z On 7 December 2020, the Board of Directors of Conio Inc. approved a capital increase of approximately $13.8 million, which included a new shareholder in the company’s shareholding structure. Poste Italiane’s shareholding at 31 December 2020 has been reduced from 19.7% to 17.6% as it did not participate in the above increase.
z Poste Italiane SpA: bond issue As part of Poste Italiane’s €2 billion Euro Medium Term Notes (EMTN) Programme, with a rating of “BBB” from Standard and Poor’s and “Baa3” from Moody’s, the Parent Company issued a senior unsecured bond with a total nominal value of €1 billion on 10 December 2020 in two tranches, placed in public form with institutional investors. The first tranche of €500 million matures on 10 December 2024, has an above-par issue price of 100.10 with fixed annual coupon of 0.00% and an effective yield to maturity of -0.025%; the second tranche of €500 million matures on 10 December 2028, with an issue price below par of 99.758, a fixed annual coupon of 0.50% and an effective yield to maturity of 0.531%. The securities are listed on the regulated market managed by the Luxembourg Stock Exchange.
Financial statements of Poste Italiane at 31 December 2020 3. Material events during the year
4. Poste Italiane Group Financial statements for the year ended 31 December 2020 4.1 Consolidated financial statements
Cash and deposits attributable to BancoPosta [A10] 6,391 - 4,303 -
Revenue from Insurance Services after changes in technical provisions and other claim expenses
Change in technical provisions for insurance business and other claim expenses
Impairment losses/(reversals of impairment losses) on financial assets [C12] 1 - 46 of which, non-recurring costs/(income) - 46
Profit/(Loss) on investments accounted for using the equity method [A5] 5 - 112 of which, non-recurring income (costs) - 88
Profit/(Loss) before tax 1,576 1,872 of which, non-recurring costs/(income) (96) -
Actuarial gains /(losses) on employee termination benefits [tab. B7] (5) (70)
Taxation of items recognised directly in, or transferred from, equity not to be reclassified in the Statement of profit or loss for the year
Total comprehensive income for the year - - - - 1,087 26 (1) - 1,292 2,404 - 2,404
Change in scope of consolidation - - - - - - - - - - 6 6 * This item includes profit for the year (Group portion) of €1,207 million and actuarial losses on provisions for employee termination benefits of €4 million, after the related current and deferred taxation.
Consolidated statement of cash flows (€m) Notes FY 2020 FY 2019
Cash flow generated by /(used in) movements in working capital [b] (677) (214)
Increase/(decrease) in liabilities attributable to financial activities, payments, cards and acquiring and insurance 14,469 7,980
Net cash generated by/(used for) financial assets attributable to financial activities, payments, cards and acquiring and insurance (15,961) (10,904)
Net cash flow from/(for) financing activities and shareholder transactions [f] 1,051 (1,434)
Reclassifications from tangible assets under construction amount to €65 million and mainly refer to the purchase cost of assets that have become available and ready for use during the year; in particular, they refer to the Parent Company for the conclusion of extraordinary renovations of owned properties and improvements to leased properties (€33 million) and to the subsidiary SDA Express Courier SpA mainly for the commissioning of the new automated sorting system of the Centre Hub, which entered the production process in December 2020 (€19 million).
96. In terms of fair value hierarchy, which reflects the relevance of the sources used to measure assets, service accommodation qualifies for level 3, while the other investment property qualifies for level 2.
The increase in Industrial patents and intellectual property rights, concessions, licences, trademarks and similar rights totals €245 million, before amortisation for the period, and relates primarily to the purchase and entry into service of new software programmes and the acquisition of software licences.
The balance of intangible assets under construction includes activities conducted by the Parent Company, primarily regarding the development for software relating to the infrastructure platform (€80 million), for BancoPosta services (€39 million), for use in providing support to the sales network (€24 million), for the postal products platform (€10 million) and for the engineering of reporting processes (€6 million).
The breakdown of the item Goodwill is as follows: tab. A3.1 - Goodwill
The balance of €23 million refers to goodwill allocated to the Insurance Services SBU and the Mail, Parcels and Distribution SBU.
The item Investments in associates (valued using the equity method) mainly refers to the companies Anima Holding and FSIA Investimenti Srl.
During 2018, Poste Italiane SpA proceeded with tax redemption pursuant to art. 15, paragraph 10-ter of Law Decree no. 185 of 2008, of the higher values resulting from the notes to the consolidated financial statements of Poste Italiane at 31 December 2017, attributed to goodwill and other intangible assets relating to the acquisition of the investment in FSIA Investimenti Srl.
In order to qualify for the relief, in 2018, the Company paid substitute tax (IRES and IRAP) of approximately €32 million, equal to 16% of the amounts to which the relief applies, totalling approximately €198 million. Specifically, the amount franked, referring to the values that emerged at the time of acquisition of the equity investment in 2017, is made up as follows: (€m)
The substitute tax paid has been accounted for in current tax assets.
Financial assets at amortised cost 33,465 17,212 50,677 25,260 14,903 40,163
Financial assets at amortised cost 31,596 16,994 48,590 23,637 14,607 38,244
Payment services and card payments 36 133 169 - 115 115
Financial assets by operating segment break down as follows: z Financial Services, relate primarily to the financial assets of BancoPosta RFC and the company, BancoPosta Fondi SpA SGR; z Insurance Services, includes the financial assets of Poste Vita SpA and its subsidiary, Poste Assicura SpA; z Mail, Parcels and Distribution, representing all the other financial assets held by the Parent Company (different from those held by BancoPosta) and the other financial assets held by companies that provide postal and business services; z Payment Services and Card Payments, representing the financial assets held by the ring-fenced EMI.
Provisions for doubtful amounts deposited with MEF - (4) (4) - (3) (3)
z Other financial receivables, including €7,494 million in deposits as collateral for amounts paid to counterparties for interest rate swap transactions (collateral provided under specific Credit Support Annexes).
These are Eurozone fixed income instruments held by BancoPosta RFC, consisting of government securities issued by the Italian government and securities guaranteed by the Italian government with a nominal value of €26,157 million. Their carrying amount of €33,254 million reflects the amortised cost of unhedged fixed income instruments, totalling €11,380 million, the amortised cost of fair-value hedged fixed income bonds, totalling €17,485 million, increased by €4,389 million to take into account the effects of the hedge. Fixed income instruments measured at amortised cost are adjusted to take into account the related impairments. Accumulated impairments at 31 December 2020 amount to approximately €15 million (€8 million at 31 December 2019).
This category of financial asset includes fixed rate instruments, amounting to nominal €3,000 million, issued by Cassa Depositi e Prestiti SpA and guaranteed by the Italian government (at 31 December 2020, their carrying amount totals €3,300 million).
Total fair value fluctuation for the year was positive for €3,644 million, with gains of €1,946 million recognised in the relevant equity reserve in relation to the portion of the portfolio not hedged by fair value hedges, and a gain of €1,698 million recognised through profit or loss in relation to the hedged portion.
Accumulated impairments at 31 December 2020 amount to €18 million (€11 million at 31 December 2019).
Below are the movements in financial assets at fair value through profit or loss: tab. A6.3 - Movements in financial assets at FVTPL
Changes in fair value through profit or loss - 1 1
Equity instruments include: z for €34 million, the fair value of 32,059 Visa Incorporated preference shares (Series C Convertible Participating Preferred Stock) received for the sale of the Visa Europe Ltd. share to Visa Incorporated on 21 June 2016. These shares are convertible at the rate of 6.853100 ordinary shares for each C share, minus a suitable illiquidity discount. These shares can be converted into several tranches starting from the fourth year after closing and up to the twelfth year. On 21 June 2020 (the fourth year after closing), the process of determining the proportion of convertibility and related rate of Visa Incorporated Series C Convertible Participating Preferred Stock commenced, partially concluded on 24 September 2020 with the grant of 2,199 preference shares of Visa Incorporated Series A Preferred Stock; z for €38 million, the fair value of 2,199 Visa Incorporated preference shares (Series A Preferred Stock); these shares are convertible into ordinary shares on the basis of a ratio of one hundred ordinary shares for every share of Class A Preferred Stock.
Net fair value gains in the year under review, amounting to €1 million, have been recognised in profit or loss in the items Income and Expenses from financial activities.
Given the conversion rate at 31 December 2020, the VISA Incorporated preference shares (Series A and C) held in the portfolio correspond to 439,600 VISA Incorporated ordinary shares.
In 2019, the Parent Company entered into a forward sale agreement for 400,000 Visa Incorporated ordinary shares at a price of US$153.46 per share and at an exchange rate of 1.2037. The total consideration is €51 million and the settlement date is 1 March 2021. The fair value of the forward sale has decreased by €5 million in the reporting year, reflecting movements in both the price of the shares in US dollars and the euro/dollar exchange rate. This reduction has been recognised in profit or loss in “Expenses from financial activities”.
The following table shows movements in derivative instruments during the year: tab. A6.4 - Movements in derivative financial instruments
Cash flow hedges in the form of interest rate swaps and forward sales relate to instruments classified as FVTOCI, with nominal values of €1,720 million and €2,068 million, respectively.
100. Until the assigned shares are fully converted into ordinary shares, the share exchange ratio may be reduced if Visa Europe Ltd. incurs liabilities that, as of the reporting date, were considered as merely contingent.
In addition, the Parent Company entered into and settled forward purchases for a total nominal value of €165 million (recognised at fair value through profit or loss), aimed at blocking the return, for 2020, on the investment of inflows from public customers on the deposit with the parent company (MEF), remunerated at a variable rate (table A6.1.1). These transactions had a positive impact of €11 million on profit or loss for the year (tab. C.3.1.1).
At 31 December 2020, fixed income instruments relate to investments primarily held by Poste Vita SpA for €112,762 million (a nominal value of €96,549 million) issued by European governments and European blue-chip companies. These instruments are mainly intended to cover products related to separately managed accounts, and therefore, the related gains and losses are transferred in full to policyholders and recognised in technical provisions using the shadow accounting method. These fixed income instruments comprise bonds issued by CDP SpA, with a fair value of €605 million.
Total fair value fluctuation for the year was positive for €5,982 million, with gains of €5,974 million (€5,899 million transferred to policyholders) recognised in the relevant equity reserve in relation to the portion of the portfolio not hedged by fair value hedges, and a gain of €8 million recognised through profit or loss in relation to the hedged portion.
Accumulated impairments at 31 December 2020 amount to €59 million, almost entirely transferred to policyholders using the shadow accounting method (at 31 December 2019, impairments amounted to €37 million, almost entirely transferred to policyholders using the shadow accounting method).
101. In terms of the fair value hierarchy, which reflects the relevance of the sources used to measure assets, €1,875 million of the total amount qualifies for inclusion in level 1 and €316 million for inclusion in level 2.
At 31 December 2020, Cassa Depositi e Prestiti’s private placement of a Constant Maturity Swap, classified as at FVTOCI, amounts to €540 million. The increase in fair value of €1 million during the period was transferred to policyholders using the shadow accounting method.
Below are the movements in financial assets at fair value through profit or loss: tab. A6.7 - Movements in financial assets at FVTPL
(€m) Receivables Fixed income instruments Units of mutual investment funds Equity instruments Other investments Total
Sales, redemptions and settlement of accruals (398) (4,209) (129) - (4,736)
At 31 December 2020, fixed income instruments of €1,992 million consist of €50 million in coupon stripped and Zero Coupon bonds, while the balance of €1,942 million is primarily made up of corporate bonds issued by blue-chip companies. Corporate financial instruments totalling €1,584 million are linked to separately managed accounts, €285 million covers contractual obligations arising on Class III insurance policies and the remaining €73 million relates to securities in which the Company’s free capital has been invested.
Equity instruments amount to €200 million, and cover the contractual obligations arising on Class I products linked to separately managed accounts and Class III policies. The change over the period reflects the combined effect of net investments of approximately €34 million, the effects from sales of approximately €15 million and fair value gains of approximately €4 million.
Other investments of €22 million relate to a Constant Maturity Swap placed by Cassa Depositi e Prestiti (a nominal value of €22 million) and covering products linked to separately managed accounts.
Due from the purchasers of service accommodation 3 2 5 4 2 6
Amounts due from others for €50 million refer to the remaining amount due from Invitalia SpA as a result of the sale of Banca del Mezzogiorno-MedioCreditoCentrale SpA (BdM) on 7 August 2017102.
Changes in fair value through equity (6) 7 1 hanges in fair value through profit or loss (11) - (11)
The item includes: z for €75 million the investment in CAI SpA (formerly Alitalia CAI SpA), acquired in 2013 and written off in 2014; z for €25 million the investment in MFM Investments Ltd, acquired on 9 August 2019 for the first tranche of €15 million and on 13 May 2020 for the second tranche of €9.6 million; z for €10 million the investment in sennder GmbH acquired on 11 November 2019; z €5 million for the investment in Milkman SpA acquired on 24 April 2020.
Fair value gains in the year under review, amounting to €7 million, have been recognised in the specific Equity reserve.
Corporate actions during 2020, are described in note 3.1 – Principal corporate actions.
Gains/(Losses) through profit or loss - - - of which: * Transactions settled include forward transactions settled, accrued differentials and the settlement of interest rate swaps linked to securities sold.
At 31 December 2020, derivative financial instruments include: z a cash flow hedging interest rate swap contract entered into in 2013 to protect the cash flows of the €50 million bond issued on 25 October 2013 (Note B.8 - Financial liabilities); with this transaction, the Parent Company assumed the obligation to pay the fixed rate of 4.035% and sold the variable rate of the bond, which at 31 December 2020 was 0.703%; z nine interest rate swaps used as fair value hedges in 2010 to protect the value of BTPs with a nominal value of €375 million against movements in interest rates. These instruments have enabled the Parent Company to sell the fixed rate on the BTPs of 3.75% and purchase a variable rate; z three swap contracts entered into in 2020, of which two are outstanding at 31 December, to cover fuel costs relating to the air transport of mail carried out via the subsidiary, Poste Air Cargo Srl, for the three-year period 2020-2022.
Financial assets at amortised cost refer solely to financial receivables due to the ring-fenced EMI, amounting to €133 million.
Financial assets at fair value through other comprehensive income of €36 million relate to investments in Tink AB for €32 million and Volante for €4 million (see also Note 4.1 - Principal corporate actions). Fair value gains in the year under review, amounting to €10 million, have been recognised in the specific Equity reserve.
104. In terms of fair value hierarchy, which reflects the relevance of the sources used to measure assets, this amount qualifies for level 2.
Work in progress, semi-finished and finished goods and goods for resale
The change in raw, ancillary and consumable materials mainly refers to protective equipment, disinfectant gel and other materials purchased during the year and which will be used in 2021.
A8 - Trade receivables (€2,375 million) tab. A8 - Trade receivables
Due from the Parent company (MEF) - 36 36 - 45 45
Amounts due for other BancoPosta services - 84 84 - 105 105
Provisions for doubtful debts due from customers - (544) (544) (13) (512) (525)
– Reimbursement of the costs associated with the management of property, vehicles and security incurred on behalf of the Ministry for Economic Development, totalling €81 million106, including €62 million involved in legal action brought by Poste Italiane in order to claim sundry costs resulting from the use of properties. On 30 April 2020, a partially favourable judgement was published for Poste Italiane; the judgement was notified to MiSE and the latter appealed before the Court of Appeal with a request for suspension. On 3 December 2020, the request was not granted and a decision is now pending in the second instance.
z Amounts due from overseas counterparties relate to postal services carried out by the Parent Company for overseas postal operators.
106. See “Revenue and amounts due from the State”, showing overall amounts due from the Ministry for Economic Development (€82 million), including amounts due for postal and other services.
z Other trade receivables include mainly: €91 million from Postepay SpA primarily in relation to the sale of TLC subscription services, acquiring services and other services provided to customers in the telecommunications sector, in the payment circuit and money transfer sectors €47 million in relation to the Posta Time service, €33 million relating to the Posta Contest service, €27 million relating to the Posta Target service, €24 million relating to non-universal mail services, €19 million relating to telegraphic services, €19 million relating to the Raccomandata Market service and €14 million relating to the service for the notification of judicial documents.
In general, there are delays in collecting amounts due from central and local government entities due primarily to the fact that no provision has been made in the related budgets or to the execution of contracts or agreements. In this regard, actions continue aimed at renewing expired agreements107 and soliciting requests for appropriations.
Amounts due from the Parent Company This item relates to trade receivables due to the Parent Company from the Ministry of the Economy and Finance.
Specifically: z Universal Service compensation includes: tab. A8.2.1 - Universal Service compensation receivable
In the year under review, the Group received €262 million in accrued compensation for the period. The amount of compensation was recognised based on the terms of the new 2020-2024 Service Contract, effective 1 January 2020. On 1 December 2020, the European Commission approved the compensation for public service obligations envisaged in the new Service Contract, in the amount of €262 million per year, as it was deemed to be fully in line with the relevant EU rules on state aid.
With reference to the amount receivable for 2012, AGCom has recognised a net cost incurred by the Company of €327 million, compared with compensation of €350 million originally recognised. Provision has not been made in the state budget for the remaining €23 million. The Company appealed AGCom’s decision on 13 November 2014 before the Regional Administrative Court (TAR).
Provisions for doubtful debts have been made for the full amount of the above receivables.
Provisions for doubtful debts due from the Parent Company are described in note 6 – Risk management.
Accrued income and prepaid expenses from trading transactions - 12 12 - 12 12
z Amounts that cannot be drawn on due to court rulings include €65 million in amounts seized and not assigned to creditors, in the process of recovery, and €13 million in amounts stolen from the Parent Company in December 2007 as a result of an attempted fraud and that have remained on deposit with an overseas bank. The latter sum may only be recovered once the legal formalities are completed. The risks associated with collection of these items are taken into account in the provisions for doubtful debts due from others.
z Receivables under Relaunch Decree no. 34/2020 refer to receivables acquired in the last months of 2020 under the provisions of the aforementioned decree later converted with amendments into Law no. 77 of 17 July 2020. These receivables will be used to offset, in the years from 2021 to 2030, tax, social security or tax payables on the basis of as provided by the Revenue Agency with reference to the characteristics of the individual receivables.
Provisions for doubtful debts due from others are described in note 6 – Risk management.
A10 - Cash and deposits attributable to BancoPosta (€6,391 million) tab. A10 - Cash and deposits attributable to BancoPosta
Cash at post offices, relating exclusively to BancoPosta RFC, regards cash deposits on postal current accounts, postal savings products (Interest-bearing Postal Certificates and Postal Savings Books) or advances obtained from the Italian Treasury to fund post office operations. This cash may only be used in settlement of these obligations. Cash and cash equivalents in hand are held at post offices (€1,198 million) and service companies that provide cash transportation services110 whilst awaiting transfer to the Italian Treasury (€1,829 million). The increase in the item Bank deposits is due to temporary excess liquidity deriving from private customer deposits on the account opened with the Bank of Italy, intended for interbank settlements, and not yet invested.
Bank deposits and amounts held at the Italian Treasury 2,503 1,638
Financial statements of Poste Italiane SpA 7,239 586 325 6,328 - Balance of profit (loss) of consolidated subsidiaries 6,319 - 1,035 5,284 - Investments accounted for using the equity method 120 - 5 115 - Balance of FV and CFH reserves of investee companies 103 61 - 42 - Actuarial gains and losses on employee termination benefits of investee companies (6) (1) - (5)
- Impairments of disposal groups held for sale (40) - - (40)
- Recognition of liabilities for call options (46) (49) 3 -
Tax effect of changes in fair value - - (576) 7 - - (569)
Transfers to profit or loss - - (263) 5 - - (258)
Tax effect of transfers to profit or loss - - 75 (1) - - 74
Share of after-tax comprehensive income/(loss) of investees accounted for using equity method
Gains/(losses) recognised in equity - - 1,276 (17) - - 1,259
z The Incentive Plans reserve includes the estimate of the valuations for the period relating to the long-term “ILT Performance Share” incentive plan and the MBO short-term incentive plan, carried out on the basis of the provisions of IFRS 2.
