After having been on the verge of a full-blown collapse, the global economy seems to have turned the corner, and there are increasing signs that the worst is now behind us. In the industrial sector, while the destocking process has gone a long way, confidence is improving and activity is showing the first signs of stabilization. A faster recovery in China and other Asian markets is helping revive European exports.
Quite encouragingly, confidence has also improved in the financial sector, following the powerful action by all major central banks. This has led to a progressive return of risk appetite, driving a sustained rebound in global equity markets and a progressive tightening of yield spreads in the corporate sector.
In Italy, the pace of recession eased significantly in the second quarter, and most forward looking indicators signal that the improvement in growth momentum will likely carry over into coming quarters as well.
In Germany, recent activity data have surprised on the upside, as the manufacturing sector begins to benefit from stronger external demand.
In the CEE region, following a tough 1H09, we see 3Q09 proving relatively benign: the sharpest period of rebalancing is behind us, ECB policy is set to remain accommodative and regional financial stability risks will only likely crystallize in the medium term (e.g. 2010). This should prove relatively FX and sovereign credit friendly in the near term.
Moreover, over the last months a faster-than-expected improvement in regional balance of payments occurred, allowing many countries to record a “basic balance” surplus, providing scope to reduce net external debt levels. At a country level, Russia, the Czech Republic, Poland and Turkey have better recovery prospects and Baltic States and Hungary more challenging prospects.
In this environment, UniCredit Group is set to exploit its business and geographical diversification. In fact, a more balanced trends of markets (and of different geographical areas) should support the growth prospects of a diversified group.
UniCredit should exploit at best the benefits of being positioned in areas with structurally higher growth rates, as those of the Central and Eastern Europe. In many of these countries UniCredit is a leading bank and has supported its local subsidiaries even in the hardest moments. Its excellent competitive positioning allows a full exploitation of the structural growth of these areas.
In addition, the continuous focus on efficiency – following important acquisitions in Germany, Austria and Italy – is set to support medium long term profitability. The room for cost savings is set to be another ‘growth driver’ due to efficiency gains resulting from synergies of the largest acquisitions by the Group.
Last but not least, UniCredit has increased its focus on its customer base also in Corporate and Investment Banking (CIB) and this should support a growing profitability in this area, set to exploit at best the links between the previous Corporate business with Market and Investment Banking business.
