354.331 135.426 218.905 161,6%
Tax receivables 130.663 119.473 11.190 9,4%
- of which impaired - 34 (34) (100,0)%
Governance and services 103.997 104.376 (379) (0,4)%
- of which with Cassa di Compensazione e Garanzia 103.636 102.707 929 0,9%
Total loans to customers 3.437.136 2.814.330 622.806 22,1%
- of which impaired 483.046 248.088 234.958 94,7%

The breakdown of loans to customers is essentially in line with the Trade Receivables segment, with 30,4% of receivables due from the Public Administration (compared to 27,9% at 31 December 2014) and 69,6% due from the private segment (compared to 72,1% at 31 December 2014).

With regard to activities in support of SMEs, the loans duration was confirmed as short-term, in line with the Group's strategy to support working capital. On average, it takes 3 months to collect receivables due from private sectors entities and nearly 4 months for those due from the Public Administration.
Finally, it should be noted that the item includes 2 positions, for a total amount of 157,9 million Euro, which fall within the category of major risks.

BANKING PRODUCTS
(in thousands of Euro)
AMOUNTS AT CHANGE
  31.12.2015 31.12.2014 ABSOLUTE %
Current accounts 110.416 105.018 5.398 5,1%
Advance accounts for future receivable transfers and other financing 95.819 90.146 5.673 6,3%
Factoring advance accounts 2.604.396 2.228.221 376.175 16,9%
Bad loans 195.016 65.340 129.676 198,5%
Tax receivables 130.663 119.473 11.190 9,4%
Mortgages 6.904 287 6.617 2305,6%
Receivable repurchase agreements 103.636 102.707 929 0,9%
Other operations 3.246.850 2.711.192 535.658 19,8%
Total net current loans (1) 190.286 103.138 87.148 84,5%
Net Bad loans 3.437.136 2.814.330 622.806 22,1%

(1) Total net current loans include unlikely to pay past due exposures classified as non-performing exposures pursuant to the Bank of Italy's provisions (see table 7.1 in the Notes to the financial statements)

Credit quality

Can a small/medium sized enterprise have the same creditworthiness as a large enterprise?


 

By adopting a business model suitable for transferring risk from customers to better-structured debtors, the Bank manages to mitigate its exposure to customer default risk. Even though the prolonged economic downturn has caused also receivables due from higher-quality debtor to deteriorate, the improvement concerning the most significant non-performing exposures – i.e. those in the Trade Receivables segment – registered in 2014 continued into 2015, as shown in the table below. Specifically, said improvement was due to the following factors: a) new bad loans continued to decrease; b) the Group is extremely effective at promptly recognising losses on positions found to be impaired (adjusting the item impairment/losses in profit or loss accordingly); finally, particular attention was paid to past due exposures, considerably improving the management of flows and the relevant level of risk. The growth registered in this category is largely attributable to some individually significant positions.

Total net non-performing exposures, also due to the recent acquisitions in the DRL segment, amounted to 483,0 million Euro at 31 December 2015, compared to 248,1 million Euro at the end of 2014 (+94,7%).

As described in the paragraph Impact of regulatory changes, starting from 1 January 2015, the Group has implemented the new definition of non-performing exposures recently adopted by the Bank of Italy, which requires to break down non-performing exposures into bad loans, unlikely to pay, and non-performing past due exposures and/or overdrafts.
To make the data more comparable, Banca IFIS restated net non-performing exposures at 31 December 2014 according to the new definitions of the Bank of Italy.

Here below is the reclassification of outstanding non-performing exposures at 31 December 2014 to the new categories and the breakdown of forborne exposures by segment.