Technical provisions where investment risk is transferred to policyholders 4,975 3,930
Other provisions 17,986 11,641 for operating costs 70 79 for deferred liabilities to policyholders 17,916 11,562
The provisions for deferred liabilities to policyholders include portions of gains and losses attributable to policyholders under the shadow accounting method. In particular, the value of the provisions reflects the attribution to policyholders, in accordance with the relevant accounting standards (to which reference is made for more details), of unrealised profits and losses on financial assets at FVTOCI at 31 December 2020 and, to a lesser extent, on financial instruments at fair value through profit or loss.
Provisions for early retirement incentives 421 416 - - (261) 576
Other provisions for risks and charges 99 25 - (4) (4) 116
z Provisions for disputes with third parties regard the present value of expected liabilities deriving from different types of legal and out-of-court disputes with suppliers and third parties, the related legal expenses, and penalties and indemnities payable to customers. Movements during the year primarily regard updated estimates of liabilities and uses to cover liabilities settled.
z Provisions for taxation/social security contributions have been made to cover potential future tax and social security liabilities.
z Other provisions for risks and charges cover probable liabilities of various type, including: estimated liabilities deriving from the risk that specific legal actions undertaken in order to reverse seizures of the Parent Company’s assets may be unable to recover the related amounts, claims for rent arrears on properties used free of charge, claims for payment of accrued interest expense due to certain suppliers, frauds and expenses for reclamation of owned land.
The main actuarial assumptions applied in calculating provisions for employee termination benefits, are as follows: B7.1 - Economic and financial assumptions 31/12/2020
The sensitivity of employee termination benefits to changes in the principal actuarial assumptions is analysed below.
Financial liabilities at amortised cost 10,174 79,727 89,901 8,424 64,344 72,768
Fair value through profit or loss - 20 20 15 1 16
Loans Other than the guarantees described in the following notes, loans are unsecured and are not subject to financial covenants, which would require Group companies to comply with financial ratios or maintain a certain minimum rating. EIB loans are subject to the maintenance of a minimum rating level of BBB- (or equivalent) by the two rating agencies of Poste, without prejudice to the bank’s right to request guarantees or an increase in the margin, or in the event of failure to agree immediate early repayment of the loan. Standard negative pledge provisions do apply, however111.
Amounts due to financial institutions are subject to standard negative pledge clauses114.
At 31 December 2020, outstanding liabilities of €15,123 million relate to repurchase agreements entered into by the Parent Company with major financial institutions and Central Counterparties, amounting to a total nominal value of €13,856 million. €7,083 million of this amount regards Long Term Repos and €8,040 million to ordinary loan operations, the resources from both invested in Italian fixed income government securities and as funding for incremental deposits used as collateral. At 31 December 2020, repurchase agreements with a nominal value of €900 million were the subject of fair value hedge transactions executed to hedge interest rate risk. Finally, financial assets and liabilities relating to repurchase agreements managed through the Central Counterparty that meet the requirements of IAS 32 are offset. The effect of netting at 31 December 2020, already included in the exposure to net balances, amounted to €362 million (€1,158 million at 31 December 2019).
The fair value115 of the repurchase agreements in question at 31 December 2020 is €14,743 million.
At 31 December 2020, the fair value117 of the medium- and long-term loan, repaid in advance in January 2021, is €258 million.
Lease payables Lease liabilities at 31 December 2020 amount to €1,235 million. Total cash outflows for leases in 2020 amount to €248 million.
Balance of cash flows from management of postal savings - (192) (192) - (47) (47)
MEF postal current accounts and other payables - 670 670 - 670 670 115. In terms of fair value hierarchy, which reflects the relevance of the sources used to measure assets, this amount qualifies for level 2. 116. In terms of fair value hierarchy, which reflects the relevance of the sources used to measure assets, this amount qualifies for level 2. 117. In terms of fair value hierarchy, which reflects the relevance of the sources used to measure assets, this amount qualifies for level 2.
The decrease in the item Net advances, compared to 31 December 2019, is mainly due to the advance payment, made in the last working days of December, of the January pension accrual due to the provisions of the Ordinance of the Head of the Civil Protection Department no. 680 of 10 December 2020 in order to comply with the measures to contain the spread of the COVID-
Payables for items in process - 186 186 - 246 246
Tax collection and road tax - 79 79 - 139 139
Net cash flow from/ (for) operating activities* Non-cash flows Balance at 31/12/2020 * The total amount of €4,884 million is included in the cash flow from/(for) operating activities, the balance of which in the statement of cash flows amounts to €1,917 million and regards loans and other financial liabilities not attributable to financing activities.
Overseas counterparties* 134 111 * The amount due to overseas counterparties relates to fees payable to overseas postal operators and companies in return for postal and telegraphic services received.
Change due to recognition of revenue for period Other changes Balance at 31 December 2020
Prepayments and advances from customers Prepayments and advances from customers relate to amounts received from customers as prepayment for the following services to be rendered: tab. B9.2.1 -Prepayments and advances from customers
Accrued liabilities and deferred income 6 36 42 10 32 42
Other amounts due to staff - 61 61 - 153 153
The reduction in Other amounts due to staff is due to the one-off payment to cover the 2019 contractual vacatio, which occurred in April 2020.
The decrease in amounts due to INPS is partly due to the payment of the one-off contribution component mentioned above.
Withholding tax on employees' and consultants' salaries - 95 95 - 92 92
z Tax due on insurance provisions relates to Poste Vita SpA and is described in note A9.
z Withholding tax on employees’ and consultants’ salaries relates to amounts paid to the tax authorities by Group companies in January and February 2021 as withholding agents.
Sundry payables attributable to BancoPosta - 5 5 74 8 82
Revenue from contracts with customers Description (€m) Notes FY 2020 FY 2019
of which Revenue from contracts with customers 2,847 3,033 recognised at a point in time 315 412 recognised over time 2,532 2,621
Change in technical provisions for insurance business and other claim expenses (18,768) (21,463)
z Net revenue from financial services refers to: – revenue from placement and brokerage: these are recognised over time and measured on the basis of the volumes placed, quantified on the basis of commercial agreements with financial institutions. In terms of payment for the collection of postal savings, the agreement entered into with Cassa Depositi e Prestiti envisages payment of a variable consideration on achieving certain levels of inflows, determined annually on the basis of the volume of inflows and expected redemptions; certain commercial agreements, entered into with leading financial partners for the placement of financial products, envisage the return of placement fees in the event of early termination or surrender by the customer; – revenue from current account and related services: these are recognised over time, measured on the basis of the service rendered (including the related services, e.g. bank transfers, securities deposits, etc.) and quantified on the basis of the contract terms and conditions offered to the customer; – revenue from commissions on payment of bills by payment slip: these are recognised at a point in time given the number of transactions handled by post offices and quantified on the basis of the terms and conditions in the contract of sale; – revenue not from contracts with customers accounted for in accordance with IFRS 9 - Financial Instruments.
C1 - Revenue from mail, parcels and other (€3,201 million) This item breaks down as follows: tab. C1 - Revenue from Mail, Parcels & other
External revenue showed a decrease due to the decrease in revenue from Mail, partially offset by the increase in revenue from Parcels, mainly due to the increase in e-commerce shipments. This trend reflects the critical issues that emerged as a result of the health emergency that has affected Italy since March 2020 and has had a significant impact on normal operations.
Universal Service compensation relates to amounts paid by the MEF to cover the costs of fulfilling the USO. The amount of the annual compensation of €262 million is defined in the 2020-2024 Service Contract, effective as of 1 January 2020 and approved by the European Commission, which has determined that the state compensation granted to the Company is in line with EU state aid rules.
C2 - Revenue from payments and mobile (€737 million) This item breaks down as follows: tab. C2 - Revenue from Payments and Mobile
C3 - Net revenue from financial services (€4,945 million) This item breaks down as follows: tab. C3 - Net revenue from Financial Services
The item Other operating income includes the effects related to the derecognition of items previously recorded under liabilities, resulting from a comprehensive review of estimates completed during the year under review.
Revenue from Financial Services breaks down as follows: tab. C3.1 - Revenue from financial services
Revenue from financial services showed a decrease compared to the 2019 due to the health emergency that has affected our country since March 2020 and that has significantly affected normal operations. The largest decreases refer to revenue from commissions on payment of bills by payment slip and commissions for the distribution of loan products.
In particular: z Fees for collection of postal savings deposits relates to remuneration for the provision and redemption of Interest-bearing Postal Certificates and payments into and withdrawals from Postal Savings Books. This service is provided by Poste Italiane SpA on behalf of Cassa Depositi e Prestiti under the Agreement expired 31 December 2020 and being renewed.
Income from investments in securities relates to interest earned on investment of deposits paid into postal current accounts by private customers. The total includes the impact of the interest rate hedge described in note A6 – Financial assets.
Foreign exchange gains 6 4 z Other income from financial activities increased by €132 million compared to 2019, mainly due to higher profits from the sale of financial assets at FVTOCI (+€46 million) and at amortised cost (+€102 million), partly offset by the lower profits from fair value measurement of instruments at FVTPL (-€17 million).
Interest expense on repurchase agreements 6 9 due to the Parent company 6 5 on guarantee deposits 36 21
C4 - Revenue from insurance services after changes in technical provisions and other claim expenses (€1,643 million)
This item breaks down as follows: tab. C4 - Revenue from Insurance Services after changes in technical provisions and other claim expenses
A breakdown of the change in technical provisions and other claim expenses, showing the portion ceded to reinsurers, is as follows: tab. C4.3 - Change in technical provisions for insurance business and other claim expenses
Change in technical provisions where investment risk is transferred to policyholders 1,045 1,278
Total change in technical provisions for insurance business and other claim expenses: Life 18,677 21,410
The change in technical provisions for the insurance business and other claim expenses primarily reflect: z claims paid, policies redeemed, expiries and the related expenses incurred by Poste Vita SpA during the year; z the change in mathematical provisions reflecting increased obligations to policyholders; z the change in Other technical provisions is entirely attributable to the change recorded in the period in the DPL reserve, related to the valuation of securities included in the separately managed accounts and classified in the FVTPL category; z the change in technical provisions where investment risk is transferred to policyholders so-called Class D.
Lease expense include €20 million for short-term leases and €15 million for low-value leases.
Change in inventories of raw, ancillary and consumable materials [tab. A7] (20) -
C6 - Personnel expenses (€5,638 million) Personnel expenses include the cost of personnel seconded to other organisations. The recovery of such expenses, determined by the relevant charge-backs, is posted to other operating income. Personnel expenses break down as follows: tab. C6 - Personnel expenses
The following table shows the Group’s average and year-end headcount: tab. C6.1 - Number of employees
Furthermore, taking account of personnel on flexible contracts, the average number of full-time equivalent personnel is 124,695 (in 2019: 129,243).
C8 - Capitalised costs and expenses (€37 million) Capitalised costs and expenses break down as follows: tab. C8 - Increases relating to assets under construction
Net provisions for risks and charges made/(released) (54) 21 for disputes with third parties [tab. B6] (13) 7 for operational risks [tab. B6] (62) 12 for other risks and charges [tab. B6] 21 2
Impairment losses/(reversals of impairment losses) debt instruments at FVTOCI 6 (2)
For the purposes of reconciliation with the statement of cash flows, in 2020 finance income after both realised gains and foreign exchange gains amounted to €108 million (€94 million in 2019).
For the purposes of reconciliation with the statement of cash flows, in 2020 finance costs after foreign exchange losses amounted to €62 million (€68 million in 2019).
The item at 31 December 2019 included the impairment of the receivable for interest accrued on IRES refund, see in this regard as reported in Note A9 - Other receivables and assets.
The nominal IRES rate has been 24% since 1 January 2017, while the Group’s theoretical average IRAP rate is 6.01%119. The breakdown of income taxes for the year is as follows.
Income taxes decreased by €160 million compared to the previous year and include the positive non-recurring effect of €96 million, including €81 million relating to the “Patent Box” for the years 2015-2019, of which €58 million was recognised by Poste Vita and Poste Assicura and €23 million by the Parent Company. Agreements to recognise the economic contribution were entered into with the Revenue Agency on 16 December 2020 for Poste Vita, 21 December 2020 for Poste Italiane and 22 December 2020 for Poste Assicura. The remaining €15 million refers to the tax benefit for the Parent Company related to the Aid to Economic Growth (ACE), referring to the 2015-2016 financial years for which, in the year under review, the uncertainties associated with the quantification no longer exist.
Net provisions for risks and charges and doubtful debts (10) -0.61% 6 0.30%
Adjustments to equity investments measured using the equity method - -0.02% (5) -0.27%
Current tax expense tab. C13.3 - Movements in current tax assets /(liabilities)
At 31 December 2020, current tax assets/(liabilities) include: z the asset of €87 million deriving from IRES and IRAP advances paid and the positive effect of the Patent Box tax benefit for the 2017-2019 financial years (€53 million in total, including €38 million relating to the Poste Vita and Poste Assicura companies and €15 million to the Parent Company), net of IRES and IRAP provisions for the year; z assets totalling €43 million (including €20 million recognised by the Poste Vita and Poste Assicura companies and €23 million by the Parent Company), relating to participation in the Patent Box scheme and the tax benefit for the Parent Company linked to the Aid to Economic Growth (ACE) for 2015-2016. These assets will become compensable after the submission of the relevant supplementary tax returns; z the substitute tax credit of €27 million relating to the redemption carried out by the Parent Company during 2018, pursuant to art. 15, paragraph 10-ter of Law Decree no. 185 of 29 November 2008, of goodwill and other intangible assets relating to the acquisition of the investment in FSIA Investimenti Srl (as further described in note A5 - Investments accounted for using the equity method); z assets totalling €9 million recognised as a result of the responses received to two petitions filed with the Revenue Agency concerning the correct implementation of IFRS 9 and 15. These assets will become compensable after the submission of the relevant supplementary tax returns; z the remaining IRES receivable of €8 million to be recovered on the failure to deduct IRAP resulting from the requests filed pursuant to art. 6 of Law Decree no. 185 of 29 November 2008 and art. 2 of Law Decree no. 201 of 6 December 2011, which provided for a partial deductibility of IRAP for IRES purposes (in this regard, see as reported on receivables for related interest in Note A9).
Movements in deferred tax assets and liabilities are shown below: tab. C13.5 - Movements in deferred tax assets and liabilities
The Financial Services segment includes the activities of BancoPosta RFC, and BancoPosta Fondi SpA SGR.
The result for each segment is based on operating profit/(loss) and gains/losses on intermediation. All income components reported for operating segments are measured using the same accounting policies applied in the preparation of these consolidated financial statements.
Net intersegment revenue from ordinary activities 4,634 341 665 1 (5,641) -
Profit/(Loss) on investments accounted for using the equity method - 8 (3) - - 5
External revenue from contracts with customers 3,132 737 2,847 9 - 6,726
Net external revenue from ordinary activities 3,492 664 5,134 1,669 - 10,959
Net intersegment revenue from ordinary activities 4,723 375 691 1 (5,790) -
Profit/(Loss) on investments accounted for using the equity method - 99 13 - - 112
Disclosure about geographical segments, based on the geographical areas in which the various Group companies are based or the location of its customers, is of no material significance. At 31 December 2020, all the entities consolidated on a line-by-line basis are based in Italy and customers are mainly located in Italy: revenue from foreign customers does not represent a significant percentage of total revenue.
Impact of related party transactions on the statement of financial position at 31 December 2020
Other related parties external to the Group 50 13 - - 3 4 66
At 31 December 2020, total provisions for risks and charges made to cover probable liabilities arising from transactions with related parties external to the Group attributable to trading relations amounted to €71 million (€70 million at 31 December 2019).
Impact of related party transactions on profit or loss in FY 2020
At 31 December 2020, net provisions for risks and charges used to cover probable liabilities arising from transactions with related parties external to the Group attributable to trading relations amounted to about €1 million (€1 million at 31 December 2019).
(reversals of impairment losses) on debt instruments, receivables and other assets
z Amounts received from CDP SpA primarily relate to payment for the collection of postal savings deposits.
z Amounts received from the Monte dei Paschi di Siena group primarily regard payment for mail shipments.
Provisions for risks and charges 1,396 72 5.2 1,218 70 5.7
Revenue from Mail, Parcels & other 3,201 400 12.5 3,492 498 14.3
Revenue from Payments and Mobile 737 48 6.5 664 59 8.9
Net cash flow from /(for) investing activities (601) (28) 4.7 (732) 3 n.a.
Net cash flow from/(for) financing activities and shareholder transactions 1,051 (388) n.a. (1,434) (492) 34.3
5. Poste Italiane SpA Financial Statements for the year ended 31 December 2020 5.1 Financial Statements
Cash and deposits attributable to BancoPosta [A11] 6,390,872,209 - 4,302,784,484 -
Cash and deposits attributable to BancoPosta [A11] - 6,390,872,209 - 6,390,872,209
Impairment losses/(reversals of impairment losses) on financial assets of which non-recurring costs - - 45,443,654 -
Balance at 31 December 2019 of which attributable to BancoPosta RFC
Balance at 31 December 2020 of which attributable to BancoPosta RFC
* This item includes profit for the period of €325 million, actuarial losses on provisions for employee termination benefits of €5 million, after the related current and deferred taxation.
Use of provisions for risks and charges [tab. B4] (373,561) (680,613)
Cash generated by/(used for) financial assets and liabilities attributable to BancoPosta [c] 1,534,736 (844,036)
Net cash flow from /(for) operating activities [d]=[a+b+c] 2,147,154 49,479 - of which related party transactions 2,312,976 780,467
Disposals: Property, plant and equipment, investment property and assets held for sale
Net cash flow from/(for) financing activities and shareholder transactions [f] 1,306,062 (234,085)
Cash and cash equivalents at end of year [tab. A12] 4,029,413 1,206,344
Unrestricted net cash and cash equivalents at end of year 2,430,241 1,064,394
120. As revised on the issuance of Law Decree 179 of 18 October 2012 converted into law with amendments by Law 221 of 17 December 2012.
As required by art. 2, paragraphs 17-octies et seq. of Law 10 of 26 February 2011, converting Law Decree 225 of 29 December 2010, in order to identify ring-fenced capital for the purposes of applying the Bank of Italy’s prudential requirements to BancoPosta’s operations and for the protection of creditors, at the General Meeting held on 14 April 2011 Poste Italiane SpA’s shareholder approved the creation of ring-fenced capital to be used exclusively in relation to BancoPosta’s operations (BancoPosta Ringfenced Capital or BancoPosta RFC), as governed by Presidential Decree 144 of 14 March 2001, and established the assets and contractual rights to be included in the ring-fence as well as By-laws governing its organisation, management and control. BancoPosta RFC was provided originally with an initial reserve of €1 billion through the attribution of Poste Italiane SpA’s retained earnings. The resolution of 14 April 2011 became effective on 2 May 2011, the date on which it was filed with the Companies’ Register. Following on from the Board of Directors’ resolution of 25 January 2018 and the subsequent Extraordinary General Meeting of Poste Italiane SpA’s shareholders, on 27 September 2018, Poste Italiane injected €210 million of fresh capital into BancoPosta RFC.
Nature of assets and contractual rights and authorisations BancoPosta’s assets, contractual rights and authorisations pursuant to notarial deed were conferred on BancoPosta RFC exclusively by Poste Italiane SpA without third-party contributions. BancoPosta’s operations consist of those listed in Presidential Decree 144 of 14 March 2001, as amended120, with the exception of activities linked to card payments and payment services, carried out by the subsidiary, PostePay SpA. More details on this aspect are provided below: z the collection of all forms of savings deposit from the public in accordance with art. 11, para. 1 of Legislative Decree no. 385/1993 of 1 September 1993 - Consolidated Banking Law (Testo Unico Bancario, or TUB) - and all related and consequent activities; z the collection of savings through postal securities and deposits; z payment services, including the issuance, administration and sale of prepaid cards and other payment instruments pursuant to art. 1, para. 2, letter f) numbers 4) and 5), TUB; z foreign currency exchange services; z promotion and arrangement of loans issued by approved banks and financial brokers; z investment and related services pursuant to art. 12, Presidential Decree 144/2001; z debt collection services; z professional gold trading, on own behalf or on behalf of third parties, in accordance with the requirements of Law 7 of 17 January 2000.
