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UniCredit, 2005 first - half profit of € 1,301 million (+24%)

Approval of consolidated 1st-half report as at June 30th 2005 based on Italian GAAP and of reconciliations with IAS/IFRS required by Article 81/2 of Italian issuers' regulation

  • Net profit of € 1,301 million, with growth of 24% over first half of 2004
  • Excellent operating results driven by total revenues growing by +7.7% over the first half of 2004. Specifically:
    a) Net interest income (exc. dividends) of € 2,560 million (+6.7% vs. first half of 2004, +6.2% YoY in second quarter of 2005)
    b) Net commissions of € 1,799 million (+8.8% vs. first half of 2004, +8.7% YoY in second quarter of 2005)
    c) Operating profit of € 2,556 million (+12.1% vs. first half of 2004, +11.4% YoY in second quarter of 2005)

  • Improvement of Cost/Income ratio to 54.4% (vs. 56.2% in first half of 2004)
  • Continued growth of customer loans (1) (€ 143.9 billion, +9.6% vs. first half of 2004, +6.1% vs. 2004 year-end)
  • Strong growth of assets managed by Pioneer to € 142.4 billion (+9.7% vs. 2004 year-end) with strengthening of Italian market share in funds to 14.89% (+35 bp vs. December 2004
  • Positive effects of transition to IAS on P&L results of first half of 2005 (net profit € +141 million) and on net equity (€ +677 million as at June 30t

Today the Board of Directors of UniCredito Italiano approved consolidated results for the first half of 2005 (2) (1H05) based on Italian GAAP and accompanied by the reconciliation with international accounting and financial reporting standards (IAS/IFRS) required by Article 81/2 by the Italian Issuers' Regulation.
1H05 ended for the Group with net profit of € 1,301 million (mn) with a 24% increase over the same period in the previous year (€ 1,049 mn in 1H04).
ROE thus rose to 20.1% in annualised terms vs. 17.5% in 1H04 and vs. 17.9% for the whole year. Earnings per share amounted, once again in annualised terms, to € 41 cents, as opposed to € 34 cents in FY2004.
The Group's total revenues rose to € 5,604 mn, with a 7.7% increase over 1H04 (+6.3% net of the foreign exchange (forex) effect. This result was driven by robust growth of both net interest income (€ 2,708 mn, +7.5% reported and +5.6% at constant exchange rates) and net non-interest income (€ 2,896 mn, +7.9% reported and +6.9% net of the forex effect) (3) . In the second quarter of 2005 (2Q05) both components featured significant QoQ and YoY progress, with total revenues thus growing by 6.6% vs. 1Q05 and by 6.5% vs. 2Q04.

Net interest income in 1H05, amounting to € 2,708 mn, increased by 7.5% vs. 1H04, underpinned by growth both of net interest (+6.7%) and of dividends and other income from equity investments (+22.3%). The progress of net interest - achieved despite completion of two major securitisations in the last 12 months (about € 2.5 bn at the end of September 2004 and a further € 3 bn at the beginning of May this year) - is explained by tangible volume growth in all divisions. The quarterly profile of net interest held firm versus the first quarter (+0.9%), despite incorporating an adverse impact of some € 7 mn due to mortgage securitisation, and increased by +6.2% vs. 2Q04.
Customer loans  (4) as at the end of June showed an increase of 6.4% over 2004 year-end, taking YoY growth up to 12.2%. Sterilising the effect of securitisations, the increase would have been 8.4% vs. December and 16.4% vs. June 2004.
Lending growth involved all the main products marketed by the Group. Mortgages, aided by the property market's still positive trend and by low interest rates, grew by 4.2% vs. December and by 13.5% vs. June 2004 (respectively +9.3% and +19% including securitised contracts), whilst current accounts and other lending increased by 8.7% in total in the first half and by 9.2% YoY. Lastly, loans relating to finance lease contracts grew by 8.7% vs. December but decreased vs. June 2004 due to the securitisation completed at the end of September 2004.
The market share in total lending of our Italian business units remained close to year-end levels (10.8% in June 2005). Considering the € 3-bn securitisation, market share as at June 2005 would be 11.0%. The share of the medium-/long-term segment was 10.9% (11.2% considering securitisation) compared with 11.1% at 2004 year-end.

