Reclassified income statement1
| (Figures in millions of euro) | 31/12/2021 | 31/12/2020 | Change | % change |
|---|---|---|---|---|
| Interest margin | 1,385 | 1,245 | 140 | 11.2% |
| Net commissions | 717 | 657 | 60 | 9.1% |
| Dividends | 3 | 2 | 1 | 50.0% |
| Net trading revenues | 230 | 359 | (129) | (35.9%) |
| Net interest and other banking income | 2,335 | 2,263 | 72 | 3.2% |
| Net value adjustments/write-backs | (526) | (616) | 90 | (14.6%) |
| Income from financial activities | 1,809 | 1,647 | 162 | 9.8% |
| Operating charges* | (1,628) | (1,556) | (72) | 4.6% |
| Net allocations to provisions for risks and charges | (34) | (56) | 22 | (39.3%) |
| Other income (charges) | 226 | 235 | (9) | (3.8%) |
| Profit (loss) from disposal of investments and equity investments | (6) | - | (6) | n.s. |
| Gross current result | 367 | 270 | 97 | 35.9% |
| Income tax | (36) | (25) | (11) | 44.0% |
| Profit (loss) for the year for minority interests | 2 | - | 2 | n.s. |
| Net result of the Parent Company | 333 | 245 | 88 | 35.9% |
1 In order to provide a better management representation of the results, the reclassified consolidated income statement figures differ from the layouts of the financial statements envisaged by Bank of Italy Circular no. 262 of 2005, 7th Update
Reclassified statement of financial position1
| (Figures in millions of euro) | 31/12/2021 | 31/12/2020 | Change | % change |
|---|---|---|---|---|
| ASSETS | ||||
| Cash and cash equivalents | 895 | 823 | 72 | 8.8% |
| Exposures to banks | 3,533 | 2,463 | 1,070 | 43.4% |
| Exposures to customers | 46,117 | 43,633 | 2,484 | 5.7% |
| - of which at fair value | 284 | 288 | (4) | (1.4%) |
| Financial assets | 37,235 | 36,812 | 423 | 1.2% |
| Equity investments | 64 | 75 | (11) | (14.7%) |
| Tangible and intangible assets | 1,328 | 1,352 | (24) | (1.8%) |
| Tax assets | 778 | 849 | (71) | (8.4%) |
| Other asset items | 1,200 | 790 | 410 | 51.9% |
| Total assets | 91,150 | 86,797 | 4,353 | 5.0% |
| LIABILITIES | ||||
| Due to banks | 16,611 | 17,438 | (827) | (4.7%) |
| Direct funding | 65,123 | 60,435 | 4,688 | 7.8% |
| - Due to customers | 61,388 | 55,447 | 5,941 | 10.7% |
| - Debt securities in issue | 3,735 | 4,988 | (1,253) | (25.1%) |
| Other financial liabilities | 33 | 81 | (48) | (59.3%) |
| Provisions (Risks, charges and personnel) | 473 | 469 | 4 | 0.9% |
| Tax liabilities | 58 | 81 | (23) | (28.4%) |
| Other liability items | 1,876 | 1,572 | 304 | 19.3% |
| Total liabilities | 84,174 | 80,076 | 4,098 | 5.1% |
| Third party minority interests | 1 | 1 | - | 0.0% |
| Group equity | 6,975 | 6,721 | 254 | 3.8% |
| Consolidated equity | 6,976 | 6,722 | 254 | 3.8% |
| Total liabilities and eq | 91,150 | 86,797 | 4,353 | 5.0% |
1In order to provide a better management representation of the results, the reclassified statement of financial position figures differ from the layouts of the Financial statements envisaged by Bank of Italy Circular no. 262 of 2005, 7th update
Cooperative Banking Group
The affiliated Banks, which represent the Group’s core business through the management of banking activities in the territory
The Industrial Group, including the Parent Company and the companies that offer services to affiliated Banks in finance, credit, insurance, ICT, NPLs and asset management.