Following the receipt of clearance from the Bank of Italy, the General Meeting of Poste Italiane held on 29 May 2018 approved the proposed removal of the assets, liabilities and contractual rights attributable to the card payments and payment services business unit from the ring-fence that applies to BancoPosta RFC. On 1 October 2018, this business unit was transferred to the subsidiary PostePay SpA, in assets earmarked for card payments and payment services, in order to enable the latter to operate as an Electronic Money Institution (EMI)121.
forming part of the operations carried out independently by the EMI. In particular, these products are issued by the EMI, which is responsible for their conception, development and management, whilst BancoPosta RFC acts as distributor of the products through the Group's physical distribution network.
123. The rate applied in overnight lending and calculated as the weighted average of overnight rates for transactions on the interbank market reported to ECB by a panel of banks operating in the Eurozone (the biggest banks in all the Eurozone countries).
z Settlement of all incoming and outgoing third party payments by Poste Italiane SpA’s Chief Financial Office.
In compliance with the Circular, the Regulation governing BancoPosta RFC’s contracting out and outsourcing process approved by the Board of Directors124 these services are in turn classified as essential and non-essential control and operating functions.
Post Office Network Fixed component: recharge of costs based on direct and indirect drivers Variable component: determined with reference to the maintenance of operating performance
The relevant transactions, profit or loss and statement of financial position amounts, generated by these relationships are only recorded in BancoPosta RFC’s Separate Report. In Poste Italiane SpA’s comprehensive accounts intersegment transactions are on the other hand eliminated, and are not presented. The accounting treatment adopted is similar to that provided for by the accounting standards regulating the preparation of the Group’s consolidated financial statements.
125. Actuarial gains and losses on defined benefit plans, which in the Company’ s financial statements are accounted for in retained earnings, are accounted for in the valuation reserves in the Separate Report (Item 110 of Liabilities).
In this regard, the following table shows a reconciliation of the components of BancoPosta RFC’s equity, as shown in the Company’s statement of financial position and in the Separate Report125.
Furthermore, BancoPosta RFC’s Regulation states that “In view of the absence of non-controlling interests in BancoPosta RFC, on approval of Poste Italiane SpA’s financial statements, the General Meeting shall – on the recommendation of the Board of Directors – vote on the appropriation of the Company’s profit for the year, and in particular: the portion of BancoPosta RFC, as shown in the related statement, taking account of its specific rules and, in particular, the need to comply with prudential supervisory capital requirements (...)”.
A1 - Property, plant and equipment (€1,987 million) Movements in property, plant and equipment are as follows: tab. A1 - Movements in property, plant and equipment
Investments in progress amounted to €51 million, of which €29 million for extraordinary maintenance and the provision of infrastructure for the commercial and production network, €8 million for the provision and maintenance of active and passive infrastructure for the security and remote surveillance network at sites and €7 million for the acquisition of industrial parcel processing equipment.
Reclassifications from property, plant and equipment under construction amounted to €43 million and refer mainly to the purchase cost of assets that became available and ready for use during the year; in particular, €33 million refer to the completion of extraordinary renovations of owned properties and improvements of leased properties.
127. In terms of fair value hierarchy, which reflects the relevance of the sources used to measure assets, service accommodation qualifies for level 3, while the other investment property qualifies for level 2.
A4 - Right-of-use assets (€1,034 million) tab. A4 - Movements in right-of-use asset
Changes in equity investments in subsidiaries and associates are shown below: tab. A5.1 - Movements in investments in FY 2020
The following material events also took place during 2020: z In July, ItaliaCamp resolved to increase its share capital, following which a new shareholder joined the company. The transaction resulted in a reduction in Poste Italiane SpA’s interest from 20% to 19.40%; z On 7 December, the Board of Directors of Conio Inc. approved a capital increase, the subscription of which was completed by 31 January 2021. Following subscription of the capital increase by a third party, Poste Italiane SpA’s shareholding was diluted from 19.74% to 17.62% as the latter did not subscribe to the capital increase.
The impairment tests required by the related accounting standards have been conducted in order to identify any evidence of impairment. Based on the available information and the results of the impairment tests carried out128, the value of the investments was reduced overall by €12 million. Specifically: z for the subsidiary Indabox Srl, whose investment was impaired by €1 million, shareholders’ equity was taken as the best approximation of the value in use, which, in the circumstances, was considered not lower than the recoverable value of the companies; z for the associate Anima Holding SpA, the recoverable amount of the investment, identified as its value in use and determined on the basis of the available 2021-2022 forecasts, was lower than its carrying amount and the investment was impaired by €11 million in the first half of 2020.
The following table shows a list of investments in subsidiaries and associates at 31 December 2020: tab. A5.2 - List of investments
*** Figures taken from the company’s latest interim financial statements at 30 September 2020, as approved by its board of directors. **** Data from the Company’s reporting package at 31 December 2019. ***** Figures of the reporting package including measurement of the SIA Group using the equity method and recognition of the related effects with regard to Purchase Price Allocation. ****** Data derived from the accounts for the period ended 31 December 2019, the latest approved by the company.
128. The method applied and the criteria used in conducting impairment tests at 31 December 2020, are described in note 2.5 – Use of estimates, with regard to the impairment testing of goodwill, cash generating units and investments.
Changes in fair value through profit or loss - 1,707 1,7078
This item breaks down as follows: tab. A6.1.1 - Loans and receivables at amortised cost
The item Loans refers to repurchase agreements of €364 million entered into with Cassa di Compensazione e Garanzia SpA (hereinafter the Central Counterparty) for the temporary use of liquidity from private inflows. These transactions are guaranteed by securities for a total notional amount of €360 million. Financial assets and liabilities relating to repurchase agreements managed through the Central Counterparty that meet the requirements of IAS 32 are offset. The effect of netting at 31 December 2020, already included in the exposure to net balances, amounted to €363 million (€1,158 million at 31 December 2019).
Receivables includes: z Deposits with the MEF, including public customers’ current account deposits, which earn a variable rate of return, calculated on a basket of government securities129. The deposit has been adjusted to reflect accumulated impairments of approximately €4 million, to reflect the risk of counterparty default (€3 million at 31 December 2019). During 2020, in the phase of increasing returns following the onset of the pandemic, the Company entered into (operating) hedging derivative contracts on the 10-year indexed remuneration component. The hedging transaction was carried out through forward purchases of the 10-year BTP with settlement of the differential between the pre-set price of the security and its market value.
This category of financial asset includes fixed rate instruments, for a total nominal amount of €3,000 million, issued by Cassa Depositi e Prestiti SpA and guaranteed by the Italian government (at 31 December 2020, their carrying amount totals €3,300 million).
129. The variable rate in question is calculated as follows: 50% is based on the average return on 6-month BOTs recognised monthly and the remaining 50% is based on the average ten-year BTP return recognised monthly.
130. In terms of the fair value hierarchy, which reflects the relevance of the sources used to measure assets, €31,188 million of the total amount qualifies for inclusion in level 1 and €3,572 million for inclusion in level 2.
Financial assets at fair value through other comprehensive income Movements in financial assets at fair value through other comprehensive income (FVTOCI) are shown below: tab. A6.2 - Movements in financial assets at FVTOCI
These are Eurozone fixed income instruments, consisting of government securities issued by the Italian government with a nominal value of €33,569 million. Total fair value gains for the year amount to €3,645 million, recognised in the relevant equity reserve in relation to the portion of the portfolio not hedged by fair value hedges (€1,947 million) and recognised through profit or loss in relation to the hedged portion (€1,698 million). These instruments are subject to impairments recognised in profit or loss with a matching entry in the relevant equity reserve. Accumulated impairments at 31 December 2020 amount to €18 million (€11 million at 31 December 2019).
Equity instruments include: z for €34 million, the fair value of 32,059 Visa Incorporated preference shares (Series C Convertible Participating Preferred Stock) received for the sale of the Visa Europe Ltd. share to Visa Incorporated on 21 June 2016. These shares are convertible at the rate of 6.853131 ordinary shares for each C share, minus a suitable illiquidity discount. These shares can be converted into several tranches starting from the fourth year after closing and up to the twelfth year. On 21 June 2020 (the fourth year after closing), the process of determining the proportion of convertibility and related rate of Visa Incorporated Series C Convertible Participating Preferred Stock commenced, partially concluded on 24 September 2020 with the grant of 2,199 preference shares of Visa Incorporated Series A Preferred Stock; z for €39 million, the fair value of 2,199 Visa Incorporated preference shares (Series A Preferred Stock); these shares are convertible into ordinary shares on the basis of a ratio of one hundred ordinary shares for every share of Class A Preferred Stock.
In 2019, the Company entered into a forward sale agreement for 400,000 Visa Incorporated ordinary shares at a price of US$153.46 per share and at an exchange rate of 1.2037. The total consideration is €51 million and the settlement date is 1 March 2021. The fair value of the forward sale has decreased by €5 million in the reporting year, reflecting movements in both the price of the shares in US dollars and the euro/dollar exchange rate. This reduction has been recognised in profit or loss in “Expenses from financial activities”.
TotalForward purchases Forward sales Interest rate swap Interest rate swaps Forward purchases Forward sales nominal fair value nominal fair value nominal fair value nominal fair value nominal fair value nominal fair value nominal fair value
Cash flow hedge transactions refer to interest rate swaps for a nominal value of €1,720 million (securities hedged at FVTOCI) and forward sales with for nominal value of €2,068 million; the instruments in question underwent an overall net negative change in fair value during the year, due to the effective component of the hedge of €27 million reflected in the cash flow hedge reserve.
Fair value hierarchy of BancoPosta’s financial assets The following table shows the classification of BancoPosta’s financial assets measured at fair value by level in the fair value hierarchy: tab. A6.5 - Fair value hierarchy
During 2020, as a result of the commencement of the Visa Incorporated Series C Convertible Participating Preferred Stock convertibility process, as described in Note A6.3, €31 million was reclassified from Level 3 to Level 2. Moreover, during the reporting year, there were no transfers of the related financial instruments measured at fair value on a recurring basis between level 1 and level 2.
A7 - FINANCIAL ASSETS (€872 million) tab. A7 - Financial assets
Financial assets at amortised cost 337 87 424 303 91 394
z €64 million regarding overdrafts on intercompany current accounts granted to subsidiaries, paying interest on an arm’s length basis.
132. Of a total consideration of €387 million, €158 million was collected in 2017 and €159 million in early 2018. As regards the remaining amount receivable, on 31 October 2018, Invitalia informed Poste Italiane that the Bank of Italy had requested the buyer not to proceed with the reduction of BdM’s capital scheduled for 2018, and preparatory to payment of a €40 million tranche of the related consideration. On 16 January 2019, in line with the contractual provisions, Poste and Invitalia defined in good faith alternative methods for the payment of the aforementioned fee. Based on the agreement signed, on 27 February 2019, Invitalia paid Poste Italiane €20 million. The remaining €20 million will be paid from the dividends to be paid by BdM in 2018, 2019 and 2020. Payment of the remaining €30 million is expected to take place between 30 June 2021 and 30 June 2022 once certain conditions have been met.
This item regards BTPs with a total nominal value of €400 million. Of these, instruments with a value of €375 million have been hedged using interest rate swaps designated as fair value hedges. In November 2020, securities with a nominal value of €100 million matured.
Further details of the main corporate actions during 2020, are provided in notes 3.1 – Principal corporate actions.
At 31 December 2020, derivative financial instruments include: z a cash flow hedging interest rate swap contract entered into in 2013 to protect the cash flows of the €50 million bond issued on 25 October 2013 (Note B.7 - Financial liabilities); with this transaction, the Company assumed the obligation to pay the fixed rate of 4.035% and sold the floating rate of the bond, which at 31 December 2020 was 0.703%; z nine interest rate swaps used as fair value hedges in 2010 to protect the value of BTPs with a nominal value of €375 million against movements in interest rates. These instruments have enabled the Company to sell the fixed rate on the BTPs of 3.75% and purchase a variable rate; z three swap contracts entered into in 2020, of which two are outstanding at 31 December, to cover fuel costs relating to the air transport of mail carried out via the subsidiary, Poste Air Cargo Srl, for the three-year period 2020-2022; z purchase and sale options that will allow Poste Italiane, starting from the second quarter of 2023, to purchase the additional 30% of MLK Deliveries SpA and ownership of the Milkman technology for e-commerce applications. The exercise price of these options is not fixed, but determined on the basis of a formula that provides for the application of a multiplier to certain economic/equity targets of MLK Deliveries SpA. At 31 December 2020, the value of the options was zero as there were no significant deviations from the initial estimates.
Fair value hierarchy of financial assets The following table shows the classification of financial assets measured at fair value by level in the fair value hierarchy: tab. A7.4 - Fair value hierarchy
There were no transfers of the related financial instruments measured at fair value on a recurring basis between level 1 and level 2 in 2020.
Due from the Parent company - 36 36 - 45 45 of which attributable to BancoPosta RFC - 1,052 1,052 - 860 860
Amounts due for other BancoPosta services - 84 84 - 104 104
Receivables for parcel delivery services - 541 541 - 189 189
Provisions for doubtful debts due from customers - (429) (429) (13) (400) (413)
of which attributable to BancoPosta RFC - 547 547 - 576 576
– Reimbursement of the costs associated with the management of property, vehicles and security incurred on behalf of the Ministry for Economic Development, totalling €81 million135, including €62 million involved in legal action brought by Poste Italiane in order to claim sundry costs resulting from the use of properties. On 30 April 2020, a partially favourable judgement was published for Poste Italiane; the judgement was notified to MiSE and the latter appealed before the Court of Appeal with a request for suspension. On 3 December 2020, the request was not granted and a decision is now pending in the second instance.
– Unfranked mail services provided on credit, totalling €67 million, to central and local government authorities. – Compensation for Publisher tariff subsidies, due from the Presidenza del Consiglio dei Ministri - Dipartimento dell’Editoria (Cabinet Office – Publishing Department), amounting to €67 million, of which €53 million accrued during the year. These receivables are shown gross of the collection of an unavailable amount of €24 million, relating to the tariff subsidies applied in the first half of 2020, deposited by the Cabinet Office - Publishing Department, during the year, in a non-interest-bearing account held by the Company with the State Treasury and for this reason recorded under Payables for advances received. Release of the amount deposited and extinguishment of the receivables in question are awaiting approval from the European Commission. A further €17 million, without financial coverage in the State Budget, was entirely impaired. In February 2021, €11 million, which was not available, was collected related to tariff subsidies charged in the third quarter of 2020.
z Amounts due from overseas counterparties primarily relates to postal services carried out by the Company for overseas postal operators.
z Receivables arising from Unfranked mail delivered include €70 million in amounts due from customers who use the service on their own behalf and €54 million for amounts due from agents who provide the service for third parties, primarily regarding bulk mail. Collection of these receivables is delegated to the authorised agents who provide the service.
z Other trade receivables primarily include: €47 million receivables relating to the Posta Time service, €33 million receivables relating to the Posta Contest service, €27 million receivables relating to the Posta Target service, €24 million receivables for non universal postal services, €19 million receivables for telegraphic services, €19 million for receivables relating to the Raccomandata Market service and €14 million for receivables for services for the notification of judicial documents.
In general, there are delays in collecting amounts due from central and local government entities due primarily to the fact that no provision has been made in the related budgets or to the execution of contracts or agreements. In this regard, actions continue aimed at renewing expired agreements136 and soliciting requests for appropriations.
136. The principal agreements that have expired regard those governing relations with the tax authorities in relation to the collection and reporting of payments.
Financial statements of Poste Italiane at 31 December 2020 5. Poste Italiane SpA Financial Statements for the year ended 31 December 2020
z Receivables for delegated services relate to fees accrued solely in 2020 for treasury services performed by BancoPosta on behalf of the State in accordance with a specific agreement with the MEF signed on 22 May 2020 for the three-year period 2020-2022.
137. Introduced by article 19 of Law Decree 201/2011 converted with amendments by Law 214/2011 in the manner provided for by the MEF Decree of 24 May 2012: Manner of implementation of paragraphs from 1 to 3 of article 19 of Law Decree 201 of 6 December 2011, on stamp duty on current accounts and financial products (Official Gazette 127 of 1 June 2012).
This item breaks down as follows: tab. A10 - Other receivables and assets
Due from social security agencies and pension funds (excl. fixed-term contract settlements)
of which attributable to BancoPosta RFC 1,474 549 2,023 1,357 544 1,901
z Amounts due from social security agencies and pension funds refer for €57 million to sums relating to periods of suspension or reduction of work for Covid-19, which the Company has advanced to its employees and which, following access to the benefits of the Bilateral Solidarity Fund at INPS, enabled by the signing of the labour union agreements of 30 April 2020 and 21 December 2020, will be recovered by means of an adjustment with the contributions due to the Social Security Agency.
z Receivables relating to fixed-term contract settlements consist of salaries to be recovered following the agreements of 13 January 2006, 10 July 2008, 27 July 2010, 18 May 2012, 21 March 2013, 30 July 2015 and 19 June 2018 between Poste Italiane SpA and the labour unions, regarding the re-employment by court order of personnel previously employed on fixed-term contracts. This item refers to receivables with a present value of €136 million from personnel, from INPS and pension funds recoverable in the form of variable instalments, the last of which is due in 2042. A breakdown of the receivables by individual agreement is provided below: tab A10.1 - Receivables from fixed-term contract settlements
Receivables due from staff under agreement of 2006 - 1 1 1 - 1 1 1 due from staff under agreement of 2008 10 9 19 20 14 10 24 26 due from staff under agreement of 2010 23 6 29 34 25 6 31 37 due from staff under agreement of 2012 17 5 22 27 19 5 24 30 due from staff under agreement of 2013 1 1 2 2 2 1 3 3 due from staff under agreement of 2015 2 - 2 3 2 1 3 3 due from staff under agreement of 2018 1 - 1 1 1 - 1 1 due from INPS (former IPOST) - 42 42 42 - 42 42 42 due from INPS (Social security) 3 10 13 14 3 11 14 14
The receivable of €42 million from INPS (formerly IPOST) under a specific agreement entered into with IPOST on 23 December 2009, consisting of six instalments of €6.9 million each, falling due between 30 June 2012 and 31 December 2014. Negotiations are underway to recover this amount and, should the outcome prove unsuccessful, the Company reserves the right to take all necessary steps to protect its rights.
This item breaks down as follows: tab. A11 - Cash and deposits attributable to BancoPosta
The cash and cash equivalents on hand are derived from deposits made in postal current accounts and postal savings products (subscription of postal savings bonds and payments into post office savings books), or from advances withdrawn from the State Treasury to guarantee the operations of post offices. These funds, which are held at post offices (€1,198 million) and at service138 companies (€1,829 million), may not be used for purposes other than to repay obligations contracted in the transactions described above. The increase in the item Bank deposits is due to temporary excess liquidity deriving from private customer deposits on the account opened with the Bank of Italy, intended for interbank settlements, and not yet invested.
Bank deposits and amounts held at the Italian Treasury 2,022 698
Cash and cash equivalents in hand 16 14 of which attributable to BancoPosta RFC 2,009 509
Bank deposits and amounts held at the Italian Treasury include €24 million deposited by the Presidenza del Consiglio dei Ministri - Dipartimento dell’Editoria (Cabinet Office – Publishing Department) in a non-interest bearing escrow account with the Italian Treasury in 2020 as advance payment for publisher tariff subsidies due to the Company (note A9). Bank deposits and amounts held at the Italian Treasury include €21 million whose use is restricted by court orders related to different disputes.
B1 - Share capital (€1,306 million) Poste Italiane SpA’s share capital consists of 1,306,110,000 no-par value ordinary shares, of which Cassa Depositi e Prestiti SpA (CDP) holds 35% and the Ministry of the Economy and Finance holds 29.3%, while the remaining shares are held by institutional and retail investors.
At 31 December 2020, the Company holds 5,257,965 treasury shares (equal to 0.4026% of the share capital). All the shares in issue are fully subscribed and paid up. No preference shares have been issued.