Asset quality featured a particularly fairly positive trend. Net non-performing loans in fact amounted to € 2,690 mn, in line with March 2005 (+0.5%) and slightly up vs. 2004 year-end (+2.6%). Total net doubtful loans amounted to € 5.2 bn, with an increase of 5.7% vs. December 2004 and of 2.9% over March 2005. This increase (€ +143 mn) was almost totally ascribable to restructured loans (€ +103 mn) - influenced, in 2Q05, by the new classification rules introduced by the Bank of Italy. According to the new classification introduced by the Bank of Italy, all new lines of credit issued to parties possessing previously restructured lines must, in turn, be classified among restructured loans.
The total net doubtful loans/total loans ratio decreased from 3.49% as at 2004 year-end to 3.46%, with a coverage ratio substantially stable at around 48%.
Going into greater detail, the ratio of net non-performing loans to total loans decreased from 1.87% in December 2004 to 1.80% at the end of June 2005, with a coverage ratio of 60.6% (vs. 60.2% in December 2004).

Direct deposits reached a level of € 162.4 bn, with an increase of 3.5% in the first half.
Indirect deposits totalled € 271.8 bn, € 18.6 bn more than at the end of December (+7.3%) and with a 9.6% increase over June 2004. Within indirect deposits, there was a positive trend of both administered assets (€ 133.8 bn, +4.3% in the first half and +4.4% YoY) and managed assets (€ 138 bn, +10.5% since the beginning of the year and +15.1% in the 12-month period).

Net non-interest income amounted to € 2,896 mn (+7.9% vs. 1H04) thanks to the significant progress of net commissions and other net operating income, set against a moderate downturn in profits from financial transactions (trading). The quarterly trend of this overall item was similar, with an increase in 2Q05 both QoQ (+5%) and vs. 2Q04 (+6.8%).
Net commissions as at the end of June totalled € 1,799 mn, with an 8.8% increased vs. 1H04. This growth was driven both by wealth management and securities in custody fees - which grew by 8.5% vs. 1H04 - and by commissions for other activities (+9.3% in total), among which we note a marked increased for those for loans granted (+19.2% YoY) thanks to the results achieved by UBM in its finance arrangement business. The trend in net commissions in 2Q05 (€ 928 mn) confirmed the YoY, with progress of +6.7% in 2Q05 vs. 1Q05 and of +8.7% in 2Q05 vs. 2Q04.

Among wealth management and securities in custody fees, there was significant growth of those for securities dealing and placement (+8.1% YoY), underpinned by the activity of the Group's investment bank, and of those for managed discretionary accounts (+41% YoY) - confirming the success of the customisable lines launched in 2004. Lastly, progress was shown also by fees for investment funds (+8.4%), relating to the increase in inflows and assets, and those on insurance product sales (+7.8% YoY) after the downturn reported in 2004.

In 1H05 profits from financial transactions - following the physiological stabilisation experienced in 2004 after a 4-year period of outstanding growth - remained at just under the levels of 1H04 (-3.9%). This trend was mainly due to the decrease in the volume of derivative sales to corporate customers.

Other net operating income increased by € 90 mn (+20.3%) vs. 1H04. This increase was mainly the result of higher income on securitisations (€ +42 mn) and by the increase in recoveries of indirect taxes and duties (€ +35 mn).
Operating costs, totalling € 3,048 mn, increased by 4.3% vs. 1H04 (+2.9% at constant exchange rates). This was largely justified by a stronger increase in the case of New Europe banks - which operate in economies featuring generally higher inflation rates - and by the increase in indirect taxes and duties borne on customers' behalf and recovered in the item other net income (€ 134 mn in 1H05, +36.7% vs. 1H04). Net of this latter item, operating costs (€ 2,914 mn) were up by 3.2% YoY in 1H05 (+1.7% at constant exchange rates). The 2Q05 trend featured an even more restrained increase in costs (€ 1,474 mn, +2.4%).
Within operating costs, personnel costs (€ 1,768 mn, +4.7% YoY reported, +3.5% at constant exchange rates) increased mainly because of higher costs for the reward system and because of the impact on 1H05 of recent renewal of the Italian national collective labour contract for the banking industry. These two factors were only partly offset by the decrease in total headcount since June 30th 2004 (-1,001 employees).
Over two thirds of the increase in other administrative expenses (+€ 56 mn, +5.5% YoY) is explained by indirect taxes and duties (headed by contract stamp duty) which increased by € 39 mn (+30.7%) vs. 1H04 following increases envisaged by the latest Italian Budget Law. Net of this item, the YoY increase was 1.9% (+0.2% at constant exchange rates).