NON-PERFORMING EXPOSURES
(in thousands of Euro)
Old definitions Period/ Values New definitions Period/ Values Period/ Values
  31.12.2014   31.12.2014 31.12.2015
Bad loans 103.138 Bad loans 103.138 190.286
Restructured loans 14.374 Unlikely to pay 109.152 234.546
Subjective substandard loans 94.778 Unlikely to pay    
Objective substandard loans 8.450 Past due exposures 35.798 58.214
Past due loans 27.348 Past due exposures    
Total net non-performing exposures 248.088 Total net non-performing exposures 248.088 483.046

FORBEARANCE
(in thousands of Euro)
TRADE RECEIVABLES DRLs TAX RECEIVABLES CONSOLIDATED TOTAL.
Bad loans        
Figures at 31.12.2015 371 15.064 - 15.435
 Figures at 31.12.2014 - 6.189 - 6.189
 Change % n.a. 143,4% - 149,4%
Unlikely to pay        
Figures at 31.12.2015 14.414 19.309 - 33.723
 Figures at 31.12.2014 14.354 6.197   20.551
 Change % 0,4% 211,6% - 64,1%
Past due exposures       -
Figures at 31.12.2015 5.300 - - 5.300
 Figures at 31.12.2014 - -   -
 Change % n.a. - - n.a.
Net performing loans to customers       -
Figures at 31.12.2015 2.954 5 - 2.959
 Figures at 31.12.2014 1.968 -   1.968
 Change % 50,1% n.a. - 50,4%

Net non-performing exposures in the trade receivables segment, which actually determine the Bank’s overall credit quality, rose 14,3% from 112,6 million Euro at the end of 2014 to 128,7 million Euro. Non-performing exposures amounted to 22,4% (25,7% in December 2014) as a proportion of the Group's equity.

CREDIT QUALITY
(in thousands of Euro)
TRADE RECEIVABLES DRLs TAX RECEIVABLES GOVERNANCE AND SERVICES CONSOLIDATED TOTAL
Bad loans          
Figures at 31.12.2015 30.950 159.336 - - 190.286
Figures at 31.12.2014 33.049 70.089 - - 103.138
Change % (6,4)% 127,3% - - 84,5%
Unlikely to pay         -
Figures at 31.12.2015 39.551 194.995 - - 234.546
Figures at 31.12.2014 43.781 65.337 34 - 109.152
Change % (9,7)% 198,4% (100,0)% - 114,9%
Past due loans         -
Figures at 31.12.2015 58.214 - - - 58.214
Figures at 31.12.2014 35.798 - - - 35.798
Change % 62,6% - - - 62,6%
Total net impaired loans          
Figures at 31.12.2015 128.715 354.331 - - 483.046
Figures at 31.12.2014 112.628 135.426 34 - 248.088
Change % 14,3% 161,6% (100,0)% - 94,7%
Net performing loans to customers         -
Figures at 31.12.2015 2.719.409 21 130.663 103.997 2.954.090
Figures at 31.12.2014 2.342.424 3 119.439 104.376 2.566.242
Change % 16,1% 600,0% 9,4% (0,4)% 15,1%
Total loans to customers (cash)          
 Figures at 31.12.2015 2.848.124 354.352 130.663 103.997 3.437.136
Figures at 31.12.2014 2.455.052 135.429 119.473 104.376 2.814.330
Change % 16,0% 161,7% 9,4% (0,4)% 22,1%

Here below is the breakdown of net non-performing exposures in the trade receivables segment alone:

At the end of the year, net bad loans amounted to 30,9 million Euro, compared to 33,0 million Euro in 2014 (-6,4%); the segment's net bad-loan ratio edged down to 1,1% from 1,3% at 31 December 2014. Net bad loans amounted to 5,4% as a proportion of equity, compared to 7,5% at 31 December 2014.

The balance of net unlikely to pay at the end of 2015 was 39,6 million Euro, -9,7% from 43,8 at the end of 2014. The decline was largely attributable to the improved coverage ratio, rising from 24,5% at 31 December 2014 to 32,1% at 31 December 2015, thanks to the Bank's rigorous assessment policy.

At 31 December 2015, net non-performing past due loans totalled 58,2 million Euro, compared to 35,8 million Euro in December 2014 (+62,6%), mainly as a result of the inclusion in this category of some individually significant positions. Changes in non-performing past due exposures are a normal part of the Bank's business model. Net non-performing past due exposures referred for 1,2 million Euro (3,9 million Euro at the end of 2014) to receivables due from the Public Administration purchased outright as part of financing operations.