Increase/(decrease) in fair value during the year - - 1,948 (28) - - 1,920
Tax effect of transfers to profit or loss - - 74 (1) - - 73
Gains/(losses) recognised in equity - - 1,215 (17) - - 1,198 of which attributable to BancoPosta RFC - 1,210 2,182 98 1 - 3,491
During the year, dividends were distributed for a total of €613 million, based on the following resolutions: z on 15 May 2020, the General Shareholders’ Meeting resolved to distribute dividends of €402 million (unit dividend of €0.309) on 24 June 2020, as the balance for the 2019 financial year, taking into account the interim dividend of €200 million (unit dividend of €0.154) already paid in November 2019; z on 11 November 2020, Poste Italiane’s Board of Directors, in line with the Group dividend policy approved in 2019, resolved to advance part of the ordinary dividend for 2020 as an interim dividend. The interim dividend of €211 million was distributed on 25 November 2020 (unit dividend of €0.162).
Retained earnings / (Accumulated losses) 2,153 retained earnings / (accumulated losses) 84 - retained earnings / (accumulated losses) 1,177 C
Unrealised gains/(losses) on financial instruments at FVTPL net of tax effect 45 B C
Provisions for disputes with third parties 274 25 (30) (32) 237
Other provisions for risks and charges 86 9 (3) (5) 87 of which attributable to BancoPosta RFC 327 35 (103) (46) 213
Specifically: z Provisions for operational risks, which regard liabilities deriving from transactions carried out by BancoPosta, primarily reflect risks linked to the distribution of postal savings products issued in previous years, adjustments and settlements of income for previous years, estimated risks for charges and expenses to be incurred as a result of seizures suffered by BancoPosta, primarily in its capacity as a third party in foreclosure, and fraud. Provisions for the year totalling €24 million mainly reflect risks associated with the distribution of postal savings products issued in previous years and expenses to be incurred as a result of seizures suffered by BancoPosta mainly as a third party. Transfers to profit or loss are due to the elimination of liabilities identified in the past and refer mainly to the revised estimate of certain risks associated with the distribution of postal savings products and the conclusion of voluntary protection initiatives undertaken for the Europa Immobiliare I and Obelisco funds. Uses are primarily attributable to risks linked to the distribution of postal savings products and to liabilities defined in favour of customers subscribing to the Obelisco fund who have taken part in the above initiative.
z Provisions for disputes with staff regard liabilities that may arise following labour litigation and disputes of various types. Provisions of €11 million regard an update of the estimate of the liabilities and the related legal expenses, taking account of the overall value of negative outcomes in terms of litigation.
z Other provisions for risks and charges cover probable liabilities of various type, including: estimated liabilities deriving from the risk that specific legal actions undertaken in order to reverse seizures of the Company’s assets may be unable to recover the related amounts, claims for rent arrears on properties used free of charge by the Company, claims for payment of accrued interest expense due to certain suppliers, frauds and expenses for reclamation of owned land.
B5 - Employee termination benefits (€1,003 million) Movements in employee termination benefits are as follows: tab. B5 - Movements in provisions for employee termination benefits
Balance at 1 January 1,107 interest component 8 effect of actuarial gains/(losses) 5
Balance at 31 December 1,003 of which attributable to BancoPosta RFC 3
B6 - Financial liabilities attributable to BancoPosta (€94,946 million) tab. B6 - Financial liabilities attributable to BancoPosta
MEF account held at the Treasury - 3,588 3,588 - 4,542 4,542
At 31 December 2020, outstanding liabilities of €14,711 million relate to repurchase agreements entered into by the Company with major financial institutions and Central Counterparties, amounting to a total nominal value of securities committed for €13,456 million. €7,083 million of this amount regards Long Term Repos and €7,628 million to ordinary loan operations, the resources from both invested in Italian fixed income government securities and as funding for incremental deposits used as collateral. At 31 December 2020, repurchase agreements with a nominal value of €900 million were the subject of fair value hedge transactions executed to hedge interest rate risk. Finally, financial assets and liabilities relating to repurchase agreements managed through the Central Counterparty that meet the requirements of IAS 32 are offset. The effect of netting at 31 December 2020, already included in the exposure to net balances, amounted to €363 million (€1,158 million at 31 December 2019).
Amounts payable due to thefts from Post Offices of €159 million regard the Company’s liability to the MEF on behalf of the Italian Treasury for losses resulting from theft and fraud. This liability derives from cash withdrawals from the Treasury to make up for the losses resulting from these criminal acts, in order to ensure that post offices can continue to operate.
Amounts payable for operational risks for €19 million regard the portion of advances obtained to fund the operations of BancoPosta, in relation to which asset under recovery is certain or probable.
Domestic and international money transfers - 917 917 - 668 668
Amounts to be credited to customers - 120 120 - 276 276
The increase in the item Domestic and international money transfers is mainly due to the greater use of money orders and transfers by customers in the last days of December.
The item Amounts to be credited to customers included at 31 December 2019, amounts related to the protection initiative for customers subscribing to the Obelisco Fund, which were settled in January 2020.
141. In terms of fair value hierarchy, which reflects the relevance of the sources used to measure assets, this amount qualifies for level 1. 142. In terms of fair value hierarchy, which reflects the relevance of the sources used to measure assets, this amount qualifies for level 2.
Amounts due to financial institutions tab. B7.1 - Due to financial institutions
EIB fixed rate loan maturing 12/03/2026 173 - 173 173 - 173
At 31 December 2020, the Group had outstanding liabilities of €412 million in respect of repurchase agreements with leading financial operators for a total nominal amount of securities committed of €400 million, entered into during the year in question with the aim of optimising profitability and meeting any temporary liquidity requirements. The fair value143 of the repurchase agreements at 31 December 2020 amounted to €412 million.
In addition, during 2020, in order to have additional liquidity and to cope with any adverse scenarios related to the COVID-19 pandemic, the Company entered into three medium-term loans for €750 million, two of which were repaid early in November and December for a total of €500 million, and used uncommitted credit lines for short-term loans for a total of €660 million, of which €250 million were outstanding at 31 December 2020.
At 31 December 2020, the committed and uncommitted credit lines are as follows: Description (€m) Balance at 31/12/2020 Balance at 31/12/2019
143. In terms of fair value hierarchy, which reflects the relevance of the sources used to measure assets, this amount qualifies for level 2. 144. In terms of fair value hierarchy, which reflects the relevance of the sources used to measure assets, this amount qualifies for level 2. 145. In terms of fair value hierarchy, which reflects the relevance of the sources used to measure assets, this amount qualifies for level 2.
Lease payables Lease payables at 31 December 2020 amounted to €1,065 million. Total cash outflows for leases in the year amounted to €214 million.
Derivative financial instruments Changes in the item in 2020, are described in note A7 – Financial assets.
Net cash flow from/ (for) financing activities Non-cash flows Balance at 31/12/2020
Contract liabilities 410 299 of which attributable to BancoPosta RFC 393 129
Overseas counterparties* 134 110 of which attributable to BancoPosta RFC 10 13 * The amount due to overseas counterparties relates to fees payable to overseas postal operators and companies in return for postal and telegraphic services received.
Amounts due to subsidiaries and associate tab. B8.2 - Due to subsidiaries and associates
Change due to recognition of revenue for period Balance at 31/12/2020
Deferred income from trading transactions 3 - - 3 of which attributable to BancoPosta RFC 26 (40) 43 29
Postage-paid mailing services 6 6 of which attributable to BancoPosta RFC - -
Other amounts due to subsidiaries - 140 140 5 36 41
Amounts due to staff These items primarily regard accrued amounts that have yet to be paid at 31 December 2020. The breakdown is as follows: tab. B9.1 - Due to staff
Current liabilities Total of which attributable to BancoPosta RFC - 3 3 - 3 3
Withholding tax on postal current accounts - 10 10 - 10 10 of which attributable to BancoPosta RFC 1,474 68 1,542 1,357 25 1,382
Specifically: z Withholding tax on employees’ and consultants’ salaries relates to amounts paid to the tax authorities by the Company in January and February 2021 as withholding agents.
Indirect subsidiaries of which attributable to BancoPosta RFC - - - - 21 21
BancoPosta services 5,177 5,435 of which Revenue from contracts with customers 3,584 3,796 recognised at a point in time 315 412 recognised over time 3,269 3,384
Revenue from contracts with customers breaks down as follows: z Revenue from Postal Services refer to services provided to customers through the retail and business channels; revenue generated through the retail channel is recognised at a point in time given the number of transactions handled through the various sales channels (post offices, call centres and online) and measured on the basis of the rates applied; revenue generated through the business channel is generally earned as a result of annual or multi-annual contracts and is recognised over time using the output method determined on the basis of shipments requested and handled. These contracts include elements of variable consideration (primarily volume discounts and penalties linked to the quality of service provided) estimated using the expected value method and recognised as a reduction from revenue.
Revenue from Postal Services tab. C1.1 - Revenue from Postal Services
Publisher tariff subsidies146 relate to the amount receivable by the Company from the Presidenza del Consiglio dei Ministri - Dipartimento dell’Editoria (Cabinet Office - Publishing department) as compensation for the discounts applied to publishers and non-profit organisations when sending mail. The compensation is determined on the basis of the tariffs set in the decree issued by the Ministry for Economic Development, in agreement with the Ministry of the Economy and Finance, on 21 October 2010 and Law Decree 63 of 18 May 2012, as converted into Law 103 of 16 July 2012. In this regard, it should be noted that for the year under review, the amount of subsidies that the Company has granted is partially covered in the 2020 State Budget.
Interest income (expense) on asset swaps of CFH on securities at FVOCI and AC 21 4
z Revenue from insurance brokerage derives from fees receivable from the subsidiaries, Poste Vita and Poste Assicura, in return for the sale of insurance policies.
z Revenue from current account services primarily relates to charges on current accounts (€218 million), fees on amounts collected and on statements of account sent to customers (€112 million), annual fees on debit cards (€18 million) and related transactions (€17 million).
z Revenue from the distribution of loan products relate to commissions received by the Company on the placement of personal loans and mortgages on behalf of third parties.
C3 - Other operating income (€299 million) tab. C3 - Other operating income
Positive accounting effects of the discharge of sundry payables relating to BancoPosta operations
Net accounting effects of the discharge of sundry payables relating to BancoPosta operations
For the purposes of reconciliation with the statement of cash flows, in 2020 this item amounted to €2 million, after losses of €1 million. In 2019, this item, after losses of €1 million, amounted to €1 million.
Lease and rental costs include €9 million for low-value leases and €6 million for short-term leases.
The increase in consumables is due to the health emergency that has made it necessary to procure personal protective equipment (such as masks, gloves, detergent gels and disinfectants) in order to guarantee the maintenance of operations both at Post Offices and at mail processing and sorting sites.
C6 - Personnel expenses (€5,446 million) tab. C6 - Personnel expenses
Total employees on permanent contracts* 113,847 117,865 109,658 115,463 * Figures expressed in full-time equivalent terms.
Furthermore, taking account of personnel on flexible contracts, the average number of full-time equivalent personnel is 121,530 (in 2019: 125,894).
C7 - Depreciation, amortisation and impairments (€622 million) tab. C7 - Depreciation, amortisation and impairments
Amortisation, depreciation, and impairments decreased by €52 million compared to 2019, due mainly to lower depreciation (-€115 million) recognised as a result of the revision of the residual useful lives and residual values of the main categories of non-current assets (for more details, see paragraph 2.5 - Use of Estimates), offset in part by higher amortisation of intangible assets (+€67 million) resulting from the completion and commissioning of new software programs and the development of existing ones.
C8 - Other operating costs (€67 million) tab. C8 - Other operating costs
Net provisions for risks and charges made/(released) (62) 16 for disputes with third parties [tab. B4] (5) (4)
C9 - Impairment losses/(reversals of impairment losses) on debt instruments, receivables and other assets (€55 million)
Net Impairment debt instruments and receivables of financial operations 15 (2)
Impairment losses/(reversals of impairment losses) receivables of financial operations 1 -
The increase of €12 million compared to 2019 is primarily due to higher realised gains from the adjustment, at year-end exchange rates, of foreign currency items.
Finance costs on provisions for employee termination benefits and pension plans [tab. B5] 8 17
C11 - Impairment losses / (reversals of impairment losses) on financial assets (-€ million)
tab. C11 - Impairment losses/(Reversals of impairment losses) on financial assets
The item at 31 December 2019 included the impairment of the receivable for interest accrued on IRES refund, see in this regard as reported in Note A10 - Other receivables and assets.
C12 - Income tax expense (€9 million) The nominal IRES rate is 24%, while the Company theoretical average IRAP rate is 4.49%147 The breakdown of income taxes for the year is as follows: tab. C12 - Income tax expense
Income taxes for the year include the positive non-recurring effect of a total of €38 million relating, for €23 million, to the adoption of the “Patent Box” regime following the agreement entered into on 21 December 2020 with the Revenue Agency for the recognition of the economic contribution, referred to the 2015-2019 financial years, and for €15 million to the tax benefit connected with the Aid to Economic Growth (ACE), referred to the 2015-2016 financial years for which, in the year under review, the uncertainties connected with the quantification no longer exist.
The tax rate for 2020, before recognition of non-recurring income, is 13.81%; however, the effective tax rate is 2.42% and is comprised of the following: tab. C12.1 - Reconciliation between theoretical and effective IRES rate
Impairment losses/(reversals of impairment losses) on financial assets - -0.03% 2 0.25%
Effective tax (before recognition of the Patent Box tax effect) 17 4.71% 44 5.38%
Current tax expense tab. C12.3 - Movements in current tax assets /(liabilities)
Deferred tax assets and liabilities Details of this item at 31 December 2020 are shown in the following table: tab. C12.4 - Deferred taxes
Income/(expense) recognised in profit or loss - - 2 69 - 1 (9) 63
Impact of related party transactions on Statement of financial position and profit or loss
Impact of related party transactions on Statement of financial position at 31 December 2020
Other related parties external to the Group - - 11 - - - 3 - 64
At 31 December 2020, total provisions for risks and charges made to cover probable liabilities arising from transactions with related parties external to the Company and attributable primarily to trading relations amount to €71 million (€70 million at 31 December 2019).
Consorzio Servizi Telef. Mobile ScpA - - - - 2 26 - - - - -
Other related parties external to the Group 12 - - - - - - 74 - - -
Other related parties external to the Group 38 - - - - 3 - 49 - - - -
At 31 December 2020, total provisions for risks and charges made to cover probable liabilities arising from transactions with related parties external to the Company and primarily attributable to trading relations amount to €1 million (€1 million at 31 December 2019).
The nature of the Company’s principal related party transactions external to the Company is summarised below: z Amounts received from the MEF relate primarily to payment for carrying out the (Universal Service) USO, the management of postal current accounts, as payment for delegated services, the franking of mail on credit, and for the integrated notification service.
Financial assets attributable to BancoPosta 91,453 10,956 12.0 76,396 11,203 14.7
Provisions for risks and charges 1,309 71 5.4 1,130 70 6.2
Cost of goods and services 2,318 1,419 61.2 1,854 922 49.7
Net cash flow from /(for) operating activities 2,147 2,231 n.a. 49 780 n.a.
No loans were granted to key management personnel during the year and, at 31 December 2020, the Company does not report receivables in respect of loans granted to key management personnel.
The note on “Risk management” is common to both the Group and Poste Italiane SpA. It deals with both financial risk (as defined by IFRS 7) and other types of risk that the Group deems it appropriate or necessary to disclose. Quantitative disclosures for Poste Italiane SpA alone are provided in the specific section of this note, unless otherwise indicated.
Additional information about other risks, particularly with regard to the Covid risk, is provided in the section of the Report on Operations entitled “Management of the Covid-19 Pandemic” in Chapter 5 “Risks and Opportunities.
In addition, the information provided complies with the provisions of the ESMA Public Statements published during the 2020 financial year148.
ESMA Notice of 28 October 2020 “Public Statement 32-63-1041. European common enforcement priorities for 2020 annual financial reports.” 149. The funds raised by private customers on postal current accounts must be used in Eurozone government bonds and, for a portion not exceeding 50% of the funds raised, in other securities backed by the Italian government guarantee (as provided by the Law no. 296 of 27 December 2006 and subsequent amendments provided by the 2015 Stability Law no. 190 of 23 December 2014.
z Financial instruments held by the insurance company, Poste Vita SpA, primarily relate to investments designed to cover its contractual obligations to policyholders on traditional life policies and unit-linked policies. Other investments in financial instruments regard investment of the insurance company’s free capital
Traditional Life policies, classified under Class I and V, primarily include products whose benefits are revaluated based on the return generated through the management of pools of financial assets, which are separately identifiable in accounting terms only, within the company’s assets (so-called separately managed accounts). In the case of policies sold in previous years, the company has guaranteed a minimum return payable at maturity on such products (at 31 December 2020, this minimum return on existing policies ranged between -1.4% and 2.13%). Gains and losses resulting from measurement are attributed in full to policyholders and accounted for in specific technical provisions under the shadow accounting method. The calculation technique used by the Group in applying this method is based on the prospective yield on each separately managed account, considering a hypothetical realisation of unrealised gains and losses over a period of time that matches the assets and liabilities held in the portfolio (see note 2.3 in relation to “Insurance contracts”).
The impact of financial risk on investment performance can be absorbed in full or in part by the insurance provisions based on the level and structure of the guaranteed minimum returns (for newly issued policies a guaranteed minimum return is not foreseen) and the profit-sharing mechanisms of the “separate portfolio” for the policyholder. The company determines the sustainability of minimum returns through periodic analyses using an internal financial-actuarial (Asset-Liability Management) model which simulates, for each separate portfolio, the change in value of the financial assets and the expected returns under a “central scenario” (based on current financial and commercial assumptions) and under stress and other scenarios based on different sets of assumptions. This model makes it possible to manage the risks assumed by Poste Vita SpA on a quantitative basis, thereby fostering reduced earnings volatility and optimal allocation of financial resources.
150. See in particular the provisions laid down in Part I – Section IV – Chapter 3. 151. The RAF consists of a framework that defines, in keeping with the maximum acceptable risk, the business model and strategic plan, the risk appetite, risk tolerance thresholds, risk limits, and risk management policies, together with the processes needed to define and implement them.
z the Financial and Insurance Services Committee, established on 19 March 2018, with the aim of overseeing the process of developing the products and services distributed by BancoPosta, in order to take a uniform, integrated view of the entire offering and to monitor the performance of the financial investments in which private customer deposits are invested.
z an Investment Committee established at the Group’s insurance company, Poste Vita SpA, which, based on analyses by the relevant functions, provides advice to senior management on the development, implementation and oversight of investment strategy; z appropriate functions established within the Parent Company and the subsidiaries providing financial and insurance services (BancoPosta Fondi SGR SpA and Poste Vita SpA) that perform Risk Measurement and Control activities, ensuring the organisational separation of risk assessment from risk management activities; the results of these activities are examined by the relevant advisory Committees, which are responsible for carrying out an integrated assessment of the main risk profiles.
The table below shows the sensitivity analysis for the fair value interest rate risk at 31 December 2020 for the Poste Italiane Group’s positions.
In terms of financial assets recognised at fair value through other comprehensive income, the risk in question primarily relates to: z fixed income government securities held by Poste Vita SpA, totalling €94,802 million; of this amount, €92,577 million is used to cover Class I and V policies linked to separately managed funds, and €2,225 million relates to the Company’s free capital; z fixed income government securities held by BancoPosta RFC for fair value totalling €42,638 million, which consist of: fixed rate bonds amounting to €17,190 million; variable rate bonds converted into fixed rate bonds via interest rate swaps designated as cash flow hedges, totalling €2,257 million, inflation-linked securities amounting to €2,657 million, and fixed or variable rate bonds converted to variable rate positions via fair value hedges amounting to €20,535 million (including €18,096 million in forward starts); z €18,500 million total fair value in other non-government debt instruments held by Poste Vita SpA, used mainly to meet obligations towards policyholders; z fixed income government securities held by Poste Assicura SpA with a total fair value of €204 million.