The cost/income ratio thus improved in 1H05 to 54.4% vs. 56.2% in 1H04 (and 57.3% in FY2004).

Group operating profit in the first half rose to € 2,556 mn, with a +12.1% increase over 1H04 (+10.6% at constant exchange rates). The 2Q05 results showed growth of over 11% versus both 1Q05 (+11.5%) and vs. 2Q04 (+11.4%).
Total amortisation and provisions in 1H05 amounted to € 671 mn, as compared with € 617 mn in 1H04. We specifically note:

  • Amortisation of goodwill and of positive consolidation differences totalling € 159 mn vs. € 143 mn in 1H04
  • Provisions for risks and charges of € 86 mn, as opposed to € 36 mn in 1H04, relating to risks for revocation, litigation underway, and other risks
  • Loan-loss provisions and provisions for guarantees and commitments, net of write-backs, totalling € 430 mn, as opposed to € 438 mn in 1H04 (-1.8%). The improvement is explained by the reduction of the Corporate Division, which in 1H04 had posted a large amount of provisions due to the presence of some major exposures, largely offset by the higher provisions of the Retail Division, also ascribable to significant lending growth
  • Net write-backs on financial assets of € 4 mn.

Extraordinary items generated net extraordinary income of € 263 mn (vs. € 102 mn in 1H04), inclusive of the capital gain of € 200 mn made on sale of the equity interest in the "Serenissima" motorway in 1Q05.
Income tax for the period, totalling € 730 mn, increased by 15.7% vs. 1H04, with an incidence on pre-tax profit of 33.8%, down from 35.8% vs. 1H04 mainly because of higher tax-neutral extraordinary income.
Net profit for the period thus amounted to € 1,418 mn, with a 25% increase over 1H04. Minority interests' portion of this profit, i.e. € 117 mn, increased by € 32 mn, mainly because of the increase in the Pekao Group's earnings. Group net profit therefore amounted to € 1,301 mn, with growth of 24% vs. € 1,049 mn in 1H04.
Group net equity as at June 30th 2005 totalled € 14,223 mn (vs. € 14,036 mn as at 2004 year-end).

The Tier 1 ratio at the end of June 2005 was 8.03% (7.94% as at December 2004). The Total Capital Ratio was 11.06% (vs. 11.64% as at December 2004).

As at the end of June 2005 the Group's organisation (5) consisted of a staff of 68,247 employees (-1,001 heads vs. June 2004 and -324 heads vs. 2004 year-end) and of a network of 4,415 branches (-121 vs. June 2004 and -27 vs. 2004 year-end).

Transition to IAS/IFRS
The UniCredito Group, pursuant to the requirements of Article 81/2 of the CONSOB (Italian securities & exchange commission) Regulation implementing Italian Legislative Decree no. 58 of February 24th 1998 (the Italian Issuers' Regulation), which regulates the phase of transition to IAS/IFRS, has prepared its first-half interim report as at June 30th 2005 in compliance with Italian GAAP, providing:

  • The reconciliations of net equity (as at January 1st 2004, December 31st 2004 and January 1st 2005) and of FY2004 net profit
  • The reconciliation of net equity and net profit for the period ending on June 30th 2005.

IAS-compliant 1H05 net profit amounted to € 1,442 mn, € +141 mn higher than the result calculated according to Italian GAAP. This difference was mainly due to the positive bottom-line impact (of some € 150 mn) relating to elimination of goodwill amortisation. The balance of the other effects (positive and negative) partly offset this change..
IAS-compliant net equity as at June 30th 2005 totalled € 14,900 mn and is higher than the corresponding figure reported in the 2005 first-half report (€ +677 mn). The change in net equity reflects the combined effect of the measurement of loans and of other instruments at amortised cost (negative impact of € 637 mn, basically relating to the time value of doubtful loans) more than offset by positive effects attributable primarily to equity investments (€ +1,104 mn) and to tangible fixed assets (€ +63 mn).