Affiliated Banks
The Affiliated Banks represent the most important part of the Cooperative Banking Group's consolidated assets and the strength of the Group's current and future development. The Affiliated Banks traditionally operate with the aim of fostering the development of communities and the local economy. The principles of mutuality, which characterise Cooperative Credit, allow the Banks to play a fundamental role in the national banking industry and be an important reference point for households and small and medium-sized enterprises (hereinafter also "SMEs").
The Group's Strategic Plan aims to develop relationships with households and SMEs by making the most of the territorial network and exploiting synergies, the expansion of the commercial offer and economies of scale resulting from belonging to a Group of national importance.
In general, the structure of Cooperative Credit Banks reflects the nature of territorial banks, characterised by high customer funding deriving from historical ties with the territory to which they belong, a prevalence of loans to counterparties represented by households and small companies and a low loan-to-deposit ratio which, from a liquidity perspective, reflects the structural soundness of the Group and the investment of excess liquidity mainly in government bonds.
Below is a summary representation of the main income statement and balance sheet aggregates of the Affiliated Banks, with a focus on the individual territorial areas in which the Group operates.
(Figures in millions of euro)
| 31/12/2021 | ||||||
|---|---|---|---|---|---|---|
| Loans to customers | Trentino-Alto Adige | North East | North West | Central | South and the Islands | Total |
| Gross customer loans | 10,784 | 10,401 | 10,377 | 10,667 | 4,776 | 47,005 |
| - of which performing | 10,033 | 9.,70 | 9,822 | 10,046 | 4.,40 | 44,212 |
| - of which performing | 751 | 531 | 555 | 621 | 335 | 2,793 |
| Value adjustments | 691 | 550 | 507 | 544 | 270 | 2,562 |
| Net customer loans | 10,093 | 9,851 | 9,870 | 10,123 | 4,506 | 44,442 |
The total gross loans of the Affiliated Banks amounted, as at 31 December 2021, to EUR 47.0 billion, up compared to the end of 2020 of 5.1%. The trend in loans to customers confirms the evolutionary trend underway since the establishment of the Cassa Centrale Group. The annual growth highlights the high commercial dynamism of the Affiliated Banks and reflects, at least in part, the extraordinary government and local measures to support credit.
The regional analysis of the credit disbursed confirms that the operations of the Affiliated Banks are mainly concentrated in the northern part of Italy, in line with the territorial structure of the branches of the Cassa Centrale Group. Looking in detail at the various geographical areas into which the Group is divided, the allocation is homogeneous in four of the five areas, with the exception of the South and Islands areas which, has a lower incidence on total loans due to the smaller average size of each Affiliated Bank operating in that area.
In 2021 the growth in performing loans of the Affiliated Banks totalled EUR 2.7 billion (+6.6% year-on-year), with marked growth in all territorial areas according to a range that varies from +4.5% for the Trentino-Alto Adige area to +8.0% for the Central area.
At the counterparty level, the significant exposure of the overall credit disbursed to households and local small and medium-sized enterprises is confirmed, demonstrating the central role of the Affiliated Banks in supporting the growth of the territory and the support to an economic context strongly affected by the effects of the Covid-19 health emergency.
In line with the Cassa Centrale Group's strategy, the active management of impaired loans continued in 2021, leading to a further reduction in total non-performing loans (-13.7%) with a special focus on the management of non-performing loans. Overall, the ratio of impaired loans to gross loans to customers stood at 5.9%, reflecting a regional trend that varied from 5.1% in the North-East to 7.0% in the South and Islands.
Confirming a strategy of the Cassa Centrale Group that is particularly attentive to credit risk management, and in the presence of a decrease in the total stock of impaired loans, provisions on non-performing loans of the Affiliated Banks stood at 73%, a sharp increase compared to 64% at the end of 2020. The average coverage levels of the Affiliated Banks remain among the highest in the national banking system.