At 31 December 2020, with reference to the interest rate risk exposure determined by the average duration152, the duration of BancoPosta’s overall investments went from 5.53 to 6.16. On the other hand, with respect to Class I and Class V policies sold by Poste Vita SpA, the duration of the matching assets went from 7.02 at 31 December 2019 to 7.72 at 31 December 2020, whilst the duration of the liabilities went from 9.24 to 10.24 (assessment of the duration was carried out using the new Coherent Duration method153). The financial instruments intended to cover the technical provisions for Class III policies have maturities that match those of the liabilities.
152. Duration is the indicator used to estimate the percentage change in price in response to a shift in market returns. 153. The Coherent Duration of assets and liabilities is defined as changes in the value of assets and liabilities, in proportion to the total amount of assets exposed to interest rate risk, following parallel shocks raising and lowering interest rates by 10 basis points.
The table below shows the results of the analysis of sensitivity154 to spread risk of the most significant positions in the portfolios of both the Parent Company and the Poste Vita Group at 31 December 2020.
For the purposes of full disclosure, a movement in the spread would have no accounting effect on financial assets measured at amortised cost, but would only impact unrealised gains and losses. In other words, fixed income instruments measured at amortised cost attributable entirely to BancoPosta, which at 31 December 2020 amounted to €33,254 million (nominal value of €26,157 million) and have a fair value of €34,760 million, would be reduced in fair value by approximately €4.3 billion following an increase in the spread of 100 bps, with the change not reflected in the accounts.
Movements in the spread have no impact on BancoPosta RFC’s ability to meet its capital requirements, as the fair value reserves are not included in the computation of own funds for supervisory purposes.
Notional Fair Value +100bps -100bps +100bps -100bps +100bps -100bps +100bps -100bps 2020 effects
In addition to using the above sensitivity analysis, Poste Italiane SpA and the Poste Vita group monitor spread risk by calculating its maximum potential losses, through an estimate of Value at Risk (VAR) on statistical bases, over a 1-day time horizon and at a 99% confidence level. Risk analysis performed through VAR takes into account the historical variability of the risk (spread) in question, in addition to modelling parallel shifts of the yield curve.
The following table shows the maximum potential loss computed at 31 December 2020, limited, in terms of materiality, to the financial assets held by the Parent Company and the Poste Vita Group.
Nominal +100 bps -100 bps +100 bps -100 bps +100 bps -100 bps 2020 effects
Nominal +100 bps -100 bps +100 bps -100 bps +100 bps -100 bps 2019 effects
Specifically, with respect to financial assets, the cash flow interest rate risk primarily relates to: z a portion of the investment portfolio held by Poste Vita SpA, with a total nominal value of €7,791 million; z receivables totalling €7,509 million, reflecting collateral posted to secure liabilities arising in relation to derivative financial instruments and repurchase agreements mainly held by BancoPosta RFC; z investment by the Parent Company of the funds deriving from the current account deposits of Public Administration entities in the following: deposits with the MEF, with a nominal value of €7,340 million; z fixed rate government securities held by the Parent Company and swapped into variable rate through fair value hedges, with a total nominal amount of €10,374 million (including €5,740 million in securities hedged against changes in fair value, where the hedges will begin to have an effect on profit or loss in the 12 months after the end of the period under review); in addition to an inflation-linked bond issued by the Italian Republic, with a nominal value of €100 million, both of which have been hedged against changes in its fair value.
In order to comply with the provisions of IFRS 9, which requires the inclusion of a forward looking approach in the calculation of expected losses on financial instruments, also taking into account the effects of the Covid-19 pandemic, the Group deemed it appropriate to update the forecast scenarios to take into account new elements based on the EU Commission’s estimates for the year 2020, which led to a change in the PD of Italy and the other Sovereign counterparties compared to what was used in the assessments of the Annual Report at 31 December 2019. With regard to Corporate and Banking counterparties, the methodology used for this purpose is to increase PD in line with the increase in sectoral risk recorded by the rating agencies in 2020 for each rating level.
General description of the models utilised The Group uses the general impairment model in accordance with risk ratings estimated on the basis of the type of counterparty: z Securities/deposits with Sovereign, Banking and Corporate counterparties: internal risk rating estimation models; z Public Administration and Central Counterparties: risk parameters deriving from agency ratings or average default rates for the sector.
Significant increase in credit risk Based on the impairment model adopted by the Poste Italiane Group to meet the requirements of the new accounting standard, any significant increase in credit risk associated with the financial instruments held, other than trade receivables, is determined on the basis of a change in the relevant credit rating between the time of the initial investment and the reporting date.
Definition of default The Poste Italiane Group defines default on the basis of ad hoc assessments that take into account: z any payment delays; z market information such as a default rating by the rating agencies; z internal analyses of specific exposures.
Collective and individual provisions The collective impairment of a homogenous group of financial assets defines the expected credit loss (ECL) of the instrument, even though it cannot be associated with a specific exposure. Grouping takes place in relation to the type of counterparty on the basis of the estimated PD.
Forward looking information According to the standard, the ECL calculation must also factor in forward looking components based on broad consensus scenarios.
This method entails the use of target variables related to the level of external rating produced by the agencies. The target could be directly the rating or, alternatively, the default rate linked to the rating level.
The internal model estimate used a definition of default based on the following approach: z Government financial instruments – payment delays, including also for one day, or debt renegotiation; z Corporate and Banking financial instruments – 90-day payment delays.
The main assumptions/choices adopted in the determination of the factors are as follows: z PD: as indicated from the start a Point in Time (PIT) and forward-looking valuation has been adopted; z LGD: use has been made of the Internal Ratings-Based (IRB) Base Approach under the Basel guidelines (45% for senior risk assets, 75% for subordinated risk assets); z EAD: exposure calculated prospectively until maturity of the instrument, starting from the development of projected cash flows. In the development account was taken of specific indexation assumptions for every asset class (fixed income securities, floating-rate securities, inflation-indexed securities, etc.); z TF: the effective interest rate of each exposure was used as discount factor.
Exposure to credit risk With regard to the financial assets exposed to this risk and to which the accounting rules governing impairment apply, the following table shows the Poste Italiane Group’s exposure at 31 December 2020, relating to financial assets measured at amortised cost and at fair value through other comprehensive income, for which a general deterioration model was used. The analysis shows the exposure by financial asset class by stages. The amounts refer to the gross carrying amount (amortised cost before ECL), unless otherwise indicated, and do not take into account guarantees or other credit enhancements.
from AAA to AA- from A+ to BBB- from BB+ to C Not rated
Stage 1 Stage 2 Stage 1 Stage 2 Stage 1 Stage 2 2020 effects
Carrying amount - Fair value at 31 December 2019 2,125 - 136,241 - 1,448 9 - 139,823
Financial statements of Poste Italiane at 31 December 2020 6. Risk management
Principles and processes involved in measuring and managing guarantees and other credit risk mitigation instruments
In the case of instruments backed by personal guarantees provided by a sovereign state or one or more companies, expected losses are calculated on the basis of the credit rating of the guarantor. With regard to covered bonds, the underlying guarantees were considered through the recognition of upgrades according to the type of guarantee.
The calculation of positions in derivatives and repurchase agreements and the related risk mitigation instruments are illustrated in the paragraph “Offsetting financial assets and liabilities.
Trade receivables To mitigate the risks arising from the extension of credit terms to its customers, the Poste Italiane Group has implemented a policy and suitable guidelines that govern the management of trade receivables, the terms and conditions of payment applicable to customers and defines the corporate process aimed at checking the customer’s creditworthiness, as well as the sustainability of the business risk inherent in the contract involving extended payment terms.
At 31 December 2020, estimated expected losses on financial instruments measured at fair value through other comprehensive income amount to approximately €19 million. The increase in the provision to cover expected losses takes account of the increased risk caused by the current pandemic.
Poste Italiane Group – Credit risk – Trade receivables impaired on the analytical basis
Movements in the expected credit loss provisions for trade receivables (due from customers and the MEF) are as follows: Details of the provision to cover expected losses on trade receivables
The provision for doubtful debts due from the Public Administration relate to items that may in part not be recoverable as a result of legislation limiting public spending and delays in payment and problems with a number of debtor entities. Credit loss provisions for amounts due from the MEF reflect the absence of funds in the state budget, meaning it is not possible to collect certain amounts receivable, recognised on the basis of legislation or contracts and agreements in effect at the time of recognition.
Poste Italiane Group – Movements in Provisions for doubtful debts due from others
Offsetting financial assets and liabilities In compliance with IFRS 7 – Financial instruments: Disclosures, this section provides details of financial assets and liabilities that are subject to master netting agreements or similar arrangements, regardless of whether the financial instruments have been offset in keeping with paragraph 42 of IAS 32158.
Repurchase agreement positions managed through the Central Counterparty, which meet the requirements of IAS 32, are shown net of offsetting.
Financial assets offset in the financial statements or subject to master netting agreements or similar arrangements
Financial assets 158. Paragraph 42 of IAS 32 provides that “A financial asset and a financial liability can be offset and the net amount presented in the statement of financial position when, and only when, an entity: (a) currently has a legally enforceable right to set off the recognised amounts; and (b) intends either to settle on a net basis or to realise the asset and settle the liability simultaneously”.
In order to minimise this risk, the Poste Italiane Group applies a financial policy based on diversification of the various forms of short-term and long-term loans and counterparties; availability of relevant credit lines in terms of amounts and the number of banks; gradual and consistent distribution of the maturities of medium/long-term borrowings; and use of dedicated analytical models to monitor the maturities of assets and liabilities.
During 2020, in order to have additional liquidity and to cope with any adverse scenarios related to the COVID-19 pandemic, the Parent Company entered into three medium-term loans for €750 million, two of which were repaid early in November and December for a total of €500 million, and used uncommitted credit lines for short-term loans for a total of €660 million, of which €250 million were outstanding at 31 December 2020. The remaining medium-term loan of €250 million was repaid in advance in January 2021.
The uncommitted credit lines are also available for overnight transactions entered into by BancoPosta RFC.
Finally, the Bank of Italy has granted BancoPosta RFC access to intraday credit in order to fund intraday interbank transactions. Collateral for this credit facility is provided by securities with a nominal value of €880 million, and the facility is unused at 31 December 2020.
At 31 December 2020, the Parent Company had an EMTN - Euro Medium Term Note program of €2 billion in place, thanks to which the Group can raise an additional €0.95 billion on the capital market. As part of this programme, in 2013, Poste Italiane placed a 10-year loan of €50 million on the Luxembourg Stock Exchange and in December 2020, it placed a further senior unsecured loan with a total nominal value of €1 billion.
Moreover, the following tables compare the Poste Italiane Group’s liabilities and assets at 31 December 2020, in terms of liquidity risk.
Flows from Poste Vita group’s policies 10,369 36,925 129,524 176,818 13,000 34,452 108,125 155,577
In terms of BancoPosta RFC’s specific operations, the liquidity risk regards current account deposits and prepaid cards159, the related investment of the deposits in Eurozone government securities and /or securities guaranteed by the Italian government, and the margins on derivative transactions. The potential risk derives from a mismatch between the maturities of investments in securities and those of liabilities, represented by current accounts where the funds are available on demand, thus compromising the ability to meet its obligations to current account holders. This potential mismatch between assets and liabilities is monitored via comparison of the maturity schedule for assets with the statistical model of the performance of current account deposits, in accordance with the various likely maturity schedules and assuming the progressive total withdrawal of deposits over a period of twenty years for retail customers, ten years for business customers and PostePay cards and five years for Public Administration customers.
159. Since 1 October 2018, prepaid cards have been the responsibility of PostePay SpA. The liquidity raised through these cards is transferred to BancoPosta, which invests the funds raised in Eurozone government bonds or other securities guaranteed by the Italian State. As such, for the purposes of specific risk analyses, the rationales related to each model underlying the different types of deposit inflow continue to apply.
Lastly, for the proper evaluation of the liquidity risk attributable to BancoPosta RFC, it should be borne in mind that, unless they are restricted, investments in Eurozone government securities are highly liquid assets and can be used as collateral in interbank repurchase agreements to obtain short-term financing. This practice is normally adopted by BancoPosta.
Price risk relates to financial assets classified as measured at fair value through other comprehensive income (“FVTOCI”) or measured at fair value through profit or loss (“FVTPL”), and certain derivative financial instruments where changes in value are recognised in profit or loss.
+ Vol - Vol + Vol - Vol + Vol - Vol + Vol - Vol 2020 effects
In relation to financial assets measured at fair value through profit or loss, price risk concerns the following: z investments in units of mutual investment funds held by Poste Vita SpA, with a fair value of €36,789160 million, including approximately €32,464 million used to cover Class I policies, approximately €4,320 million used to cover Class III policies and a residual amount relating to the free capital; z equity instruments held by Poste Vita SpA, totalling €200 million, used to cover Class I policies linked to separately managed accounts and to cover Class III policies; z shares held by BancoPosta RFC, totalling €72 million, consisting of €34 million in Visa Incorporated preference shares (Series C Convertible Participating Preferred Stock) and €38 million in Visa Incorporated preference shares (Series A Preferred Stock). For the purpose of the sensitivity analysis, the equities are matched with the corresponding amount of the Class A shares, considering the volatility of the shares listed on the NYSE.
In the area of Derivative Financial Instruments, price risk mainly relates to the forward sale contract for 400,000 of Visa Incorporated ordinary shares entered into by the Parent Company.
The table below shows the sensitivity to foreign exchange risk of the Poste Italiane Group’s most significant positions at 31 December 2020.
The risk in question relates to equities held by the Parent Company and PostePay and units in certain alternative investment funds in which Poste Vita SpA has invested.
Total amortised cost at 31 December 2019 1,532 - 33,135 - 251 - - 507 2,870 38,295
Carrying amount - Fair value at 31 December 2019 - - 36,798 - - - - - - 36,798
Provision to cover expected losses - - (21) - - - - - - (21)
Carrying amount - Fair value at 31 December 2019 - - 524 - - - - - - 524
BancoPosta RFC – Credit Risk – Details of the provision to cover expected losses on financial instruments at FVTOCI
Impairment of securities / receivables held at the beginning of the period - 4 4
Impairment of securities / receivables held at the beginning of the period - - - -
Due from the Parent company 32 1 - - 33 of which attributable to BancoPosta RFC 40 7 (1) - 46
Receivables relating to fixed-term contract settlements of which attributable to BancoPosta RFC 29 - - 29
Fair value through profit or loss (17) (15) (1) 1 (1) 1
The other principal risks to which the Poste Italiane Group is exposed at 31 December 2020 are described below.
In technical terms, mortality is one of the main risk factors for Poste Vita SpA, i.e. any risk associated with the uncertainty of a policyholder’s life expectancy. Particular attention is paid in selling pure life insurance policies, an area where procedures set underwriting limits to the capital and the age of the policyholder. In terms of “pure life” insured amounts the Group’s insurance companies transfer their risks to reinsurers in keeping with the nature of the products sold and conservation levels adequate to the companies’ capital structure.
Nevertheless, at 31 December 2020, the mortality risk is limited for the Group, considering the features of the products offered. The only area where this risk is somewhat significant is term life insurance. With reference to these products, a comparison is periodically made between actual deaths and those predicted by the demographic bases adopted for pricing. Moreover, mortality risk is mitigated through reinsurance and by setting limits on both the capital and the age of the policyholder when policies are sold.
Longevity risk is also low. In fact, for most life insurance products the probability of annuitisation is very close to zero, as historical experience shows that policyholders never use the option to annuitise. Pension products, in particular, still account for a limited share of insurance liabilities. In addition, for these products, the Group may, if certain conditions materialise, change the demographic base and the composition by sex used to calculate the annuity rates.
Pricing risk is the risk of incurring losses due to inadequate premiums charged for the insurance products sold. It may arise due to: z inappropriate selection of the technical basis; z incorrect assessment of the options embedded in the product; z incorrect evaluation of the factors used to calculate the expense loads.
For nearly all the products in the portfolio there are no surrender penalties: the surrender risk only becomes significant, however, in the event of mass surrenders which, on the basis of historical evidence, have a low probability of occurrence (a surrender rate of approximately 2.55% in 2020).
z Anti-selection risk: this relates to the company’s unwillingness to insure an event not classified as future, uncertain and damaging.
The reinsurance strategy allows: z mitigating risks, stabilising the variability of insurance business results and ensuring the technical balance of the portfolio; z mitigating risks arising from peak exposures; z strengthening financial soundness, if possible and/or necessary, optimising costs in terms of capital allocation and optimisation.
The Poste Italiane Group has adopted a fair value policy, setting out the general principles and rules to be applied in determining fair value for the purposes of preparing the financial statements, conducting risk management assessments and supporting the market transactions carried out by the Finance departments of the various Group entities. The general principles for measuring financial instruments at fair value have been updated since 31 December 2019 primarily to review roles and responsibilities in the process of establishing and implementing the Policy and to integrate, among others, the models supporting the valuation of unlisted shares described below. These general principles have been identified in compliance with the indications from the reference accounting standards and from the various Regulators (banking and insurance), ensuring uniformity in the valuation techniques adopted within the Group. The methods used have been revised, where necessary, to take into account developments in operational procedures and in market practices during the year.
Level 1: this level is comprised of fair values determined with reference to unadjusted prices quoted in active markets for identical assets or liabilities to which the entity has access on the measurement date. For the Poste Italiane Group the following categories of financial instrument apply: Bonds quoted on active markets: z Bonds issued by EU government bodies or Italian or foreign corporate bonds: measurement is based on bid prices, according to a hierarchy of sources where the MTS (the wholesale electronic market for government securities) ranks first, MILA (Milan Stock Exchange) second, for bonds intended for retail customers, and the CBBT (Composite Bloomberg Bond Trader) third; z Financial liabilities: measurement is based on the ask prices quoted by CBBT (Composite Bloomberg Bond Trader).
Equity securities and ETFs (Exchange Traded Funds) listed on active markets: the valuation is made considering the price resulting from the last contract traded on the day on the relevant stock exchange.
z Bond forwards: valuation is based on the present value of the differential between the forward price of the underlying instrument as of the measurement date and the settlement price.
Fixed rate and variable rate instruments: measurement is based on discounted cash flow. The counterparty’s credit spread is considered through: z use of the Italian government yield curve or the credit default swap (CDS) of the Italian Republic, in the case of Italian government agencies; Financial statements of Poste Italiane at 31 December 2020 7. Determination of fair value
z use of quoted CDS yield curves or, if not available, the adoption of “synthetic” CDS yield curves represented by the counterparty ’s rating, as constructed starting from the input data observable on the market; z use of yield curves based on the specific issuer’s quoted bond prices.
Level 3: this category includes the fair value measurement of assets and liabilities using inputs which cannot be observed, in addition to Level 2 inputs. For the Poste Italiane Group the following categories of financial instrument apply: Fixed and variable rate loans: the measurement is carried out using discounted cash flow techniques. The counterparty’s credit spread is set according to best practices, by using the probability of default and transition matrices created by external information providers and loss given default parameters determined by prudential regulations for banks or in accordance with market standards.
The following table shows an analysis of financial instruments measured at fair value at 31 December 2020, classified by level in the fair value hierarchy.
Reclassifications from level 1 to level 2 relate to financial instruments whose value, at 31 December 2020, is not observable in a liquid and active market, as defined in the Group’s Fair Value Policy. Reclassifications from level 2 to level 1, on the other hand, relate to financial instruments whose value, at 31 December 2020, is observable in a liquid and active market.
Financial statements of Poste Italiane at 31 December 2020 7. Determination of fair value
Changes in fair value through profit or loss - (111) - (111)
In the case of the Group’s insurance company, instruments in level 3 regard funds that invest primarily in unlisted instruments, whose fair value measurement is based on the latest available NAV (Net Asset Value) as announced by the fund manager. This NAV is adjusted according to the capital calls and reimbursements announced by the managers and occurring between the latest NAV date and the measurement date. These financial instruments primarily consist of investments in private equity, private debt and real estate funds associated entirely with Class I products related to separately managed accounts. Movements during the period regard the purchase of new investments, redemptions of units of unquoted close-end funds and changes in fair value during the year.
Below is a description of the hedging transactions entered into by the Poste Italiane Group, as distinguished between fair value hedges and cash flow hedges, which are accounted for as per IAS 39 – Financial Instruments: Recognition and Measurement. The fair value hedges and cash flow hedges described below refer mainly to transactions involving fixed-income or inflation-linked securities held by BancoPosta.