Retail Division

As up to the end of June 2005 the Retail Division reported a net profit for the period of € 375 mn (+45% vs. June 2004).
Total revenues in 1H05 amounted to € 2,370 mn, up by 14.3%% vs. 1H04, thanks to the positive contribution of both net interest income and of commissions and other net income.
Net interest income - excluding dividends and earnings of companies booked at equity totalling € 18 mn - reached € 1,228 mn, growing by +8.4% vs. June 2004. This positive trend was driven by YoY volume growth for loans (+10.4% reported, +16.1% net of the securitisation effect) and deposits (+6.1%), which more than made up for the fractional decrease in market rates (average 3-month Euribor down by -2 bp vs. 4Q04). 
Going into greater detail customer loans totalled € 57.9 bn, growing by 10.4% YoY and by 2.1% vs. December 2004, with the latter change reflecting the effects of the € 3-bn mortgage securitisation that took place in 2Q05.
Within loans as a whole, constant and growing progress was shown both by mortgages (€ 41 bn, +8.8% YoY) and other types of customer lending (€ 16.8 bn, +14.3% YoY).
On the asset quality front, the Division's total net doubtful loans amounted to € 2.3 bn, +4% vs. December 2004, with a net doubtful loans/total net loans ratio that went from 3.86% in December 2004 to 3.93% in June 2005. The net non-performing loans/total net loans ratio was 2.01% (vs. 1.95% as at 2004 year-end).
Direct deposits amounted to € 67.8 bn (+1.0% since the beginning of the year, +6.1% vs. June 2004), of which about € 44.7 bn consisting of customer deposits, up by over 4% YoY and by almost 1% QoQ.
Net non-interest income (including profits from financial transactions, commissions and other net income) amounted to € 1,124 mn (+20.5% YoY). Besides the growth of other net income (+17.3%) (relating to higher charge-backs to customers following introduction of a higher rate of contract stamp duty), the increase in non-interest income (+20.8% YoY) was mainly due to net fees and commissions.
Going into greater detail, fees and commissions (+22.5% YoY) were basically driven by higher revenues on sales of asset management products, as well as by higher management fees, financing services, and the contribution of consumer credit products (Clarima). The positive results achieved in the quarter as regards non-interest revenues were also the consequence of the good trend in customer assets, with indirect deposits rising to € 111.5 bn in June 2005, up by 4.4% since the beginning of the year and by 6.2% YoY. Similar growth was also featured in the managed segment (up by 6.2% since the beginning of the year and by 9.8% vs. June 2004), mainly thanks to the contribution of managed discretionary accounts and bancassurance, and in the administered segment (which grew by 2.6% in the first half and by 2.7% YoY, due to the strong drive in loan bond sales).

Operating costs amounted to € 1,532 mn (+4.4% YoY): Net of the indirect taxes & duties item - not directly governable and exacerbated in 2005 by the increase in stamp duty - like-for-like growth in operating costs decreased to 2.2% YoY.
Personnel costs (€ 790 mn) increased by 2.6% vs. 1H04, as a result of the combined effect of higher provisioning for the incentivation system, increases due to renewal of the collective labour contract, plus other scheduled increases, and savings for efficiency improvement as regards resources. The last step of headcount reduction continued (24,633 heads, - 503 vs. 2004 year-end and -834 on an annual basis) with significant redeployment of resources in UniCredit Banca towards the commercial segment (business developers = 1,016, i.e. +320 vs. 2004 year-end).

Other operating expenses, i.e. those other than personnel, amounted to € 742 mn at the end of 1H05 (+6.3% vs. 1H04) with their various sub-items featuring different trends.
Administrative expenses, net of indirect taxes, totalled € 578 mn, with an increase of € 16 mn (+2.8%) vs. 1H04. This was mainly due to revision of tariffs by the Group's service companies and to advertising expenses. The Division's ordinary direct operating costs remained substantially stable on a YoY basis. Indirect taxes and duties (€ 126 mn, +37% YoY) increased due to the higher stamp duty in force since the beginning of 2005 pursuant to the Italian Budget Law.
Lastly, as regards depreciation & amortisation, there was a decrease of € 6 mn vs. 1H04, largely due to assets' completion of their depreciable working life.

