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UniCredit Group: Consolidated Results for the First Nine Months of 2010: Net Profit €1,165 Million

15.11.2010

CONSOLIDATED RESULTS FOR THE FIRST NINE MONTHS OF 2010: NET PROFIT OF €1,165 MILLION (-12.5% YOY), PROFIT BEFORE TAX RISES TO €2,713 MILLION (+1.2% YOY), EXCLUDING GOODWILL IMPAIRMENT IN THE SECOND QUARTER OF €162 MILLION.

GOOD TREND YOY IN NET COMMISSIONS, OPERATING COSTS AND LOAN LOSS PROVISIONS. NET INTEREST STABLE DESPITE PERSISTANTLY UNFAVOURABLE INTEREST RATE ENVIRONMENT.

SOLID STRUCTURE OF THE BALANCE SHEET AND THE REGULATORY CAPITAL CONFIRMED (CORE TIER 1 AT 8.61%, +20 BP QOQ).

FIRST NINE MONTHS OF 2010:

  • Group’s portion of net profit reaches €1,003 million, €1,165 million net of goodwill impairment in 2Q10 of €162 million, a slight drop YoY (-€166 million YoY) despite a higher tax rate
  • Profit before tax, which is not impacted by the higher taxes, rises, net of goodwill impairment, by 1.2% YoY to €2,713 million
  • Operating income at €19,793 million, -7.9% YoY on a constant currency and perimeter basis, with trading income down by 39.5%
  • Good trend in operating costs (+0.7% YoY on a constant currency and perimeter basis) and loan loss provisions (-18.6% YoY on a constant currency and perimeter basis)
  • Noticeable strengthening of the balance sheet and the regulatory capital: Core Tier 1 at 8.61% and Tier 1 at 9.67%

THIRD QUARTER 2010:

  • Group’s portion of net profit reaches €334 million, an increase QoQ (2Q10: €148 million, €310 million net of goodwill impairment)
  • Operating income at €6,494 million, in line with the €6,493 million recorded in 2Q10, with trading income offsetting the seasonality of other revenue items
  • Operating costs total €3,911 million, down 0.7% QoQ
  • Loan loss provisions decline further to €1,634 million, with the cost of risk dropping with respect to the 122 bp reported in 2Q10 to 117 bp
  • The solid structure of the balance sheet, the high level of liquidity (the internal liquidity ratio reaches 0.99) and the capacity to generate capital confirmed in the quarter (Core Tier 1 +20 bp QoQ)

The Board of Directors of UniCredit approved the consolidated results for the first nine months of 2010 which show the Group’s portion of net profit at€1,003 million (€1,165 million net of goodwill impairment posted by the Kazakhstan subsidiary in second quarter 2010), €334 of which in the third quarter. The Group’s quarterly results stand out for the stability of the operating income (unchanged QoQ), cost control (-0.7% QoQ) and the drop in loan loss provisions (-4.8% QoQ).

Operating income reaches €19,793 million in the first nine months of 2010, a drop of 7.9% YoY on a constant currency and perimeter basis), and €6,494 million in third quarter 2010, in line with the €6,493 million recorded in the prior quarter. The evolution QoQ reflects the recovery in net trading, hedging and fair value income, which offsets the seasonality of net commissions and dividends, as well as a slight drop in net interest income.

Net interest amounts to €11,814 million in the first nine months of 2010 (-12.1% YoY on a constant currency and perimeter basis), reflecting an unquestionably less favourable interest rate environment. In the third quarter net interest reaches €3,919 million, down with respect to the €3,977 million recorded in the second quarter, attributable above all to a lower contribution from trading related interests and a greater cost of funding due to the issue of subordinated notes in the third quarter.

Net commissions amount to €6,417 million in the first nine months of 2010, a noticeable increase (+11.2% on a constant currency and perimeter basis) with respect to the €5,666 million reported in the same period of the prior year, confirming the good recovery of the asset management activities, as well as the satisfactory performance of the other commission items. Net commissions in third quarter 2010 amount to €2,038 million, a decrease with respect to the €2,209 million recorded in the prior quarter explained, above all, by the seasonal slowdown in commissions from investment management services which, typically, decline in the summer months. At September 30th 2010, the volume of the assets managed by the Group’s Asset Management Division amounts to €185.0 billion.