IMPAIRED TRADE RECEIVABLES
(in thousands of Euro
)
BAD LOANS (1) UNLIKELY TO PAY PAST DUE TOTAL
BALANCE AT 31.12.2015        
Gross amount 255.404 58.257 59.788 373.449
Incidence on gross total receivables 8,2% 1,9% 1,9% 12,0%
Adjustments 224.454 18.706 1.574 244.734
Incidence on gross value 87,9% 32,1% 2,6% 65,5%
Net amount 30.950 39.551 58.214 128.715
Incidence on net total receivables 1,1% 1,4% 2,0% 4,5%
BALANCE AT 31.12.2014        
Gross amount 243.729 57.982 37.301 339.012
Incidence on gross total receivables 9,1% 2,2% 1,3% 12,6%
Adjustments 210.680 14.201 1.503 226.384
Incidence on gross value 86,4% 24,5% 4,0% 66,8%
Net amount 33.049 43.781 35.798 112.628
Incidence on net total receivables 1,3% 1,8% 1,5% 4,6%

(1) As far as bad loans are concerned, Banca IFIS enters its gross bad 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.

Intangible assets and property, plant and equipment and investment property

Intangible assets totalled 7,2 million Euro, compared to 6,6 million Euro at 31 December 2014 (+9,4%).
The item refers to software (6,4 million Euro) as well as goodwill (820 thousand Euro) arising from the consolidation of the investment in IFIS Finance Sp.Z o.o.

Property, plant and equipment and investment property totalled 52,2 million Euro, compared to 50,7 million Euro at 31 December 2014 (+2,9%).
The properties classified under property, plant and equipment and investment property mainly include: the important historical building Villa Marocco, located in Mestre (Venice) and housing Banca IFIS’s registered office, and the property in Mestre (Venice), where some of the Bank’s services were relocated.
Since these are luxury properties, they are not amortised, but are tested for impairment at least annually. To this end, they are appraised by experts specialising in luxury properties. The appraisal for the year 2015 did not result in an impairment.
There are also two buildings in Florence: the first, worth 3,9 million Euro, was acquired under a finance lease and is the current head office of the NPL business area; the second, measured at 11,6 million Euro—including the restructuring costs incurred to date—will become the new head office of said area.
Properties not yet brought into use at the reporting date are not depreciated.

Tax assets and liabilities

These items include current and deferred tax assets and liabilities.
Deferred tax assets, amounting to 39,4 million Euro at 31 December 2015, refer for 38,0 million Euro to impairment losses on receivables that can be deducted in the following years.
Deferred tax liabilities, amounting to 21,4 million Euro at 31 December 2015, refer for 5,7 million Euro to the measurement of the tax receivables of the former subsidiary Fast Finance S.p.A., which was
carried out at the time of the business combination, and for 5,8 million Euro to taxes on the valuation reserve for AFS securities held in the portfolio.

Other assets and liabilities

Other assets amounted to 82,3 million Euro at 31 December 2015 (+58,8% from 31 December 2014). This line item referred for 18,1 million Euro to receivables due from Italian tax authorities for payments on account (stamp duty and withholding taxes), and for 7,3 million Euro to an escrow account held with the Italian Revenue Agency concerning a pending appeal in an outstanding tax dispute (as described in section 12 under liabilities, Provisions for risks and charges). The Bank voluntarily set up said account to allow the Fast Finance Business Area to collect tax receivables as usual; the Bank can simply request for it to be returned.
Other assets included the 25,5 million Euro receivable due from one of the two buyers of the sales completed at the end of 2014. The amount corresponds to the consideration for the sale.
Other liabilities, totalling 204,6 million Euro at the end of the period, were up 93,5 million Euro. This was largely attributable to payables due to the parent company La Scogliera S.p.A. deriving from the tax consolidation regime; amounts due to customers that have not yet been credited; and the payable due to one of the buyers of the sales of DRL receivables completed at the end of 2015. This payable totalled 20,7 million Euro, which is the amount of the receivables transferred.