The cost/income ratio as at June 30th 2005 was 64.6% as compared with 70.8% in June 2004.
Operating profit amounted to € 838 mn, growing by 38.3% YoY.
Provisions and net write-downs of loans totalled € 186 mn, up by over 29% vs. 1H04. The increase of € 32 mn in net loan-loss provisions was due to higher lending volume intermediated and to higher coverage of doubtful loans.
As at June 30th 2005 the Retail Division had 24,633 employees (-503 vs. 2004 year-end, -834 vs. June 2004) and a retail banking network of 2,695 branches (-47 vs. 2004 year-end and -142 vs. June 2004).

Corporate & Investment Banking Division

Net profit for the period achieved by the Corporate & Investment Banking Division in 1H05 totalled € 502 mn (-7.9% YoY). The YoY comparison is impacted by the presence in 1H04 of extraordinary income coming from reversal of amounts previously provisioned for tax purposes and no longer allowed under new company regulations. The quarterly earnings trend was perfectly even, with a result of € 251 mn in both the first and second quarters of 2005.
Total revenues, which amounted to € 1,515 mn, featured a reduction of 1.5% YoY. This trend was basically due to profits generated by the sale of derivative products, which were affected by the change in market conditions. Net of profits from financial transactions (€ 418 mn, -18%), total revenues grew by 6.7%, generated by the increase in commissions (+33.1% y/y), with this being driven by investment banking business, growth in the payout of medium-/long-term forms of lending and by the favourable trend of the various other customer service areas.
Set against expansion of lending, net interest income totalled € 739 mn in 1H05, with a -2.6% reduction YoY. This was entirely due to the effects of Locat's € 2.5-bn securitisation in September 2004. The quarterly trend in net interest income featured a reduction of 2.6% vs. 2Q04 set against an increase in the division's customer loans  (6) (€ 66.9 bn, +6.2% vs. June 2004, +5% vs. March 2005) and slight narrowing of Unicredit Banca d'Impresa's spread (-13 bp YoY).

The Division's net doubtful loans amounted to € 2.0 bn (+14% vs. December 2004) and net non-performing loans to € 1.1 bn (+2.9% vs. 2004 year-end). The trend in doubtful loans was also partly due to changes occurring in regulatory requirements concerning doubtful-loan classification. More specifically, in 2005 some positions have been classified as restructured that, under previous regulations, were classified in the performing-loan category.
The net doubtful loans/total net loans ratio was 2.77% (vs. 2.60% in December 2004) whilst the net non-performing loans/total net loans ratio was 1.58% (vs. 1.65% at 2004 year-end).
The Corporate Division's customer deposits, net of repos, totalled € 12.1 bn, growing by +3.6% YoY (+2.5% vs. December 2004).
Operating costs totalled € 452 mn (+2.7% YoY), almost entirely because of (a) the growing demand for outsourced services provided by other Group companies against development of Division companies' business and (b) the tariff revision applied by the Government in the field of indirect taxes.
The cost/income ratio was 29.8% (vs. 28.6% in June 2004).
Operating profit amounted to € 1,063 mn (-3.2% YoY).
Provisions and net write-downs amounted to € 229 mn, with a reduction of 10.2% YoY.
As at the end of June 2005 the Corporate Division had 244 branches (+3 YoY) and 5,192 employees (-122 heads YoY, -103 vs. 2004 year-end).

Private Banking & Asset Management Division

The Private Banking & Asset Management Division ended 1H05 with a net profit pertaining to the Group of € 200 mn, showing strong growth over 1H04 (+26%). Net profit is not meaningfully comparable with that of 1H04, which featured unrepeatable tax benefits.

Operating profit amounted to € 273 mn, much higher than in 1H04 (+37.9%).