Net trading, hedging and fair value income totals €999 million in the first nine months of 2010, down sharply with respect to the €1,651 million recorded in the same period of 2009.This performance is attributable primarily to the deterioration of the financial markets following the government debt crisis in second quarter 2010. The quarterly trend, in fact, shows clear improvement: at the close of third quarter 2010 the Group’s net trading, hedging and fair value income climbs to €381 million (from €58 million in second quarter 2010).

Other net income in the first nine months of 2010 comes in at €299 million (€86 million of which in the third quarter), in line with the €304 million recorded in the first nine months of 2009.

Operating costs amount to €11,728 million in the first nine months of 2010, an increase of 0.7% YoY on a constant currency and perimeter basis. The operating costs in third quarter 2010 amount to €3,911 million, -0.7% QoQ (-1.7% QoQ net of a €38 million non-recurring charge recognized in third quarter 2010).

Payroll costs in the first nine months of 2010 rise 1.9% YoY on a like-for-like basis, due above all to the release of provisions for variable compensation in 2009, coming in at €7,009 million. Payroll costs in third quarter 2010 rise 1.1% QoQ, due primarily to the non-recurring item of €38 million, net of which and on a constant currency and perimeter basis, payroll costs show a drop of 0.6% QoQ.

Other administrative expenses, net of recovery of expenses, reach €3,752 million in the first nine months of 2010, a slight drop with respect to the €3,769 million recorded in the same period in of 2009. In third quarter 2010 the figure reaches €1,219 million, -5.7% QoQ due also to the seasonality that typically affects advertising costs.

Amortization, depreciation and impairment losses on intangible and tangible assets in the first nine months of 2010 amounts to €966 million, compared with €931 million in the same period of 2009. The figure reaches €336 million in third quarter 2010, an increase with respect to the €314 million recorded in the prior quarter.

The cost/income ratio reaches 59.3% in the first nine months of 2010 (60.2% in the third quarter, down with respect to the 60.7% reported in the second quarter), an increase with respect to the first nine months of 2009 (54.5%).

Operating profit in the first nine months of 2010 amounts to €8,065 million, €2,583 million of which in the third quarter, an increase of 1.1% with respect to the prior quarter.

In the first nine months of 2010 the Group recognized goodwill impairment of €162 million, wholly ascribable to Kazakhstan and posted in second quarter 2010. The reassessment conducted in September 2010 confirmed that, as a whole, the goodwill recognised for the different business units was sustainable.

The provisions for risks and charges decrease by 22.2% YoY reaching €293 million in the first nine months of 2010,€32 million of which accrued in the third quarter (down with respect to the €106 million recorded in the prior quarter).

Loan loss provisions and provisions for guarantees and commitments in the first nine months of 2010 amount to €5,141 million (a decline from more than €6 billion in the same period in 2009), equal to a cost of risk of 122 bp annualized. In third quarter 2010 the figure continues its decline from the peak recorded in second quarter 2009, coming in at €1,634 million (from €1,716 million in second quarter 2010), equal to a cost of risk of 117bp annualized.

Gross impaired loans at the end of September 2010 amount to €65.2 billion, with the growth QoQ slowing to +2.3%. Gross NPLs rise 2.2% QoQ, while the other problem loan categories rise by 2.5% QoQ.

The coverage ratio of total gross impaired loans at September 2010 is unchanged with respect to June 2010 and comes in at 45.2%, which reflects a 60.0% coverage of the NPLs and a 24.8% coverage of the other problems loans.

Integration costs amount to €27 million in the first nine months of 2010 (€16 million of which incurred in the third quarter), down with respect to the €321 million recorded in the first nine months of 2009 (which included charges related to staff reductions).

Net income from investments totals €110 million in the first nine months of 2010, an increase with respect to the €15 million reported in the same period of the prior year. Net income from investments in third quarter 2010 amounts to €2 million versus €39 million in second quarter 2010.

Income tax amounts to €1,135 million in the first nine months of 2010, an increase with respect to the €885 million recorded in the same period of the prior year. The tax rate is noticeably higher, rising 8.8 percentage points YoY to 41.8% net of goodwill impairment. The tax rate in third quarter 2010 (at 43.2%) is also relatively high compared to the past, with income tax in the period reaching €390 million.

Minorities total €241 million in the first nine months of 2010 compared with €269 million in the same period 2009. In third quarter 2010 minorities total €122 million, an increase of €66 million with respect to the prior quarter.

