Growth Drivers

Over the past year, the global recovery has become increasingly widespread, despite progressing at variable speeds across countries and regions. Several emerging economies are now reaping the benefits of having entered the financial crisis with sounder balance sheets, both in the public and in the private sector.

In many advanced economies, the large amount of public debt that has been accumulated during the recent recession, has increased the need for fiscal consolidation and financial sector repair. As several eurozone economies have presented plans to reduce the size of their budget deficits, this is helping bring back their public finances on a sustainable path. In turn, this should allow to regain markets’ confidence.

In Italy, GDP growth outperformed most eurozone peers in the first quarter, mainly thanks to stronger exports and firm investment activity. Chances of a double-dip recession seems quite limited, as in the rest of the eurozone, while for the coming quarters the outlook remains one of moderate growth

In Germany, the strong export-driven recovery in industry remains on course, while also domestic demand is showing signs of stabilization. Growth momentum will slow in the second part of the year, but economic activity will keep expanding also next year.

In the CEE region, following a tough 2009, the situation in 2010 has improved steadily. The Eastern European recovery began materializing already during the summer of 2009, when exports and industrial production cycles began to swing upward again. In 2010, rating agencies are reversing their assessments, in turn leading to a revision in the ratings of a number of countries (Russia, Turkey, Ukraine, Estonia, Latvia, and Lithuania); most of the local currencies appreciated and country risk has declined accordingly.

The spillovers from the Greek sovereign crisis have been rather limited, while CEE will benefit from the resilience of core Europe (as trade links with Germany are very strong). At a country level, Poland, the Czech Republic, Russia, Slovakia and Turkey show the best recovery prospects for the coming quarters, while the Baltic States, Hungary and South Eastern Europe (the latter suffering the effects of the austerity plans) face more challenges going ahead.

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.