Funding

Funding, net of the rendimax savings account and the contomax current account, shall be analysed in a comprehensive manner based on market trends; it consists of wholesale funding through repurchase agreements (largely classified under payables due to customers, as they are carried out with counterparties formally other than banks), refinancing transactions on the Eurosystem, and short-term treasury transactions with other lenders.

FUNDING
(in thousands of Euro)
YEAR CHANGE
  2015 2014 ABSOLUTE %
Due to customers: 5.487.476 5.483.474 4.002 0,1%
 Repurchase agreements 2.278.983 2.082.854 196.129 9,4%
Rendimax 3.048.357 3.241.746 (193.389) (6,0)%
Contomax 64.912 72.454 (7.542) (10,4)%
 Other payables 95.224 86.420 8.804 10,2%
Due to banks: 662.985 2.258.967 (1.595.982) (70,7)%
 Eurosystem 119.792 2.226.872 (2.107.080) (94,6)%
  Repurchase agreements   384.225 - 384.225 n.a.
 Other payables 158.968 32.095 126.873 395,3%
Total funding 6.150.461 7.742.441 (1.591.980) (20,6)%

Total funding, which amounted to 6.150,5 million Euro at 31 December 2015, down 20,6% from 31 December 2014, is represented for 89,2% by Payables due to customers (compared to 70,8% at 31 December 2014) and for 10,8% by Payables due to banks (compared to 29,2% at 31 December 2014).

Payables due to customers at 31 December 2015 totalled 5.487,5 million Euro. The item included the repurchase agreements with underlying government bonds and Cassa di Compensazione e Garanzia as counterparty, amounting to 2.279,0 million Euro (compared to 2.082,9 million Euro at the end of 2014). Retail funding totalled 3.113,3 million Euro at 31 December 2015, including 3.048.4 from rendimax and 64,9 million Euro from contomax, compared to 3.314,2 million Euro at 31 December 2014 (-6,1%), also as a result of the newly introduced 3-, 4- and 5-year maturities for rendimax. The Bank still bears proportional stamp duty costs on rendimax and contomax, which amount to 0,20%.

Payables due to banks, amounting to 663,0 million Euro (2.259,0 million Euro at 31 December 2014, -70,7%), mainly consisted of funding from repurchase agreements with underlying government bonds (384,2 million Euro) and refinancing operations on the Eurosystem for 119,8 million Euro (-94,6% from 2.226,9 million Euro at 31 December 2014). The latter amount referred entirely to the TLTRO loan received in December 2014 at a fixed 0,15% rate and maturing on 26 September 2018. The remainder of payables due to banks consists of interbank deposits. The significant decrease in Payables due to banks compared to the end of the previous year was due to the fact that the Bank carried out less refinancing operations on the Eurosystem, rather using the MTS platform and dealing with Cassa di Compensazione e Garanzia as counterparty. The Bank turns to the ECB or the MTS platform exclusively based on which is more convenient in light of interest rate trends.

Provisions for risks and charges

PROVISIONS FOR RISKS AND CHARGES
(in thousands of Euro)
AMOUNTS AT CHANGE
  2015 2014 ABSOLUTE %
Legal disputes 1.513 1.527 (14) (0,9)%
Tax disputes 197 - 197 n.a.
FITD provisions (Deposit Protection Fund) 461 461 - 0,0%
Total provisions for risks and charges 2.171 1.988 183 9,2%

Legal disputes

The provision outstanding at 31 December 2015, amounting to 1,5 million Euro, included 1.481 thousand Euro for eleven disputes concerning the Trade Receivables segment, and 32 thousand Euro for seven disputes concerning the DRL segment.
Overall, the Bank recognises contingent liabilities amounting to 4,5 million Euro in claims, represented by 11 disputes: 9 refer to disputes concerning the Trade Receivables segment, for a total of 4,5 million Euro. The Bank, supported by the legal opinion of its lawyers, made no provisions for these positions, as the risk of defeat is considered possible.