(Figures in millions of euro)
| 31/12/2021 | ||||||
|---|---|---|---|---|---|---|
|
Funding |
Trentino-Alto Adige | North East | North West | Central | South and the Islands | Total |
| Overall funding | 23,034 | 19,908 | 22,115 | 19,209 | 7,976 | 92,242 |
| Direct funding | 15,305 | 13,558 | 14,635 | 13,286 | 7,040 | 63,824 |
| Indirect funding* | 7,729 | 6,350 | 7,481 | 5,923 | 936 | 28,418 |
| - of which administrated | 1,768 | 1,402 | 2,508 | 1,482 | 434 | 7,595 |
| - of which managed | 5,962 | 4,947 | 4,972 | 4,440 | 502 | 20,823 |
* Indirect funding is expressed at market values.
The total funding of the Affiliated Banks amounted to EUR 92.2 billion (EUR +8.3 billion year-on-year), confirming the high ability of the Affiliated Banks attracting new depositors and converting direct funding into indirect funding.
Direct funding amounted to 63.8 billion, up by 4.6 billion compared to the end of 2020 (+7.8%), a figure that reflects at least in part the growing share of savings held by households due to the economic uncertainty linked to the ongoing health emergency.
The distribution of direct funding among regional areas proportionally respects the trend described above for credit volumes and shows, during 2021, greater growth in the North East, North West and Central areas, with an increase of over 8%.
The different regional areas show a structural surplus of resources in the ratio of lending to funding, which results in a high degree of liquidity for the Affiliated Banks and for the Cassa Centrale Group. The prudent approach to the investment of resources raised by depositors historically characterises the operations of the BCC-CR-RAIKAs.
Total indirect funding of the Affiliated Banks amounted to EUR 28.4 billion , up by EUR 3.7 billion compared to December 2020. Indirect funding as a percentage of total funding amounted to 31%, up from 29% at the end of 2020, demonstrating the ability to shift funding to the indirect component in accordance with the guidelines of the Cassa Centrale Group, even in a context of strong prudence on the part of depositing customers. The regional analysis shows that indirect funding as a percentage of total funding exceed 30% in all areas, except for the South and Islands, where the ratio is 12%.
An analysis of the composition of indirect funding confirms the growth, in absolute and relative terms, of the managed and insurance component, which rises to 73% of total indirect funding, compared to 68% at the end of 2020.
The trend in indirect funding of the Affiliated Banks in 2021 reported a strong growth in both the Bancassurance segment (+16% year-on-year) and the Asset Management and Funds segment (+29%), against a decrease in assets under management, which stood at EUR 7.6 billion (-4.2%).
The strong boost in managed indirect funding, which has been in progress since the establishment of the Cassa Centrale Group, is part of the significant growth margins available to the Affiliated Banks compared to the rest of the banking industry, having historically favoured the placement of direct funding products. Growth has been driven and accompanied by important investments in the specialist training of staff of the Affiliated Banks in order to increase their ability to offer Shareholders and customers a high level of advisory support. These investments, supported by the careful research of the Industrial Group’s companies for products suitable for BCC-CR-RAIKAs' Shareholders and customers, is gradually closing the gap with the system, while maintaining a high level of attention to the quality of the overall service offered to the savings customer.
(Figures in millions of euro)
| 31/12/2021 | ||||||
|---|---|---|---|---|---|---|
| Margins and commissions | Trentino-Alto Adige | North East | North West | Central | South and the Islands | Total |
| Interest margin | 320 | 279 | 258 | 303 | 170 | 1,331 |
| Net commissions | 123 | 137 | 147 | 140 | 60 | 608 |
| Net interest and other banking income | 495 | 458 | 451 | 487 | 258 | 2,149 |
The economic contribution from the interest margin for the affiliated banks totalled EUR 1,331 million, or 62% of net interest and other banking income. Growth compared to 2020 amounted to +11.6%, reflecting, on the one hand, the resilience of credit intermediation, despite a generalised contraction in the average return of the loan portfolio, and, on the other hand, the growing benefit deriving from ECB refinancing operations and the return on the own securities portfolio with the greater contribution of inflation-linked securities.