Full hedges and partial hedges are implemented, with the start date equal to the date of purchase of the instrument (swap spot start) and after the purchase of the instrument (swap forward start), respectively).
The Group evaluates the effectiveness of every hedging relationship in offsetting movements in fair value through a retrospective effectiveness test and a prospective effectiveness test163, using the approaches illustrated in the following notes.
164. The dollar offset approach is a quantitative method that involves a comparison between movements in the fair value or cash flow of the hedging instrument and the movements in the fair value or cash flow of the hedged instrument attributable to the risk hedged. Depending on the policy selected, this approach can be used: • on a cumulative basis, by observing the performance of the hedge since inception; • on a periodic basis, by comparing the hedge performance with that of the last test. The dollar offset approach can be implemented through a hypothetical derivative, that is by constructing a theoretical derivative to compare the relevant theoretical movements in far value or cash flow with those of the hedged instrument (actual derivative).
165. For the hypothetical derivative use is made of the mid-market spread, which makes the present value at the settlement date equal to zero, and for the actual derivative the interest rate agreed upon with the counterparty.
To limit the effects of interest rates on fair value, the Group enters into Interest Rate Swaps (IRC) Over the Counter (OTC) to hedge the fair value of the repurchase agreements held in portfolio.
For the purposes of the prospective effectiveness test, the Group adopts the “dollar offset through the hypothetical derivative” approach performed by calculating the hedge ratio between the change in fair value of the hypothetical derivative and the change in fair value of the actual derivative169. The hedge is considered effective if the hedge ratio falls in the interval between 80% and 125%.
167. Calculated by assuming a parallel shift of + / - 100 bps of the curves. 168. The hedge is carried out by defining the variable rate component simply indexed to Euribor and the fixed rate component that instead incorporates market conditions. The hypothetical derivative uses the mid-market fixed rate, which makes the present value at the settlement date equal to zero, while the actual derivative uses the interest rate agreed upon with the counterparty.
169. Calculated by assuming a parallel shift of + / - 100 bps of the curves.
For the purposes of the prospective effectiveness test, the critical terms approach is applied, considering at inception the consistency between the hedging instrument and the hedged item on the basis of the qualitative characteristics of the contracts170.
The hypothetical derivative and the actual derivative have the settlement date that matches the inception of the hedge and differ in terms of their fixed income component171. Moreover, for the derivatives used to hedge inflation-linked BTP, the fair value at the settlement date reflects also the interest accrued of the instrument accrued from the latest interest payment date to the date of settlement of the derivative. As such, both are considered the main sources of ineffectiveness.
For the purposes of the prospective effectiveness test, different approaches have been applied, depending on the characteristics of the hedging swap. Specifically: z the “Critical terms” approach for derivatives for which it has been determined at inception that the characteristics of the indexed leg of the swap make it possible to replicate exactly the variable cash flows generated by the hedged item; z the “Dollar offset through the hypothetical derivative” approach for derivative contracts with a fixed rate applicable to a nominal amount growing constantly at six-month intervals until the derivative expires. For these contracts the prospective effectiveness test is performed by calculating the hedge ratio between the change in fair value of the hypothetical derivative and the change in fair value of the actual derivative172. The hedge is considered effective if the hedge ratio falls in the interval between 80% and 125%.
Nominal Carrying amount* Accumulated amount of fair value hedge adjustments on the hedged item
Financial statements of Poste Italiane at 31 December 2020 8. Hedging transactions
Currently, the main benchmark indices for the Eurozone are: z the Euro Short Term Rate - ESTR (administered by the European Central Bank and published from 2 October 2019) which replaces the Euro OverNight Index Average (EONIA - no longer quoted from 1 January 2022) redefining it as ESTR plus 8.5 bps; z the EURIBOR (administered by the European Money Market Institute), whose reform process ended in November 2019.
In addition, the Group holds interest rate swaps designated as fair value hedges with a floating “leg” indexed to EURIBOR and a notional value of €31,034 million, almost entirely held by BancoPosta RFC.
Between 2009 and 2011, the Regional Tax Office for Large Taxpayers (Agenzia delle Entrate - Direzione Regionale del Lazio - Ufficio Grandi Contribuenti) notified Poste Vita of a number of alleged violations of the VAT regulations in the 2004, 2005 and 2006 tax years, resulting in fines of approximately €2.3 million for the alleged failure to pay VAT on invoices for service commissions. With regard to these disputes, currently pending before the Supreme Court of Cassation, the company, bearing in mind the Court’s by now consistent approach with regard to such matters, decided to take advantage of the option granted by Law Decree 119 of 23 October 2018. This involved settlement of the existing disputes in return for concessions via the payment of a sum amounting to €0.35 million, equal to 15% of the total penalties imposed in relation to the three alleged violations. The evaluation of adhering to the faculty granted by the aforementioned Law Decree no. 119/2018 is supported by the participation in the collaborative compliance regime with the tax authorities provided for by Law Decree no. 128 of 5 August 2015 (Cooperative Compliance). Since by the deadline of 31 July 2020 (deadline set forth in paragraph 12 of art. 6 of Law Decree no. 119/2918) the Company has not received any denial notices from the tax authorities, the settlement of the disputes can be considered correctly completed. The Company then released the amount set aside in the provision for risks.
On 19 April 2018, the tax Authorities in Rome (Guardia di Finanza – Nucleo di Polizia economico-finanziaria) entered the offices of SDA Express Courier. The purpose of the inspection was to verify the company’s compliance with the requirements regarding VAT, income tax, IRAP and withholding tax for the years 2014, 2015 and 2016, pursuant to and for the purposes of articles 52 and 63 of Presidential Decree 633/72, art. 33 of Presidential Decree 600/73, art. 2 of Legislative Decree 68/2001 and Law 4/1929. On 29 November 2018, the audit was formally declared at an end. The main finding in final notice of assessment for about €1 million regards the deduction of VAT relating to the adjustment entries issued by the company in connection with discounts granted to customers following an increase in the number of shipments. These discounts become price reductions, originally applied by the company when the shipment is handled, and are therefore classified as rebates or discounts under the related contract. Subsequently, on 5 December 2019, a notice of assessment for the year 2014 alone was notified with a total claim of €0.4 million, which, referring to the Formal Tax Audit Report (PVC), mainly contests the VAT deducted. On 3 February 2020, the Company appealed against this notice and provided for the provisional payment of the fine imposed. The hearing originally scheduled for 17 February 2021, for which a request for oral arguments was sent on 21 January 2021, has not yet been discussed nor has any news been received regarding the date of postponement.
Some of the judgements have already been decided by the Court of Genoa and, on their outcome, against debit notices totalling €13.2 million, the Company was ordered to pay only the CUAF contributions of 0.68%, less the family allowances paid by Postel to employees, amounting to €0.3 million, while nothing was deemed to be due under the CIG, CIGS and mobility being at the time Postel wholly owned by the State through Poste Italiane (a requirement existing up to the date of listing of Poste Italiane) and therefore included among the industrial enterprises of the State for which the law excludes the obligation to pay redundancy and mobility. INPS filed an appeal for the first tranche of requests made (€9.16 million), contesting the merits of the judgement at first instance and the sum arrived at. In the view of INPS, the rate applicable for contributions for family benefits, in line with recent guidance issued by INPS, should have been 4.40% in place of the 0.68% applied in the payment notices involved in the court action. In two judgements dated 28 December 2018, the Court of Appeal in Genoa confirmed in full the judgements at the first instance, rejecting INPS’s appeals, who filed an appeal in Cassation notified to Postel on 28 June 2019, which appeared before the court.
Other cases are still pending and are still at the preliminary stage, relating to the appeals filed by Postel SpA against the payment orders for the periods from May 2009 to July 2020.
Moreover, on 8 October 2019, INPS requested to regularise contributions from September 2014 to September 2019 at the non-harmonised CUAF rate of 4.40% of taxable income for social security purposes. With regard to the latter claim, the company settled differently depending on the period under consideration: z for October, November and December 2019, Postel has adjusted to the payment of the CUAF contribution in the amount of 4.40%, subject to repetition reserve; z for the previous period from September 2014 to the end of 2015, Postel appealed through administrative channels against the debt notices received from INPS with a request for payment of 4.40% by the CUAF; z for the year 2018 and the first 7 months of 2019, two Notices of Debit were served with the request for payment of the CUAF at 0.68% and minor contributions CIG, CIGS to Postel, which it paid, subject to repetition reserve awaiting the decision of the appeal pending in Cassation; z with effect from January 2020, Postel pays the CUAF rate to INPS at 0.68% instead of 4.40%, as a result of the provisions of art. 11, paragraph 5 bis of Law Decree no. 162 of 2019, converted into Law no. 8 of 28 February 2020.
Autorità Garante della Concorrenza e del Mercato (AGCM – the Italian Antitrust Authority) On 9 March 2015, the Authority notified Poste Italiane of an investigation of BancoPosta RFC for alleged violation of articles 20, 21 and 22 of the Consumer Code, regarding the “Libretto Smart” product. On 21 December 2015, the AGCM notified Poste Italiane of its final ruling in which it deemed the Company’s conduct unfair and imposed a fine of €0.54 million, limited to a tenth of the maximum applicable amount taking into account the mitigating circumstance that Poste Italiane had adopted initiatives aimed at allowing customers to benefit from the bonus rate. Poste Italiane lodged an appeal against this ruling before the Lazio Regional Administrative Court, which has adjourned the case until a hearing on the merits to be set.
On 3 October 2018, Poste Italiane proceeded to pay the fine of €23 million plus interest imposed by the Autorità Garante della Concorrenza e del Mercato (AGCM - the Antitrust Authority) following its ruling, in January 2018, that Poste Italiane had abused its dominant market position in the period from 2014 to 2017, as per art. 102 of the TFEU. This did not constitute acceptance or admission of liability in relation to the alleged misconduct and does not affect the Company’s right to defend its position through the appropriate channels. Poste Italiane has challenged the above measure before the Lazio Regional Administrative Court (TAR). The hearing on the merits scheduled for 8 April 2020 was postponed to 20 July 2020 at which time the hearing was postponed to a date to be determined.
On 19 November 2019, the AGCM initiated proceedings PS11563 against Poste Italiane in order to ascertain allegedly unfair commercial practice in the delivery of mail and, in particular, registered mail, in possible violation of articles 20, 21 and 22 of the Consumer Code. In particular, according to some customers: i) the advertised features of the “registered mail delivery” service are not reflected in the service actually provided; ii) the advertising for the “digital registered mail collection” service does not make it clear that the service may no longer be free of charge in the near future and that, in any case, there are restrictions on its use, since it can only be accessed if the sender has authorised it. In January 2020, a number of consumer associations were admitted to the proceedings. At the conclusion of the proceedings, by way of a measure notified on 15 September 2020, the Authority imposed an administrative fine of €5 million, payment of which was made on 5 January 2021. Poste Italiane has appealed this decision to the Lazio Regional Administrative Court, and the hearing on the merits has been set for 26 May 2021.
iii. (AGCom Resolution 298/17/CONS regarding “Assessment of the net cost of the universal postal service for 2013 and 2014” was published on 6 September 2017. In addition to acknowledging that the cost is unfair, the Resolution quantified the cost of providing the Universal Postal Service in 2013 and 2014, respectively, as €393 million and €409 million, compared with compensation of €343 million and €336 million provided for in the Contratto di Programma. Again, no Compensation Fund was established for 2013 and 2014 and, on 6 November 2017, Poste Italiane had filed a legal challenge before the Lazio Regional Administrative Court against the above resolution (the case is still pending).
iv. AGCom Resolution 412/14/CONS regarding “Assessment of the net cost of the universal postal service for 2011 and 2012” was published on 31 July 2014. In addition to acknowledging that the cost is unfair, the Resolution quantified the cost of providing the Universal Postal Service in 2011 and 2012, respectively, as €381 million and €327 million for fees originally recognised by Poste Italiane for €357 and €350 million respectively. The Authority has also established that no compensation fund was established for 2012 and on 13 November 2014, Poste Italiane filed an appeal before the Lazio Regional Administrative Court against the above resolution (still pending).
On 5 May 2020, a communication from the Bank of Italy was received containing the results of the transparency audits it carried out from 23 May to 19 July 2019 at 24 Post Offices and headquarters, which concerned, among other things: the organisational structure of BancoPosta, the Group and the territorial network, the management of relations with external partners, and the management of payment not approved. In response to the feedback of the Bank of Italy, the Company has prepared a plan containing the corrective measures to be put in place with an indication of the implementation methods and timing, which was communicated to the Bank of Italy on 3 July 2020.
CONSOB In January 2020, the Consob launched an inspection of a general nature pursuant to article 6-ter, paragraph 1, of Legislative Decree no. 58 of 24 February 1998, aimed at ascertaining the state of adaptation to the new MiFID 2 legislation. The inspection was completed on 23 October 2020. The Company is awaiting feedback from the Authority.
174. Events and transactions are defined as such when their occurrence is non-recurring, being transactions or events that do not recur frequently in the ordinary course of business.
175. Such transactions are defined as transactions that due to their significance/materiality, the nature of the counterparties, the purpose of the transaction, the manner of determining the transfer price and timing of the transaction may give rise to doubts over the correctness and/or completeness of the disclosures in the financial statements, over a conflict of interest, safeguards for the Company’s financial position and protections for non-controlling shareholders.
On 27 January 2021, Poste Italiane’s Board of Directors approved an amendment to BancoPosta RFC resulting in the removal of the restriction on the assets, properties and legal relationships that make up the Debit Business, to be submitted for final approval by Poste Italiane’s Extraordinary Shareholders’ Meeting, after obtaining all the authorisations required by current legislation and regulations; on 4 February 2021, PostePay’s Extraordinary Shareholders’ Meeting approved, among other things, a divisible capital increase to be subscribed and paid up by 30 September 2021 via the contribution in kind of the Debit Business by Poste Italiane.
Financial liabilities at amortised cost 3,757 7,085 79,756 41 (738) 89,901 4,379
Cash and deposits attributable to BancoPosta - - (6,391) - - (6,391) -
Financial liabilities at amortised cost 1,886 5,194 66,123 42 (477) 72,768 4,829
Financial instruments at fair value through profit or loss - (73) - (73) -
MEF account held at the Treasury - 4,542 - 4,542 4,542
Financial assets at amortised cost 5,930 6,366 7,079 4,929 5,179 5,207
Financial liabilities arising from repos (14,717) (14,711) (14,743) (12,201) (12,194) (12,205)
Receivables used as collateral provided by CSAs 7,494 7,494 5,181 5,181
Receivables used as collateral provided by GMRAs - - 208 208
Securities used as collateral provided by CSAs and GMRAs 497 603 528 527
At 31 December 2020, the Parent Company has received financial assets as collateral for repurchase agreements and reverse repurchase agreements, having a nominal value of €375 million and a fair value of €379 million.
With regard to financial assets, as required by Communication DEM/11070007 of 28 July 2011, implementing Document 2011/266 published by the European Securities and Markets Authority (ESMA) and later amendments, the Group’s exposure to sovereign debt at 31 December 2020 is shown in the table below.
Nominal value Carrying amount Market Value Nominal value Carrying amount Market Value
Financial assets at amortised cost - - - - - -
Financial assets at amortised cost 23,157 29,955 31,294 17,425 21,118 20,706
ISIN - Name (€m) Nature of entity Activity of the Fund
Pursuit of absolute returns, with low long-term volatility and correlation with the main financial markets
Investment in "core" and "core plus" income real estate assets located in the central areas of the main Italian cities, starting with Rome and Milan
Investments in energy companies to achieve capital appreciation and realise relevant gains, after exit
Nature of the involvement in the unconsolidated structured entity The purpose of Poste Vita’s investment in the funds is to diversify its portfolio of financial instruments intended to cover Class I products (Separately Managed Accounts), with the objective of mitigating the concentration of investments in Italian government. The entities primarily regard open-end harmonised funds that invest in a mix of assets, such as corporate bonds, government bonds and equities, and closed-end real estate funds that invest in property and property rights. Certain details are provided below.
Difference between carrying amount and maximum loss exposure Method to determine maximum loss exposure
Financial assets at FVTPL 4,886 1,037 3,849 Annual VaR 99.5% over a 5-year time horizon and 1-year half life
Financial assets at FVTPL 4,191 904 3,287 Annual VaR 99.5% over a 5-year time horizon and 1-year half life
Financial assets at FVTPL 909 176 733 Annual VaR 99.5% over a 5-year time horizon and 1-year half life
Financial assets at FVTPL 614 136 477 Annual VaR 99.5% over a 5-year time horizon and 1-year half life
Financial assets at FVTPL 567 80 486 Annual VaR 99.5% over a 5-year time horizon and 1-year half life
Financial assets at FVTPL 447 30 418 Provided by fund management company
Financial assets at FVTPL 383 174 209 VaR at 99.5% over a time horizon of 1 year calculated from SII sensitivity markets
IT0005247819 - Diamond Core Financial assets at FVTPL 276 91 185 VaR at 99.5% over a time horizon of 1 year calculated from SII sensitivity markets
Financial assets at FVTPL 275 36 238 VaR at 99.5% over a time horizon of 1 year calculated from SII sensitivity markets
Financial assets at FVTPL 249 62 186 VaR at 99.5% over a time horizon of 1 year calculated from SII sensitivity markets
Financial assets at FVTPL 110 34 75 VaR at 99.5% over a time horizon of 1 year calculated from SII sensitivity markets
Financial assets at FVTPL 101 36 65 VaR at 99.5% over a time horizon of 1 year calculated from SII sensitivity markets
Financial assets at FVTPL 46 20 25 VaR at 99.5% over a time horizon of 1 year calculated from SII sensitivity markets
Financial assets at FVTPL 15 8 6 VaR at 99.5% over a time horizon of 1 year calculated from SII sensitivity markets
Risk nature The company’s investments in the funds in question are reported at fair value (mainly level 2 of the fair value hierarchy), on the basis of the NAV reported from time to time by the fund manager. These investments were made in connection with Class I policies and, as such, any changes in fair value are passed on to the policyholder under the shadow accounting mechanism.
Description of the Plan The “ILT Phantom Stock 2016-2018” Plan provides for the assignment to the Beneficiaries of rights to receive units representing the value of the Poste Italiane share (the so-called Phantom Stock), and the related bonus in cash, at the end of a vesting period. The number of phantom stocks awarded to each Beneficiary is dependent on achieving some conditions and targets over a three-year period. The Plan covers a medium- to long-term period. In particular, the plan includes three award cycles, corresponding to the financial years 2016, 2017 and 2018, each with a duration of three years.
Plan terms and conditions The Performance Targets, to which receipt of the cash bonus is subject, are as follows: z for the General Manager and other beneficiaries of the Plan employed by Poste Italiane, other than BancoPosta personnel, an indicator of earnings based on the Group’s cumulative EBIT over a three-year period, used to account for the continuity and sustainability of earnings over the long term; z for Beneficiaries included among BancoPosta RFC’s Risk Takers, the three-year RORAC (Return On Risk Adjusted Capital), used for the LTIP with the aim of taking into account the continuity and sustainability of the long-term performance after appropriately adjusting for risk; z for Beneficiaries including personnel belonging to the Poste Vita insurance group, the RORAC registered by the Poste Vita insurance group over a three-year period, used for the LTIP with the aim of taking into account the continuity and sustainability of the long-term performance after appropriately adjusting for risk.
Vesting of the Phantom Stocks is subject to achievement of the Performance Hurdle, designed to ensure sustainability of the Plan at Group level. The Performance Hurdle corresponds with achievement of a certain target for the Group’s cumulative EBIT over a three-year period at the end of each Performance Period. In addition, in the case of the General Manager (and Chief
First Cycle 2016-2018 At the end of the one-year retention period to which the 139,604 Phantom Stocks deriving from the finalisation of the Plan, which matured in 2018, were subject, the cash equivalent of the units fully paid out during the year amounted to approximately €1.5 million. The cost recognised for the first half of the year was about €0.1 million.