Tax dispute

At 31 December 2015, the provision for risks amounted to 197 thousand Euro. This amount refers to the provision set aside for the verification notices received by the Bank, which has filed an appeal against them with the competent Tax Commission. The Bank's tax advisers believe the relevant risk of defeat is probable.

As for contingent liabilities outstanding at 31 December 2015:
Following a tax check for the fiscal year 2005, on 25 July 2008 the Italian Revenue Agency issued a report of verification, in which the Office alleged a tax avoidance scheme as set out in article 37-bis of Italian Presidential Decree 600/1973. This concerned the impairment loss on the equity investment in Immobiliare Marocco S.p.A. recognised in 2003, which was deducted in fifths over the following accounting periods as per articles 61 and 66 of the Consolidated Law on Income Tax in force at the time.
In addition, the tax officials also challenged the calculation of the limits for the deductibility of bad debt and impairment losses (pursuant to art. 106, para, 3, of the Consolidated Law on Income Tax), but they did not consider that the Bank would have deducted the amount assessed as taxable on a straight-line basis over the 18 following accounting periods, as required by art. 110, para. 8 of the Consolidated Law on Income Tax.

Based on the first alleged tax avoidance scheme, for the fiscal year 2004, the Italian Revenue Agency issued a verification notice assessing a higher corporate income tax liability of 276 thousand Euro, plus interest and penalties. The Bank received this notice on 3 December 2009 and challenged it before Venice's Provincial Tax Commission, which rejected the appeal. Subsequently, the Bank filed another appeal. On 18 October 2012, the Tax Commission of the Veneto Region upheld the appeal, dismissing the findings of the verification notice and ordering the Office to reimburse the court costs.
The Revenue Agency filed an appeal with the Court of Cassation. The Bank filed a counter-appeal, confident that the second-instance ruling will be upheld, since the Office's claims are baseless. At 31 December 2015, the date for the hearing had yet to be settled.

As for the fiscal year 2005, on 22 August 2012, even though the statute of limitations for assessing income taxes had expired, the Bank received a verification notice in which the Office claimed that the following items were assessed as taxable:

  • the amount related to the mentioned write-down of the equity investment in Immobiliare Marocco S.p.A., totalling 837 thousand Euro, with a higher tax liability of 276 thousand Euro, plus interest and penalties.
  • the amount related to the recalculation of the limits for the deductibility of bad debt losses, totalling 1,4 million Euro, with a higher tax liability of 478 thousand Euro, plus interest and penalties;
  • the capital losses and the so-called “manufactured dividends”, as they arose—in the Office's opinion—from tax avoidance schemes, totalling 6,3 million Euro, with a higher tax liability of 2,1 million Euro, plus interest and penalties.

Thus, the Revenue Agency assessed an additional 8,6 million Euro in income as taxable, resulting in a higher tax liability of 2,8 million Euro, plus interest and penalties.
However, such assessment lacks legitimacy. Besides the fact that the Office's claims are baseless, it is clear that the statute of limitations for the income tax assessment had expired pursuant to art. 43 of Italian Presidential Decree 600/1973.
As there is no reason for doubling the statute of limitations (which is possible only for criminal offences), the notice shall be considered null and void.
In light of these considerations, as well as the 18 October 2012 ruling of the Tax Commission of the Veneto Region (which dismissed the findings of the verification notice for the year 2004, including the alleged non-deductibility of the write-down of the equity investment in Immobiliare Marocco S.p.A.), the Bank applied for composition proceedings.
However, the Revenue Agency rejected the application, and therefore the Bank had to file an appeal with Venice's Provincial Tax Commission. This was filed on 11 February 2013.
After a series of delays, the hearing has been scheduled for 18 March 2016.