Therefore, the contribution of the interest margin to overall profitability is high, in line with the predominantly traditional banking operations that characterise the Affiliated Banks and the Group as a whole. The main source of income remains the traditional activity of collection of savings and lending in the territories where the Affiliated Banks are located.
The net commissions of the Affiliated Banks totalled EUR 608 million, up 9.2% compared to 2020, the latter being strongly affected by the Covid-19 health emergency.
The commission margin of the Affiliated Banks shows an average contribution to the net interest and other banking income of around 28%, with a regional impact that goes from 33% in the North West to 23% in the South and Islands, in line with the lower volumes of indirect funding placed by BCC-CR-RAIKA operating in this regional area.
The trend of the net interest and other banking income of the Affiliated Banks (+1.9%) is completed by the contribution from trading in the Affiliated Banks' own securities portfolio, down compared to 2020.
An analysis of Affiliated Banks' primary revenues shows that their ability to offer Shareholders and customers services capable of completing the commercial offer and increasing margins, is becoming increasingly decisive. This development is carried out with a strong focus on the protection of Shareholders and customers in compliance with the cooperative principles that are the basis of the operations of the Affiliated Banks.
1 Indirect funding is expressed at market values.
Industrial Group
The Industrial Group is represented by the Parent Company and the subsidiaries and associates that operate in different areas of activity, namely:
- ICT and back office services, with the subsidiary Allitude S.p.A. (hereinafter also "Allitude");
- leasing services, with the subsidiary Claris Leasing S.p.A. (hereinafter also "Claris Leasing" or "Claris");
- insurance services, with the subsidiaries Assicura Agenzia S.r.l. and Assicura Broker S.r.l. (hereinafter also “Assicura Agenzia” and “Assicura Broker”);
- collective asset management services, with the subsidiary Nord Est Asset Management S.A. (hereinafter also "NEAM");
- consumer credit services, with the subsidiary Prestipay S.p.A. (hereinafter also referred to as "Prestipay");
- other ancillary services, with the subsidiaries Centrale Credit Solutions S.r.l., Centrale Soluzioni Immobiliari S.r.l., Centrale Casa S.r.l., Claris Rent S.p.A. and Centrale Trading S.r.l.
The main income statement and balance sheet aggregates of the Industrial Group as at 31 December 2021 are shown below.
(Figures in millions of euro)
|
Loans to customers* |
31/12/2021 | 31/12/2020 | Change | % change |
|---|---|---|---|---|
| Gross customer loans | 1,805 | 1,479 | 326 | 22.0% |
| - of which performing | 1,715 | 1,378 | 337 | 24.5% |
| - of which non-performing | 82 | 101 | (19) | (18.6%) |
| Value adjustments | 122 | 98 | 24 | 24,7% |
| Net customer loans | 1,675 | 1,381 | 294 | 21.3% |
* Management data including all intra-group eliminations.
With reference to loans to customers, the Industrial Group's contribution mainly reflects the lending activities of the Parent Company and its subsidiaries Claris Leasing and Prestipay.
Gross loans to customers totalled EUR 1.8 billion, up EUR 326 million year-on-year (+22%). The growth reflects the expansion of the Parent Company's loan portfolio, the consolidation of Claris Leasing's loan portfolio and the start of consumer credit operations by the newly formed Prestipay. Performing loans to customers include exposures in margins and default funds to Cassa di Compensazione e Garanzia related to repos, which remain stable at EUR 105 million at the end of 2021.
Non-performing loans amounted to EUR 82 million with an annual decrease of EUR 19 million (-18.6%), thanks to the active management of the impaired portfolio in line with the guidelines of the Cassa Centrale Group.
Total gross allocations amounted to EUR 122 million, up from EUR 98 million at the end of 2020. The increase, in accordance with a policy of sound and careful management, reflects the prudent hedging of positions under moratorium and exposures in the company portfolio.