The impact of the Purchase Price Allocation in the first nine months of 2010 comes in at -€173 million, compared to -€195 million in the first nine months of 2009; the third quarter, at -€57 million, is in line with the second quarter.

The Group’s portion of net profit in the first nine months of 2010 amounts to €1,003 million compared with €1,331 million in the same period of the prior year (-€328 million YoY), which had benefited from a greater contribution of trading income to revenues and which was not impacted by the non-recurring charge of €162 million related to goodwill impairment posted by the Kazakhstan subsidiary in second quarter 2010. The third quarter comes in at €334 million, an increase of €186 million with respect to the second quarter (€24 million net of goodwill impairment).

In third quarter 2010 the Group’s customer loans reach €559 billion, unchanged with respect to June 2010, with a drop in CIB, growth in the Corporate Centre and in CEE, net of the currency effect. Direct funding at September 2010 comes in at €589 billion (versus €577 billion at June 2010), with a solid dynamic in all the main components. The loan-direct funding ratio at September 2010 comes in at 94.9%, testimony to the balanced funding structure. Net interbank funding at September 2010 amounts to €28 billion, down with respect to the €35 billion recorded at June 2010.

The trading assets amount to €157 billion at September 2010, rising QoQ with respect to the €152 billion recorded at June 2010 due to an increase in derivatives (+€10.6 billion QoQ due to changes in fair value in more volatile markets), while trading assets net of derivatives show a further decline (dropping -€5.7 billion QoQ to €50 billion at the end of September 2010).

Total assets at September 2010 amount to €969 billion, up 1.5% QoQ (almost entirely attributable to derivatives), with a balance sheet structure that maintained its high quality even in a difficult funding environment. The Group’s leverage ratio at September 2010 reaches 22.3, unchanged QoQ despite the increase in the derivatives’ fair value.

The Core Tier 1 ratio at the end of September 2010 reaches 8.61%, an increase QoQ of 20 basis points, due to both the positive contribution of net profit for the period (net of dividend accruals, in line with 2009) and a drop in risk weighted assets. In third quarter 2010 the risk weighted assets fall 1.2% QoQ to €453.5 billion, attributable to a drop in both assets weighted for market risk (falling -€2.8 billion QoQ to €9.3 billion) and in assets weighted for credit risk (falling -€2.8 billion to €403.2 billion). The Tier 1 ratio is 9.67% and the Total Capital Ratio is 12.97%.

At the end of September 2010 the Group’s structure consists of a staff of 161,169, a decrease of 5,252 relative to September 2009 and of 689 relative to June 2010. The reduction in third quarter 2010 is attributable to different areas, with the largest drop coming from the Retail division (-550 QoQ).

The Group’s network at the end of September 2010 consists of 9,585 branches (9,892 at September 2009 and 9,578 at June 2010).

Furthermore, the Board of Director of UniCredit has appointed Federico Ghizzoni as General Manager of UniCredit Spa, on top of his position as CEO of the Group.

 


 

Deposits and securities

Calculated as the ratio of total assets net of goodwill and other intangible assets (the numerator) and net equity (including minorities) net of goodwill and other intangible assets (the denominator).

“Full time equivalent “. In the figures reported the companies consolidated proportionately, including the KFS Group, are included at 100%.

NOTE

Ukrsotsbank is one of the largest universal banks of Ukraine, operating in the local market since 1990. The bank offers full range of services to individuals and corporate clients.

The renovated Ukrsotsbank emerged on 31 October 2016 as a result of strategic deal whereby 99.9% of Ukrsotsbank shares have been transferred from UniCredit Group to ABH Holdings S.A. (АВНН) in exchange for a minority 9.9% stake in ABHH. Thus, the bank has combined 26-year-old traditions of Ukrsotsbank’s client-centric attitude, European quality of service inherent to UniCredit, as well as international banking expertise of ABHH in a number of European countries including CIS. Thanks to the successful synthesis and synergy of the two assets of ABHH in Ukraine, Ukrsotsbank and Alfa-Bank, the banking market of Ukraine will see the rise of a new stronger financial institution. This, in turn, will spur up technological advance, increase efficiency, improve quality of service for the clients, reduce cost of banking services whereas their range will inevitably expand.

The extensive retail network of Ukrsotsbank consists of 237 branches, its headcount reaching nearly 5 thousand employees.


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