Second Cycle 2017-2019 Also the Second Cycle of the “Phantom Stock LTIP”, awarded in 2017 (2017-2019), vested in 2019. The final number of phantom stocks awarded under the Plan totals 645,673, including 207,320 stocks subject to a one-year retention period. The cash value of the stocks granted in the year was approximately €4.7 million. The cost recognised in the period was approximately €0.3 million, whilst the liability recognised in amounts due to staff was approximately €1.7 million.
Third Cycle 2018-2020 At 31 December 2020, the total number of phantom stocks awarded to the 68 Beneficiaries of the Third Cycle of the Plan amount to 624,869 to the target. The cost recognised for 2020 was approximately €1.5 million, whilst the liability recognised in amounts due to staff was approximately €6 million.
Second Cycle 2017-2019 Also the Second Cycle of the “Phantom Stock LTIP”, awarded in 2017 (2017-2019), vested in 2019. The final number of phantom stocks awarded under the Plan totals 595,131, including 156,778 stocks subject to a one-year retention period. The cash value of the stocks granted in the year was approximately €4.7 million. The cost recognised in the period was approximately €0.3, whilst the liability recognised in amounts due to staff was approximately €1.3 million.
Third Cycle 2018-2020 At 31 December 2020, the total number of phantom stocks awarded to the 63 Beneficiaries of the Third Cycle of the Plan amount to 584,656 to the target. The cost recognised for 2020 was approximately €1.5 million, whilst the liability recognised in amounts due to staff was approximately €5.6 million.
Poste Italiane Group The Annual General Meeting of Poste Italiane SpA’s shareholders held on 28 May 2019 approved the information circular for the “Equity-based incentive plan (ILT) – Performance Share Plan”, prepared in accordance with art 84-bis of the Regulations for Issuers. This incentive scheme, set up in line with market practices, aims to link a portion of the variable component of remuneration to the achievement of earnings targets and the creation of sustainable shareholder value over the long term.
Description of the Plan The “ILT Performance Share” Plan, as described in the relevant Information Circular, provides for the assignment of Rights to the ordinary shares of Poste Italiane. The number of Rights to be granted to Beneficiaries is subject to the achievement of Performance Targets over a three-year period, following confirmation of achievement of the Hurdle, the Qualifying Conditions and compliance with the Malus Provisions (the latter for BancoPosta Beneficiaries, hereinafter “BP Beneficiaries” including then General Manager). The Plan covers a medium- to long-term period. In particular, the Plan includes two award cycles, corresponding to the financial years 2019 and 2020, each with a duration of three years. Shares are awarded if performance targets are met or after a Retention Period. The key characteristics of the Plan are described below.
Plan terms and conditions The Performance Targets, common to all Beneficiaries, to which the vesting of the Rights and, therefore, the allocation of the Shares is conditioned, are highlighted below: z profitability indicator identified in the Group’s three-year cumulative EBIT used to recognise the continuity and sustainability of profitability results over the long term; z an indicator of shareholder value creation, based on the relative Total Shareholder Return, used to measure performance based on the value created for Poste Italiane’s shareholders compared with the FTSE MIB index176.
First Cycle 2019-2021 The total number of Rights to receive Shares assigned for the First Cycle of the Plan concerns 106 Beneficiaries and was 632,679 units, whose unit fair value at the grant date (28 May 2019 for the General Manager and 7 October 2019 for the BP Beneficiaries and Other Beneficiaries) was €6.19, €8.29 and €8.88, respectively. The cost recognised for 2020 was approximately €2.3 million, whilst the specific equity reserve was approximately €4 million. The unit fair value of each Right at the valuation date is equal to its nominal value at the grant date (determined on the basis of stock market prices), discounted by the expected dividend rate and the risk-free interest rate and updated taking into account the best estimate of service conditions and performance (non-market based performance conditions) considering the best estimate of the service conditions and performance conditions (non-market based performance conditions).
First Cycle 2019-2021 At 31 December 2020, the total number of Rights to receive Shares assigned for the First Cycle of the Performance Share Plan concerns 102 Beneficiaries and was 620,178 units, whose unit fair value at the grant date (28 May 2019 for the General Manager and 7 October 2019 for the BP Beneficiaries and Other Beneficiaries) was €6.19, €8.29 and €8.88, respectively.
The cost recognised for 2020 was approximately €2.3 million, whilst the specific equity reserve was approximately €4 million. The unit fair value of each Right at the valuation date is equal to its nominal value at the grant date (determined on the basis of stock market prices), discounted by the expected dividend rate and the risk-free interest rate and updated taking into account the best estimate of service conditions and performance (non-market based performance conditions) considering the best estimate of the service conditions and performance conditions (non-market based performance conditions).
Long-term incentive schemes: Stock Options MLK delivery’s long-term incentive scheme, which was approved by the subsidiary’s Board of Directors on 10 December 2020, provides for the grant, free of charge, of a maximum number of stock options that entitle holders to subscribe for class Z shares of MLK delivery, i.e., shares issued to service the Plan without dividend and voting rights. The Plan has a total duration of five years and will end with the assignment of all Stock Options.
The cost recognised for 2020 is approximately €0.3 million, equivalent to the equity reserve specifically created for this case.
Short-term incentive schemes: MBO On 27 May 2014, the Bank of Italy issued specific Supervisory Standards for BancoPosta (Part IV, Chapter I, “BancoPosta” including in Circular 285 of 17 December 2013 “Prudential supervisory standards for banks”) which, in taking into account the specific organisational and operational aspects of BancoPosta and Poste Italiane SpA, has extended application of the prudential standards for banks to include BancoPosta. This includes the standards relating to remuneration and incentive policies (Part I, Title IV, Chapter 2 “Remuneration and incentive policies and practices” in the above Circular 285). These standards, only applicable to the Parent Company Poste Italiane SpA provide that a part of the bonuses paid to BancoPosta RFC’s Risk Takers may be awarded in the form of financial instruments over a multi-year timeframe.
With regard to the management incentive schemes adopted for BancoPosta RFC MBO for 2017 and 2018, where the incentive was above a certain materiality threshold, the MBO management incentive scheme envisages the award of 50% of the incentive in the form of phantom stocks, representing the value of Poste Italiane’s shares, and application of the following deferral mechanisms: z for 60% of the 5-year pro-rata incentive, for key personnel who benefit from both the short-term incentive system and the long-term incentive plan “Phantom Stock ILT Plan”; z 40% of the award to be deferred for a 3-year period on a pro-rata basis for the remaining Material Risk Takers.
The General Manager is also expected to apply an additional Qualifying Condition, in addition to those set out above, linked to the Solvency Ratio of the Poste Vita Insurance Group.
Determination of fair value and effects on profit or loss The valuation was carried out using an internal pricing tool that adopts simulation models consistent with the requirements of the reference accounting standards and takes into account the specific characteristics of the Plan.
At 31 December 2020, the number of Phantom Stocks relating to the 2017 and 2018 MBO plans in place was 170,613, relating mainly to personnel employed by the Parent Company. During the year, a cost adjustment of approximately €0.2 million was recognised, payments of €0.4 million were made and the liability recognised amounted to approximately €1.3 million.
Poste Tributi ScpA - in liquidation (Rome)* ** 100.00% - 901 -
Poste Insurance Broker Srl (Rome) 100.00% 600 (96) 465 * The figures shown for these companies were prepared in accordance with IFRS and, as such, may vary from those contained in the respective financial reports, which were prepared in accordance with the Italian Civil Code and Italian GAAP.
** On 26 May 2020, the company was cancelled from the Register of Companies.
Anima Holding SpA (Milan) (a) Associate 210,046 10.35% 2,147,129 888,472 1,258,657 714,722* 103,258
Other SDA Express Courier associate (d) Associate 4 a. Data derived from the latest consolidated interim accounts for the period ended 30 September 2020 approved by the company’s board of directors. b. Figures taken from the company’s latest financial statements approved by the Board at 31.12.2019. c. Figures including measurement of the SIA Group using the equity method and recognition of the related effects with regard to Purchase Price Allocation. d. It refers to Speedy Express Courier Srl in liquidation. * The amount includes commissions, interest income and other similar income. ** The amount includes the amount represented by dividends and measurement of the investments at equity.
Poste Italiane Ministry of Education, Universities and Research Financed training and research projects 460
At 31 December 2020, the item Lease contracts includes commitments that do not fall under IFRS 16 - Leases.
In addition, at 31 December 2020, EGI SpA had substantially ceased its activities as an electricity wholesaler and did not purchase electricity on regulated futures markets.
Contracts to purchase property, plant and equipment 46 1 95 1
At 31 December 2020, the Parent Company has paid a total of €97 million in claims on behalf of the Ministry of Justice, for which, under the agreement between Poste Italiane SpA and the MEF, it has already been reimbursed by the Treasury, whilst awaiting acknowledgement of the relevant account receivable from the Ministry of Justice.
Other services Deloitte & Touche SpA - * Includes costs for the audit of funds managed by BPF SGR charged to savers for a total fee of €195 thousand.
BANCOPOSTA RFC’S SEPARATE REPORT FOR THE YEAR ENDED 31 DECEMBER 202014.
BANCOPOSTA RFC’S SEPARATE REPORT FOR THE YEAR ENDED 31 DECEMBER 2020
Balance sheet Liabilities and equity 10. Financial liabilities measured at amortised cost 86,109,541,953 70,378,845,309 a) due to banks 10,814,911,214 7,186,265,048 b) due to customers 75,294,630,739 63,192,580,261 c) debt securities in issue - 20.
60. Net fee and commission income 3,290,279,204 3,458,831,296 70. Dividends and similar income 406,922 429,921 80. Profits/(Losses) on trading 6,530,477 (11,070,181)
100. Profits/(Losses) on disposal or repurchase of: 365,352,304 339,308,445 a) financial assets measured at amortised cost 63,032,233 (10,460,322)
b) financial assets measured at fair value through other comprehensive income 302,320,071 349,768,767 110.
Profits/(Losses) on other financial assets/liabilities measured at fair value through profit or loss a) financial assets and liabilities designated at fair value - b ) other financial assets mandatorily measured at fair value 1,700,378 26,531,023 120. Net interest and other banking income 5,159,419,473 5,375,055,487 130. Net losses/recoveries due to credit risk on: (22,043,396) (9,234,870)
b) financial assets measured at fair value through other comprehensive income (6,224,583) 1,651,673 140. Profits//Losses from contract amendments without termination - 150. Net income from banking activities 5,137,376,077 5,365,820,617 b) other administrative expenses (4,409,929,623) (4,501,967,416)
180. Net losses/recoveries on property, plant and equipment - 190. Net losses/recoveries on intangible assets - 200. Other operating income/(expense) 66,599,191 32,420,978 220. Profits/(Losses) on investments - 230.
Profits/(Losses) on fair value measurement of property, plant and equipment and intangible assets 250. Profits/(Losses) on disposal of investments - 260. Income/(Loss) before tax from continuing operations 829,431,471 844,210,198 270. Taxes on income from continuing operations (200,635,764) (233,524,285)
280. Income/(Loss) after tax from continuing operations 628,795,707 610,685,913 290. Income/(Loss) after tax from discontinued operations - 300. Profit/(Loss) for the year 628,795,707 610,685,913
40. Hedges of equity instruments measured at fair value through other comprehensive income - 50. Property, plant and equipment - 80. Non-current assets and disposal groups held for sale - 90. Share of valuation reserve attributable to equity-accounted investments - -
Other components of comprehensive income after taxes reclassified to profit or loss 100. Hedges of foreign investments - 130. Hedges (elements not designated) - 140.
Equity at 31/12/2020 * This item represents the Reserve for BancoPosta RFC of €1,210 million and also includes the Incentive Plans Reserve of €0.6 million.
3. Cash flow from/(used for) financial liabilities 15,156,757,443 6,308,408,020 - financial liabilities measured at amortised cost 15,730,722,989 6,429,614,758 - financial liabilities held for trading - - - financial liabilities designated at fair value - -
- dividends received on investments - - - disposal of property, plant and equipment - - - disposal of intangible assets - - - disposal of business divisions - 2. Cash flow used for - - - acquisition of property, plant and equipment - - - acquisition of intangible assets - - - acquisition of business divisions - -
Net cash flow from / (used for) investing activities - -
- issuance/purchase of treasury shares - - - issuance/purchase of equity instruments - - - dividends and other payments (525,685,913) (596,808,586)
NET CASH FLOW GENERATED / (USED) DURING THE YEAR 2,090,432,810 986,020,536
Cash and cash equivalents at beginning of the year 4,313,694,951 3,327,674,415
Cash and cash equivalents: effect of exchange rate fluctuations - -
Section 1 – Declaration of compliance with international financial reporting standards
The Separate Report has been prepared in compliance with the International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”). These were endorsed for application in the European Union by European Regulation (EC) 1606/2002 of 19 July 2002, as transposed into Italian law by Legislative Decree 38 of 28 February 2005 governing the introduction of IFRS into Italian legislation. The term IFRS includes all the International Financial Reporting Standards, International Accounting Standards (“IAS”) and interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”, previously known as the Standing Interpretations Committee or “SIC”), adopted by the European Union and contained in the EU regulations in force at 31 December 2020, regarding which no derogations were made.
Accounting standards and interpretations applicable from 1 January 2020 and those soon to be effective
The Separate Report have been prepared in accordance with the provisions of the sixth update of Bank of Italy Circular no. 262 of 22 December 2005 - “Bank’s financial statements: layouts and preparation” and the Bank of Italy Communication of 15 December 2020 - Additions to the provisions of Circular no. 262 concerning the impact of Covid-19 and measures to support the economy and amendments to IAS/IFRS, where applicable, and have been prepared in accordance with the provisions of art. 2447-septies paragraph 2 of the Italian Civil Code. On 27 May 2014, the Bank of Italy issued specific Supervisory Standards for BancoPosta RFC (Circular 285/2013, Part Four, Section 1) which, in taking into account the entity’s specific organisational and operational aspects, has established prudential requirements that are substantially in line with those applicable to banks. The Standards also govern the requirements regarding capital adequacy and risk containment. The Separate Report relates to the year ended 31 December 2020, has been prepared in euros and consists of the balance sheet, the statement of profit or loss, the statement of comprehensive income, the statement of changes in equity, the statement of cash flows and the explanatory notes. The balance sheet, statement of profit or loss and statement of comprehensive income consists of numbered line items and lettered line sub-items. Nil balances have also been presented in the balance sheet, statement of profit or loss and statement of comprehensive income for the sake of completeness. The cash flow statement has been prepared under the indirect method178. All figures in the notes are stated in millions of euros. Notes and account analysis have not been included for nil balances.
The Separate Report forms an integral part of Poste Italiane SpA’s financial statements and has been prepared on a going concern basis in that BancoPosta RFC’s operations are certain to continue in the foreseeable future. Poste Group companies, and thus BancoPosta RFC, as a going concern, prepare their financial statements on a going concern basis, taking account of the Group’s economic and financial outlook, as reflected in the “2024 Sustain & Innovate” strategic plan approved by the Board of Directors on 18 March 2021.
BancoPosta’s accounting policies, described in the Separate Report, are the same as those adopted by Poste Italiane SpA are described in this Part A and are relevant to all of BancoPosta RFC’s operations.
BancoPosta RFC Separate report for the year ended 31 December 2020 Notes – Part A – Accounting policies
These Regulations, in execution of the provisions set out in the Regulations for ring-fenced capital, govern and formalise the process of awarding BancoPosta’s Corporate Functions to Poste Italiane in accordance with the relevant regulations, identifying the operational phases, roles and responsibilities of the Bodies and Corporate Functions involved in various ways. The general policies and instructions contained in the Regulations in relation to transfer pricing are detailed in specific Operating Guidelines, jointly developed by BancoPosta and other Poste Italiane SpA functions. The Operating Guidelines establish, among other things, the applicable levels of service and transfer prices and are effective, as established in the Regulations, following an authorisation process involving the relevant Functions, the Chief Executive Officer and, where required, the Company’s Board of Directors. When BancoPosta intends to contract out a major process or a control procedure, whether in its entirety or in part, to Poste Italiane SpA in accordance with specific Operating Guidelines, it must give prior notice to the Bank of Italy. In accordance with Bank of Italy Circular 285 issued on 17 December 2013, Part Four, the Board of Statutory Auditors is required to verify, at least every six months, that the policies adopted are fit for purpose and are in compliance with the related statutory requirements and supervisory standards.
For the purposes of oversight of the unbundled accounts, in 2020, the Board of Statutory Auditors conducted the relevant audit activities during 2 meetings, reporting its conclusions in its annual report to shareholders for the year ended 31 December 2020.
4.3 Risks, uncertainties and impacts of the Covid-19 pandemic For a description of the principal risks and uncertainties arising from Covid-19, reference should be made to the section Risk management - Covid risk management at Poste Italiane in the Report on Operations.
180. The acronym SPPI - Solely Payments of Principal and Interest defines financial assets held solely to collect the relevant contractual cash flows, as represented by payments of principal and interest accrued on the principal outstanding at specified dates. The SPPI test is intended to check that the characteristics of the instruments are consistent with this objective.
b) classification This item includes all financial assets other than those classified as “Financial assets measured at fair value through other comprehensive income” and as “Financial assets measured at amortised cost”. In particular, this item includes: a) financial assets purchased and held mainly for trading; b) financial assets designated as such on initial recognition, thanks to the fair value option; c) financial assets mandatorily measured at fair value through profit or loss.
This item comprises: z debt securities and loans that are classified in the “Other/Trading” business model (thus not in the “Hold to Collect” and “Hold to Collect and Sell” business models) or fail to meet the SPPI test180; z equity instruments held for trading or that were not initially recognised at fair value through other comprehensive income; z derivative contracts, except those designated as hedges, that are classified as assets or liabilities held for trading, depending on whether their fair value is positive or negative; positive and negative fair values arising from transactions with the same counterparties are offset during collateralisation, where allowed by contract.
b) classification This item includes financial assets held in connection with a business model where financial instruments are held to collect contractual cash flows and for sale (“Hold to Collect and Sell” - HTCS business model), with the relevant contract calling for the payment, at specified dates, of principal and interest accrued on the principal outstanding (SPPI).
c) measurement and recognition of gains and losses Financial assets other than equity instruments are measured at fair value and any subsequent change in fair value is recognised through Other comprehensive income (“OCI”) until the financial asset is either derecognised or reclassified, except for currency gains and losses recognised in the statement of profit or loss in “Item 80 – Profits/(Losses) on trading”. When the financial asset is derecognised, the related cumulative gains and losses recognised in OCI are reclassified to profit or loss in “Item 100 – Profits/ (Losses) on disposal or repurchase”.
The effects of the application of amortised cost are recognised in profit or loss in “Item 10 - Interest and similar income”.
Equity securities elected to be classified in this item are measured at fair value and any changes in such fair value are recognised in line “Item 110 – Valuation reserves” without subsequent recycling to profit or loss, not even in case of sale. The only component that is reported in profit or loss is the related dividends.
3 – Financial assets measured at amortised cost a) recognition Financial assets measured at amortised cost are initially recognised on (i) the settlement date for debt securities and investments and (ii) the date on which the service is rendered for trade receivables. They are initially recognised at fair value which is generally the price paid for debt securities or at the contractual value of the service rendered for all the other receivables. Changes in fair value between the trade date and the settlement date are recognised.
b) classification This item includes financial assets held in connection with a business model where the objective is the collection of the relevant cash flows (“Hold to Collect” - HTC business model), represented by payments, at specified dates, of principal and interest accrued on the principal outstanding (SPPI). The business model on which the classification of financial assets is based permits the sale of such assets; if the sales are not occasional, and are not immaterial in terms of value, consistency with the HTC business model should be assessed.
The carrying amount of financial assets measured at amortised cost is adjusted to take into account expected credit losses, as illustrated in the specific section. These expected credit losses are recognised in profit or loss in line “Item 130 – Net losses/ recoveries due to credit risk”.
4 – Hedges The Poste Italiane Group has elected to use the option made available by IFRS 9 and has retained the accounting treatments provided for by IAS 39 with reference to hedge accounting.