As a whole, net loans to customers of the Industrial Group grew by EUR 294 million year-on-year (+21%), reaching EUR 1.7 billion.
(Figures in millions of euro)
|
Funding* |
31/12/2021 | 31/12/2020 | Change | %change |
|---|---|---|---|---|
| Overall funding | 8,098 | 7,806 | 292 | 3.7% |
| Direct funding | 1,299 | 1,223 | 76 | 6.2% |
| Indirect funding** | 6,799 | 6,583 | 216 | 3.3% |
| - of which administrated | 4,223 | 4,165 | 58 | 1.4% |
| - of which managed | 2,576 | 2,418 | 158 | 6.5% |
* Management data including all intra-group eliminations.
** Indirect funding are expressed at market values; ETF financial products are included in the segment.
Total funding of the Industrial Group amounted to 8.1 billion, up by EUR 292 million compared to the end of 2020, with the change mainly attributable to the Parent Company's operations.
Direct funding increased by EUR 76 million year-on-year to EUR 1.3 billion. This growth reflects the increase in liquidity deposited on the current accounts of the asset management, which was only partially offset by lower exposures to Cassa di Compensazione e Garanzia.
Indirect funding totalled EUR 6.8 billion, with a contribution of EUR 2.6 billion, or 38%, from assets under management and transactions mainly related to asset management products. Funding under administration amounted to EUR 4.2 billion, or 62% of indirect funding, with operations mainly focused on the bond market.
(Figures in millions of euro)
|
MARGINS AND COMMISSIONS* |
31/12/2021 | 31/12/2020 | Change | %change |
|---|---|---|---|---|
|
Interest margin |
55 | 51 | 4 | 7.3% |
| Net commissions | 110 | 99 | 11 | 10.1% |
| Net interest and other banking income | 185 | 154 | 31 | 20.1% |
* Management data including all intra-group eliminations and the residual economic results of fully consolidated entities other than the cohesion agreement.
The breakdown of revenues highlights the mainly service-oriented nature of the Industrial Group. Net commissions totalled 110 million, while the Interest margin amounted to 55 million, representing 59% and 30%, respectively, of net interest and other banking income.
Compared to the previous year, there was an increase in Interest margin of approximately EUR 4 million, and of Net commission income of approximately EUR 11 million; the growth of the latter is mainly attributable to the scope of consolidation of the Parent Company and of the subsidiary NEAM, which, compared to the previous year, saw an increase in commissions from assets under management. With regard to Cassa Centrale Banca, the commissions related to the payment systems also outperformed 2020, although the latter was partially affected by restrictions related to the Covid-19 health emergency.
Overall, net interest and other banking income increased by 20% due to the trading of the Parent Company's own securities portfolio, which generated significant profits in 2021.
1 The indirect funding represented refers to the component placed by Cassa Centrale Banca directly with customers and does not include the component placed through Banks.
During 2020, the Italian government passed important legislative measures to mitigate the effects of the Covid-19 pandemic on the economy. As a result, the Cassa Centrale Group has promptly taken all actions to favour the concession to its customers of the benefits provided by these measures in addition to adhering to specific conventions or agreements including the Addendum to the 2019 Credit Agreement promoted by the Italian Banking Association (Associazione Bancaria Italiana - ABI).
The economic support measures and arrangements based on moratoria and new loans guaranteed by the state were initially designed for a limited duration until 2020, namely 30 September 2020.
If during the summer of 2020, also thanks to the expectations on the imminent launch of vaccination plans at national and European level, the health emergency seemed to be heading towards a progressive mitigation, during the autumn of 2020 there was a resurgence of infections with a consequent new worsening of data on both hospital admissions and the percentage of deaths. From the economic point of view, this flare-up of the pandemic did not lead to periods of complete interruption of economic activities but to geographically variable slowdowns with restrictive measures applied in a diversified and alternating manner on a regional basis.