The tax advisers handling the mentioned disputes (referring to the fiscal years 2004 and 2005) believe the Bank's case is strong, and deem that the risk of defeat is possible. Therefore, in accordance with IAS 37, the Bank did not make any provisions for the tax proceedings concerned.

Others

Italy's Interbank Deposit Protection Fund (FITD, Fondo Interbancario di Tutela dei Depositi), of which Banca IFIS is a member, approved in a letter dated 16 September 2014 another rescue loan (in addition to the measures announced on 9 January 2014 and 17 July 2014) to Banca Tercas, based in Ascoli Piceno. The relevant potential obligation for Banca IFIS amounts to 0,5 million Euro. Therefore, in 2014 Banca IFIS allocated said amount to the provisions for risks and charges.

Equity and capital adequacy ratios

At 31 December 2015, consolidated Equity was 573,5 million Euro, compared to 437,8 million Euro at 31 December 2014 (+31,0%). The breakdown of the item and the change compared to the previous year are detailed in the tables below.

EQUITY: BREAKDOWN
(in thousands of Euro)
AMOUNTS AT CHANGE
  31.12.2015 31.12. 2014 ABSOLUTE %
Capital 53.811 53.811 - 0,0%
Share premiums 58.900 57.113 1.787 3,1%
Valuation reserve: 5.739 (109) 5.848 (5365,1)%
- AFS securities 11.677 5.969 5.708 95,6%
- post-employment benefit (167) (262) 95 (36,3)%
- exchange differences (5.771) (5.816) 45 (0,8)%
Reserves 298.856 237.874 60.982 25,6%
Treasury shares (5.805) (6.715) 910 (13,6)%
Profit for the period 161.966 95.876 66.090 68,9%
Equity 573.467 437.850 135.617 31,0%

EQUITY: CHANGES
(in thousands of Euro)
YEAR 2015
Equity at 31.12.2014 437.850
Increases: 170.636
Profit for the year 161.966
Sale of treasury instruments 2.697
Valuation reserve: 5.848
- AFS securities 5.708
- post-employment benefit 95
- exchange differences 45
Other variations 125
Decreases: 35.019
Dividends distributed 35.019
Equity at 31.12.2015 573.467

The change in the valuation reserve for AFS securities recognised in the period was the result of the mentioned sale of part of the portfolio, which caused the Bank to reduce the reserve.
The change in the valuation reserve for exchange differences refers mainly to exchange differences deriving from the consolidation of the subsidiary IFIS Finance Sp. Z o.o.

OWN FUNDS AND CAPITAL RATIOS
(in thousands of Euro)
AMOUNTS AT
  31.12.2015 31.12.2014 
Common equity Tier 1 Capital (CET1) (1) 479.316 387.221
Tier 1 Capital (AT) 488.956 389.769
Total own funds 501.809 396.190
Total RWA 3.264.088 2.787.920
Common Equity Tier 1 Ratio 14,68% 13,89%
Tier 1 Capital Ratio 14,98% 13,98%
Total own funds Capital Ratio 15,37% 14,21%

(1) Common Equity Tier 1 capital includes the profit for the period net of estimated dividends

Consolidated own funds, risk-weighted assets and solvency ratios at 31 December 2015 were determined based on the regulatory principles set out in Directive 2013/36/EU (CRD IV) and Regulation (EU) 575/2013 (CRR) dated 26 June 2013, which were transposed in the Bank of Italy's Circulars no. 285 and 286 of 17 December 2013.
Article 19 of the CRR requires to include the unconsolidated Holding of the banking group in prudential consolidation.

The measures concerning own funds provide for the gradual phase-in of a new regulatory framework, with a transitional period lasting until 2017 during which some elements that will be accounted for or deducted in full once the provisions become effective will have only a limited impact.

The Banca IFIS Group, in compliance with the transitional provisions of the Bank of Italy's Circular no. 285 of 17 December 2013 as amended, calculated own funds at 31 December 2015 by excluding the unrealised gains on the exposures to central governments classified under “Available for sale financial assets” in IAS 39, for a net positive amount of 5,9 million Euro.