10 – Provisions for risks and charges Provisions for risks and charges are recorded to cover losses that are either probable or certain to be incurred, for which, however, there is an uncertainty as to the amount or as to the date on which they will occur. Provisions for risks and charges are made when the entity has a present (legal or constructive) obligation as a result of a past event, and it is probable that an outflow of resources will be required to settle the obligation. Provisions are measured on the basis of management’s best estimate of the use of resources required to settle the obligation. The value of the liability is discounted, where the time effect of money is relevant, at a rate that reflects current market values and takes into account the risks specific to the liability. Provisions are reviewed at each reporting date and are adjusted to reflect the best estimate of the expected charge to meet existing obligations at the reporting date. Any effect of the passage of time and the effect of changes in interest rates are shown in the statement of profit or loss under net provisions for the year. With regard to the risks for which the occurrence of a liability is only possible, specific information is provided without making any provision. Under the option granted by the relevant accounting standards, limited disclosure is provided when, in rare cases, disclosure of some or all of the information regarding the risks in question could seriously prejudice BancoPosta RFC’s position in a dispute or in ongoing negotiations with third parties.
a) classification and recognition Financial liabilities held for trading consist of derivatives which do not qualify for classification as hedging instruments in accordance with accounting standards, or originally obtained as a hedge which was subsequently discontinued. Financial liabilities held for trading are recognised on the derivative contract date.
b) measurement and recognition of gains and losses Financial liabilities held for trading are measured at fair value though profit or loss in “Item 80 - Profits/(Losses) on trading”.
14 – Foreign currency transactions a) recognition Foreign currency transactions are initially recognised in the functional currency by translating the foreign currency amount at the transaction date spot rate.
In accordance with IFRS 15, revenue is recognised on the basis of a 5-step framework, which consists of the following: 1. identify the contract with the customer (sales contracts except lease contracts, insurance contracts, financial instruments and non-monetary exchanges); 2. identify the performance obligations, which can be defined as the explicit or implicit promise to transfer a distinct good or service to the customer; 3. determine the transaction price; 4. in case of bundles of goods or services involving different performance obligations, allocate the transaction price to the performance obligation; to that end, it is necessary to estimate the stand-alone selling price of each component; 5. recognise revenue when or as the entity fulfils the performance obligation, that is upon delivery of the good or service to the customer. Performance obligations can be fulfilled: – “at a point in time”: in the case of obligations fulfilled at a point in time, revenue is recognised only as control over the good or service is passed to the customer. In that respect, consideration is given not only to the significant exposure to the risks and benefits related to the good or service but also physical possession, customer’s acceptance, the existence of legal rights, etc.; – “over time”: in the case of obligations fulfilled over time, the measurement and recognition of revenue reflect, virtually, the progress of the customer’s satisfaction. An appropriate approach is defined to measure progress of the performance obligation (the output method).
In determining whether credit risk has increased significantly, it is necessary to compare the risk of default of the financial instrument as at the reporting date with the risk of default of the financial instrument on initial recognition.
Related parties external to the Group include the MEF and its direct and indirect subsidiaries and associates. Related parties also include Poste Italiane SpA’s key management personnel and the funds representing post-employment benefit plans for the personnel of BancoPosta RFC and its related parties. The state and public sector entities other than the MEF are not classified as related parties. Related party transactions do not include those deriving from financial assets and liabilities represented by instruments traded on organised markets.
Employee benefits Short-term employee benefits are those that will be fully paid within twelve months of the end of the year in which the employee provided his or her services. Such benefits include wages, salaries, social security contributions, holiday pay and sick pay.
The undiscounted value of short-term employee benefits, to be paid to employees in consideration of employment services provided over the relevant period, is accrued as personnel expenses.
z Defined contribution plans Employee termination benefits payable pursuant to art. 2120, Italian Civil Code fall within the scope of defined contribution plans provided they vested subsequent to 1 January 2007 and were paid into a Supplementary Pension Fund or a Treasury Fund at INPS. Contributions to defined contribution plans are recognised in profit or loss when incurred, based on their nominal value.
In the case of cash-settled share-based payment transactions: z a liability is recognised as a matching entry at cost; z if the fair value of the goods or services received or acquired cannot be reliably determined, this value must be estimated indirectly on the basis of the fair value of the liability; z the fair value of the liability must be remeasured at the end of each reporting period, recognising any changes in fair value in profit or loss for the period.
Use of estimates The preparation of financial information requires the use of estimates and assumptions that can have a significant effect on the final values indicated in the financial statements and in the disclosure provided. The preparation of these estimates involves the use of available information and the adoption of subjective assessments, also based on historical experience, used for the formulation of reasonable assumptions for the recognition of operating events. Estimates and assumptions are periodically reviewed and the impact of any changes is reflected in the financial statements for the period in which the estimate is revised if the revision only influences the current period, or also in future periods if the revision influences both current and future periods. Due to their nature, the estimates and assumptions used may vary from year to year and, therefore, it cannot be excluded that in subsequent years, the values recorded in this Separate Report may also vary significantly as a result of changes in the subjective valuations used.
With regard to trade receivables, on the other hand, stage allocation is not applied in accordance with the Simplified Approach. Impairment, for these items in the financial statements, is based on: z analytical impairment: when a defined credit threshold is exceeded, the individual credit position is analytically monitored on the basis of internal or external evidence; or z on a flat-rate basis impairment: elaboration of a provision matrix for historical losses.
For further details, please refer to Part E - Credit Risk.
The main factors in the recognition of revenue from contracts with customers include elements of variable consideration, particularly penalties (other than those related to compensation for damages). Elements of variable consideration are identified at the inception of the contract and estimated as of every close of the accounts for the entire contract term, to take into account new circumstances and changes in the circumstances already considered for the previous estimations. Elements of variable consideration include refund liabilities.
A.3 – Information on transfers between financial asset portfolios 182. Given the nature of BancoPosta RFC’s operations, the observable data used as input to determine the fair value of the various instruments include, for example, quoted prices provided by third parties (pricing or brokerage services), yield and inflation curves, exchange rates provided by the European Central Bank, ranges of rate volatility, inflation option premiums, interest rate swap spreads or credit default spreads which represent the creditworthiness of specific counterparties and any liquidity adjustments quoted by primary market counterparties.
Level 1: this level is comprised of fair values determined with reference to unadjusted prices quoted in active markets for identical assets or liabilities to which the entity has access on the measurement date. For BancoPosta RFC, the financial instruments included in this category consist of bonds issued by the Italian government, the valuation of which is based on the bid prices, according to a hierarchy of sources where the MTS (the wholesale electronic market for government securities) ranks first, MILA (Milan Stock Exchange) second, for bonds intended for retail customers, and the CBBT (Composite Bloomberg Bond Trader) third. Level 1 bond price quotations incorporate a credit risk component.
Level 2: this level is comprised of fair values based on inputs other than Level 1 quoted market prices that are either directly or indirectly observable for the asset or liability182.
For BancoPosta RFC, these include the following types of financial instrument: z Straight Italian and international government and non-government bonds, quoted on inactive markets or unquoted: valuation is based on discounted cash flow techniques involving the computation of the present value of future cash flows, inputting rates from yield curves incorporating spreads reflecting credit risk that are based on spreads determined with reference to quoted and liquid benchmark securities issued by the issuer, or by other companies with similar characteristics to the issuer. Yield curves may be slightly adjusted to reflect liquidity risk relating to the absence of an active market.
– Bond forwards: valuation is based on the present value of the differential between the forward price of the underlying instrument as of the measurement date and the settlement price.
The derivatives held in BancoPosta RFC’s portfolio may be pledged as collateral and the fair value, consequently, need not be adjusted for counterparty risk. The yield curve used to compute present value is selected to be consistent with the manner in which cash collateral is remunerated. This approach is also followed for security in the form of pledged debt securities, given the limited level of credit risk inherent in the securities held as collateral by BancoPosta RFC.
z Reverse Repos: are valued using discounted cash flow techniques involving the computation of future contractual cash flows. Reverse Repos may also be used for collateral and in such cases fair value need not be adjusted for the counterparty’s credit risk.
The processes used in recurring and non-recurring fair value measurements of instruments classified in Level 3 are described in paragraphs A.4.1 and A.4.5, respectively, of Part A.
Sensitivity analysis of recurring fair value measurements classified in Level 3 of the hierarchy is conducted for the Series C Visa Incorporated Convertible Participating Preferred Stock. Measurement of these financial instruments is in fact subject to change following alterations that may occur in the discount factor applied in determining fair value, in order to take into account the illiquid nature of the shares. This discount factor, estimated using an internal valuation technique, is above all influenced by the annual volatility of the underlying shares. Applying the maximum volatility according to the technique used, the potential reduction in fair value could reach approximately 30.71%.
The primary factors contributing to transfers between fair value levels include changes in the observability of significant inputs and market conditions (including the liquidity parameter) and refinements in valuation models used in measuring fair value.
1. Financial assets measured at fair value through profit or loss - 38 34 - - 71 a) financial assets held for trading - - - - - b ) financial assets designated at fair value - - - - - c ) other financial assets mandatorily measured at fair value - 38 34 - - 71 2.
During the reporting period, the changes that occurred include €6 million to the change in fair value of the Series C Visa Incorporated Convertible Participating Preferred Stock and €31 million to the transfer from Level 3 to Level 2 of a portion of the Visa Incorporated Series C Preferred Stock converted to Series A Preferred Stock on 24 September 2020, as described in Part B, Section 2 of Assets.
Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Financial assets measured at amortised cost 52,028 31,188 3,573 18,772 39,792 20,613 4,073 14,728 2.
Property, plant and equipment held for investment purposes 3. Non-current assets and disposal groups held for sale - - - - - - - 1. Financial liabilities measured at amortised cost 86,110 - 14,380 71.762 70,379 - 11,047 59,343 2.
Liabilities associated with non-current assets held for sale and discontinued operations
(€m) Total at 31/12/2020 Total at 31/12/2019 b) Central Bank deposit 3,362 814
“Cash” is comprised of cash at post office counters and companies that provide cash transportation services, consisting of cash deposits on postal current accounts, postal savings products (Interest-bearing Postal Certificates and Postal Savings Books) or advances obtained from the Treasury to fund post office operations. This cash may only be used in settlement of these obligations. Cash includes foreign banknotes equivalent to €15 million.
The increase in the sub-item “Central bank deposits” is due to temporary excess liquidity deriving from private customer deposits on the account opened with the Bank of Italy, intended for interbank settlements, and not yet invested.
2.3 / 2.4 Financial assets designated at fair value: breakdown by type and by debtor/issuer
There are no financial assets designated at fair value under the fair value option in portfolio.
2.5 Other financial assets mandatorily measured at fair value: breakdown by type
In 2019, BancoPosta RFC entered into a forward sale agreement for 400,000 ordinary Visa Incorporated shares at a price of US$153.46 per share and at an exchange rate of 1.2037. The total consideration is €51 million and the settlement date is 1 March 2021. The fair value of the forward sale has decreased by €5 million in the reporting year, reflecting movements in both the price of the shares in dollars and the euro/dollar exchange rate. This reduction has been recognised in profit or loss in “Item 80 - Profits (Losses) on trading”.
Section 3 – Financial assets measured at fair value through other comprehensive income – Item 30 3.1 Financial assets measured at fair value through other comprehensive income: breakdown by type
Debt securities issued by governments include Eurozone fixed income government bonds, represented by Italian government securities with a nominal value of €33,569 million. Total fair value fluctuation for the period was positive for €3,645 million, with gains of €1,947 million recognised in the relevant equity reserve in relation to the portion of the portfolio not hedged by fair value hedges, and a gain of €1,698 million recognised through profit or loss in relation to the hedged portion.
Securities with a nominal value of €8,615 million are encumbered as follows: z €7,526 million, carried at fair value for €8,883 million (Part B, Other Information, Table 3), and delivered to counterparties in connection with repurchase agreements concluded prior to 31 December 2020; z €172 million, carried at fair value for €177 million (Part B, Other Information, Table 3), and delivered to counterparties in connection with interest rate swaps and repurchase agreements concluded in the year under review; z €880 million, carried at fair value for €894 million, and delivered to the Bank of Italy to secure an intraday credit line; z €37 million carried at fair value for €37 million and delivered to the Bank of Italy in relation to the clearing service offered by the central bank for the execution of Sepa Direct Debits.
3.3 Financial assets measured at fair value through other comprehensive income: gross amount and overall impairment losses
Level 1 Level 2 Level 3 1.1 Current accounts and demand deposits - Reverse repurchase agreements
Level 1 Level 2 Level 3 1.2 Reverse repurchase agreements 1.4 Credit cards, personal and salary loans
“Other loans” primarily consist of: z €7,344 million, €8 million being accrued interest, in public customers’ current account deposits deposited with the MEF, which earn a variable rate of return, calculated on a basket of government securities184. The deposit has been adjusted to reflect accumulated impairments of €4 million, to reflect the risk of counterparty default (€3 million at 31 December 2019). During 2020, in the phase of increasing returns following the onset of the pandemic, (operating) hedging derivative contracts were entered into on the 10-year indexed remuneration component. The hedging transaction was carried out through forward purchases of the 10-year BTP with settlement of the differential between the pre-set price of the security and its market value. These transactions generated positive effects of €11 million, recorded in the statement of profit or loss in “Item 80 - Profits/ (Losses) on trading”; z €1,205 million in cash collateral held by counterparties for interest rate swaps (collateral pursuant to Credit Support Annexes), entered into for cash flow and fair value hedging purposes by BancoPosta RFC; z €902 million in amounts receivable from Poste Italiane SpA’s functions outside the ring-fence, €901 million of which relates
to Poste Italiane SpA’s Finance function’s intersegment financial account, used for the processing of payments to and from third parties; z €1,988 million, €3 million of which being accrued net interest expense, in deposits at the MEF (the “Buffer account”), remunerated at the EONIA rate185; z €432 million in fees receivable from Cassa Depositi e Prestiti during the year in connection with postal savings; z €220 million in amounts due from PostePay for services relating to the placement of payment products; z €214 million from Poste Vita in respect of commissions deriving from the placement of insurance policies; z €24 million in amounts due for the payment of pensions and vouchers on behalf of INPS (the National Institute of Social Security).
“Other debt securities” include Italian fixed income government bonds and securities guaranteed by the Italian State for €26,157 million. Their carrying amount of €33,255 million reflects the amortised cost of unhedged fixed income instruments, totalling €11,380 million, the amortised cost of fair-value hedged fixed income bonds, totalling €17,485 million, increased by €4,390 million to take into account the effects of the hedge (€2,871 million related to 2019). The value of these securities was adjusted to take into account the related impairments. Accumulated impairments at 31 December 2020 amount to approximately €15 million (€8 million at 31 December 2019).
Stage 1 and 2 Stage 3 of which: purchased or originated impaired assets
5.1 Hedging derivatives by type of hedge and fair value level
5.2 Hedging derivatives: breakdown by hedged portfolio and type of hedge
Financial assets measured at amortised cost 2. Portfolio of financial assets and liabilities x x x x x x - x - -
Section 6 – Adjustments for changes in hedged financial assets portfolio – Item 60
Section 10 – Tax assets and liabilities – Assets item 100 and liabilities item 60
Current tax assets and liabilities form part of intersegment relations and are shown in “Other assets” (Item 120 in Assets) and “Other liabilities” (Item 80 in Liabilities), as they are settled with Poste Italiane SpA’s functions outside the ring-fence, within the scope of internal relations with Poste Italiane SpA, as the sole taxable entity.
Deferred tax assets through Profit or loss - 2 - - 13 - 34 6 47 8
Deferred tax assets through Equity 32 6 31 6 - - - - 63 12
Deferred tax assets through Profit or loss - 1 - - 14 - 54 10 68 11
Deferred tax liabilities through Profit or loss 1 2 - - 1 2
Deferred tax liabilities through Equity 769 144 53 10 822 154
Deferred tax liabilities through Profit or loss - - - - - -
(€m) Total at 31/12/2020 Total at 31/12/2019 2.1 Deferred tax assets recognised in the year 1 2 a) relating to previous years - 1 b) due to changes in accounting policies - 2. 2 New taxes or tax rate increases - 3. 1 Deferred tax assets derecognised in the year (25) (60)
(€m) Total at 31/12/2020 Total at 31/12/2019 2.1 Deferred tax liabilities recognised in the year (448) (416)
a) relating to previous years - b ) due to changes in accounting policies - 2. 2 New taxes or tax rate increases - 3. 1 Deferred tax liabilities derecognised in the year 134 126 b) due to changes in accounting policies - 3. 2 Reductions of tax rates - -
The net charge or credit to profit or loss due to movements in deferred tax assets and liabilities through equity is the tax effect on reserves described in Part D.
Current tax assets receivable from Poste Italiane SpA outside the ring-fence
Tax receivables refer mainly to advances paid to the tax authorities, of which: €320 million for stamp duty to be paid virtually in 2021 and €11 million for withholding tax on interest payable to current account holders in 2020, both advances to be recovered from customers.
The sub-item “Items in process” includes: z amounts due from the commercial partners for providing PostePay top-ups for €14 million; z €68 million in withdrawals from BancoPosta ATMs yet to be debited to customer accounts or awaiting settlement; z amounts to be charged to PostePay SpA for €72 million (mainly in the first few days of 2021).
“Other items” include mainly: z €1,474 million in stamp duty accrued to 31 December 2020 payable by holders of outstanding Interest-bearing Postal Certificates186. An equal amount has been recognised in “Other liabilities” as tax payables (Part B, Liabilities, Table 8.1) until expiration or early extinguishment of Interest-bearing Postal Certificates, which is the date on which the tax must be paid to the authorities; z €118 million relating to stamp duty charged to Postal Savings Books, which BancoPosta RFC pays in virtual form as required by law.
The sub-item “Current tax assets receivable from Poste Italiane SpA outside the ring-fence” is commented in Section 8 of Liabilities.
Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Due to Central Banks - x x x - x x x 2.1 Current accounts and demand deposits 720 x x x 383 x x x 2.4 Obligations to repurchase equity instruments - x x x - x x x
The sub-item “Other payables” includes €392 million in guarantee deposits relating to sums paid to counterparties with which Repo transactions are in place (collateral provided for by specific Global Master Repurchase Agreements).
BancoPosta RFC has uncommitted overnight credit lines amounting to €1,017 million, overdraft facilities for €148 million and arrangements for the issue of personal guarantees for €620 million granted to Poste Italiane SpA, undrawn at 31 December 2020.
In addition, from 26 June 2020, it may access a 3-year committed facility granted by Cassa Depositi e Prestiti for repurchase agreements up to a maximum of €4.25 billion, unused at 31 December 2020.
1.2 Financial liabilities measured at amortised cost: breakdown of amounts due to customers by type
The sub-item “Current accounts and demand deposits” include €7,044 million in postal current accounts held by PostePay SpA mainly relating to the deposit of income from prepaid cards, €484 million in postal current accounts held by PosteVita SpA and €140 million in current accounts held by Poste Italiane outside the ring-fence.
The sub-item “Loans, Other” consist of the net amount of €3,588 million deposited in the MEF account held at the Treasury, which breaks down as follows: z the balance of cash flows for advances, amounting to €3,602 million, represents the net amount payable as a result of advances from the MEF to meet the cash requirements of BancoPosta; z net balance of cash flows from the management of postal savings of €192 million, due to the excess repayments on deposits made in the last two days of the year in question and settled in the first few days of the following year; at 31 December 2020, the balance consisted of a receivable of €146 million owed to Cassa Depositi e Prestiti and a receivable of €46 million owed to the MEF for issues of Interest-bearing Postal Certificates attributable to Cassa Depositi e Prestiti; z amounts payable due to thefts suffered by Post Offices of €159 million, relating to obligations assumed towards the MEF on behalf of the Treasury as a result of theft and embezzlement; these obligations derive from withdrawals made from the Treasury, which are necessary to replenish the cash shortfall due to these criminal events so as to ensure the continuity of the Post Offices’ operations; z amounts payable for operational risks for €19 million regard the portion of advances obtained to fund operations, in relation to which asset under recovery is certain or probable.
The sub-item “Other payables” primarily consist of domestic postal orders, amounting to €784 million, and postal money orders for €381 million.