In consequence of these developments, the measures for suspending payments contained in the main legislative intervention to support economic activities (Law Decree no. 18 of 17 March 2020, converted into Law no. 27 of 24 April 2020) were extended for the first time until 31 January 2021 by Law Decree no. 104 of 14 August 2020, converted into Law no. 126 of 13 October 2020, and then until 30 June 2021 by the 2021 Budget Law (Law no. 178 of 30 December 2020). Finally, with Law Decree no. 73 of 25 May 2021, the suspension of mortgage payments, albeit limited to the principal amount only, was further extended until 31 December 2021. In this further round of renewal of facilities, given the partial recovery of the economy due to the good results of the vaccination campaign, the Group recorded requests for renewal of moratoria for a minority of previously suspended mortgages.
The measures aimed at ensuring new liquidity to businesses through access to Government-guaranteed financing (Law Decree no. 23 of 8 April 2020, converted into Law no. 40 of 5 June 2020), after an initial period of validity limited to 2020, have also been extended until 31 December 2021 for the same reasons.
The data relating to the moratoria linked to Covid (EBA compliant and non) and the loans covered by the State guarantee extended until 31 December 2021 are shown below1.
|
MORATORIA GRANTED AS AT 31/12/2021 |
Number of loans* |
Amount** |
Performing** (Figures in millions of euro) |
Impaired** (Figures in millions of euro) |
% impaired amount |
|---|---|---|---|---|---|
| Total moratoria granted | 125,476 | 13,314 | 12,527 | 786 | 6% |
|
By source of reference: |
|||||
|
EBA compliant moratoria |
83,872 | 9,814 | 9,438 | 377 | 4% |
|
Other Covid-related moratoria |
35,833 | 2,904 | 2,817 | 87 | 3% |
| Moratoria subject to forbearance measures | 5,771 | 596 | 273 | 323 | 54% |
|
By status of moratoria: |
|||||
|
Outstanding (repayment schedule suspended) |
4,091 | 620 | 577 | 42 | - |
|
of which: Households |
1,406 | 114 | 103 | 10 | - |
|
of which: Non-financial companies |
2,619 | 499 | 467 | 32 | - |
|
Past due (repayment schedule reactivated) |
121,385 | 12,694 | 11,950 | 744 | - |
| of which: Households | 52,894 | 4,346 | 4,095 | 251 | - |
| of which: Non-financial companies | 59,323 | 8,223 | 7,732 | 491 | - |
* The figure refers to individual positions.
**Gross amount.
The data shown in the first section of the table above refer to all the requests for suspension of the payment of the mortgage instalments, submitted and accepted from the beginning of the health emergency until 31 December 2021.
Moratoria that were first granted as EBA Compliant and that are extended upon expiry are no longer classifiable as EBA Compliant and are classified as "Other Covid-related moratoria"; and as such continue to be classified even after the reactivation of the repayment schedule (i.e. upon expiry of the extension/moratoria). As shown in the table, as at 31 December 2021, "Other Covid-related moratoria" have been granted on a total of 35,833 transactions with a value of EUR 2.9 billion, of which EUR 2.4 billion already have a repayment schedule reactivated.
In general, as at 31 December 2021, the majority of the moratorium relationships concluded the period of use of the benefit, with the consequent restart of the ordinary amortisation plans.
Therefore, the consolidated figure can be considered a very comforting signal that eases fears of a possible cliff effect and confirms a positive connection between the improvement in the health situation and a return to normal compliance with loan repayment obligations without the end of the facilities being reflected in a general deterioration in credit quality.
|
LOANS GRANTED WITH A STATE GUARANTEE AS AT |
Number of loans* |
Amount** |
|---|---|---|
|
Total loans granted |
71,326 | 5,395 |
|
By type of customer |
||
|
of which: Households |
30,939 | 789 |
|
of which: Non-financial companies |
40,145 | 4,596 |
|
By residual duration: |
||
| Less than/equal to 12 months | 268 | 26 |
| More than 12 months | 71,058 | 5,369 |
The possibility of obtaining loans with public guarantees through a simplified selection procedure (the guarantee, in fact, is issued without any prior selection based on the MCC rating of the applicant) continues by virtue of the exception to the normal restrictions on State aid introduced by the Temporary Framework, the validity of which was extended until 30 June 2022. Thus, the growth of loans granted on the basis of Law Decree no. 23/2020 continues, albeit following a much flatter curve than in 2020. The new requests are less and less due to the actual difficulties of companies, which at this stage are resorting to guaranteed finance to reschedule their debts in the medium/long term and not to make up for urgent liquidity shortages.
1 Data source: EBA - COVID19 reporting as at 31 December 2021 on legislative and non-legislative moratoria on loans.
2021 saw the prolonged effects of the current health emergency, which generated significant impacts in terms of health on the social, economic and financial fabric of large areas of the world.
The measures issued by the European Authorities together with the government interventions (in particular the Decrees “Cura Italia”, “Liquidità” and “Rilancio”) are helping to contain the recessionary effects, and the massive vaccination campaign makes it possible to look forward to 2022 with greater positivity. Nonetheless, the entire banking sector will have to continue to assess the evolution of the situation with great care, all the more so in an environment conditioned by the increase in the costs of raw materials and energy.
2021 saw the prolonged effects of the current health emergency, which generated significant impacts in terms of health on the social, economic and financial fabric of large areas of the world.
The measures issued by the European Authorities together with the government interventions (in particular the Decrees “Cura Italia”, “Liquidità” and “Rilancio”) are helping to contain the recessionary effects, and the massive vaccination campaign makes it possible to look forward to 2022 with greater positivity. Nonetheless, the entire banking sector will have to continue to assess the evolution of the situation with great care, all the more so in an environment conditioned by the increase in the costs of raw materials and energy.
A strong focus on the reduction of impaired loans must be maintained, aiming at a continuous improvement in asset quality. The effects of the pandemic on the various sectors of the economy are not yet fully appreciated, so the focus on credit risk management will have to remain high.
The stable financial markets in 2021 allowed for growth in household financial investments so that cash investments in asset management instruments continued to support revenues. The climate of persisting uncertainty certainly influenced this trend.
One of the new developments on the macroeconomic front in the second half of 2021 is the issue of inflation. After a prolonged period of virtually no price pressure, prices have been rising rapidly in recent months. The trend initially seemed temporary and related to the price of raw materials and energy. In recent months, the phenomenon has proved to be more structural, and this could lead to a revision of market interest rate expectations in the coming months.
Therefore, bank lending and borrowing rates could undertake an upward normalisation phase after many years of ultra-expansionary policies by all major central banks. The timing and intensity of this normalisation is still uncertain.
A lower contribution to profitability could come from payment and liquidity management services, also as a result of increased competitive pressure from non-banking operators and the digital transformation process. Within a context of weakness in traditional banking activity, improving operating efficiency, cost reduction and new business strategies are confirmed as the main levers for the recovery of profitability in the sector.
In the current economic and social context, the Group continues to focus its attention on the one hand on strongly supporting the economic fabric of the reference territories, which are facing a crisis never experienced in the past, and on the other on overseeing the overall risk profile.
Activities related to the Group's organisational and operational structure continue, also considering that the new operating context will require further investments in technology and human capital.
With regard to the ongoing military crisis in Ukraine, Cassa Centrale Banca acted promptly in order to intercept the possible impacts of the conflict and measure its effects on the Group, also with respect to the most exposed customers.
In this context, despite the considerable uncertainties of this phase, the reference macroeconomic scenarios are of particular relevance: their continuously evolving updates show a significant increase in energy and raw material procurement costs, which may be mitigated by possible government support measures currently under discussion.
The very duration of the conflict is now an unpredictable variable, but at the same time fundamental in determining the repercussions on the Italian and world economies. Consequently, a clearer quantification of the impacts will only be possible in 2022.
On the other hand, with regard to the Cassa Centrale Group's direct exposures to Russia and to entities residing in Russia, note that the amounts were immaterial as at 31 December 2021.
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