More specifically, total revenues rose to € 642 mn (+13.0% YoY), thanks to growth of net interest income (€ 54 mn, +10.2% YoY) and to an increase of 13.1% YoY in non-interest income (commissions and other net income). The trend in total revenues in 2Q05 featured growth of 5.9%.
Revenues were positively affected by an increase in average total assets managed by Pioneer (up by some +10% YoY), accompanied by an improvement in asset mix (with the equity component rising to 30.3% vs. 27.6% as at the end of June 2004) and by higher productivity of Xelion's financial advisors (per-head AUM up from € 5.2 mn to € 6.8 mn, +30.7% in the last 12 months).
A further positive impact came from improvement in UPB's profitability thanks to the new managed discretionary accounts FocusInvest and Investment Program, which were not present in 1H04.
Operating costs (including depreciation & amortisation of € 12 mn) totalled € 369 mn, in line with the previous year (about -0.3%). In particular, personnel costs (€ 176 mn, +6.7% YoY) felt the impact of renewal of the national collective labour contract, of the increase in highly skilled resources, of the business' international development, and of the incidence of the variable compensation component.
The significant YoY decrease in other expenses and amortisation (€ 193 mn, approximately -5.9%) was the result of efficiency enhancement undertaken during 2005, stemming from corporate rationalisation (ex-ING non-strategic vehicles and outsourcing of IT activities).
The cost/income ratio was 57.5%, improving by close to 8 percent points vs. 1H04.
The Private Banking & Asset Management Division managed and administered € 189 bn of financial assets (about +16% YoY, +5.8% in 2Q05).
The increase in total assets, also aided by financial markets' performance, was the result of net inflows in all the Division's business units.
In 1H05 Pioneer Investments reported a total net inflow of € 4.6 bn with an increased of € 2.5 bn (about +120%) vs. 1H04 - confirming an outstanding period of growth in the global asset management panorama. Total assets managed by the company thus rose to € 142.4 bn vs. € 129.8 bn at the beginning of the years, increasing by some 10% (+3.6% net inflow effect and +6.4% market effect), whilst, at the same time the company expanded its profit margins compared with the previous years, thanks to better asset mix and to major product innovation.
Xelion's 1H05 featured strong growth of total assets (+11%), which progressed from € 12.1 bn at the end of December 2004 to € 13.4 bn.
A contributor to this growth was the net inflow achieved in the period of € 788 mn, equivalent to a 14% market share in the financial-advisor sales network sector.

New Europe Division

During the first half of 2005 New Europe's economic growth featured a sound and sustainable trend. In addition, the process of economic and legislative converge underway, for some countries, for the purposes of EU membership and, for others, for EMU membership, has enabled New Europe to enjoy unchanged or slightly improved ratings.
Below we analyse the Division's main P&L and balance sheet highlights, quantified on the basis of constant exchange rates.
In 1H05 the New Europe Division made a net profit for the period of € 359 mn, up by +27.8% vs. 1H04. The Group's portion of these earnings amounted to € 241 mn (+26.2% YoY).
Total revenues amounted to € 1,048 mn, growing by 13.2% YoY. Net interest income (€ 609 mn) increased by 5.2% YoY, mainly thanks to a good volume trend in both loans and deposits in the Division's banks. Within lending, mortgages (€ 2.4 bn, +23.7% YoY) and consumer credit (€ 1.9 bn, +33.3% YoY) featured a buoyant growth trend.

The Division's customer loans (7) amounted to € 16.2 bn, with growth of 18.9% YoY and of 11.7% vs. December 2004. Customer deposits (8) rose to € 23.1 bn (+3.8% YoY, +0.6% vs. December 2004).

Net doubtful loans decreased to € 814 mn (-11.0% vs. 2004 year-end, -6.3% vs. March 2005) whilst net non-performing loans totalled € 354 mn (-8.0% vs. December 2004, -6.3% vs. March 2005). The numerous projects and actions undertaken to improve the entire lending process led to a considerable increase of the coverage ratio for both non-performing loans (86.0% vs. 84.7% in December 2004 and 85.0% in March 2005) and total doubtful loans (73.5% vs. 70.7% in December 2004 and 71.9% in March 2005). There was also clear improvement of the total doubtful loans/total customer loans ratio, which was 5% vs. 6.3% in December 2004.

Net non-interest income (€ 439 mn) grew by 26.5% YoY, thus confirming the banks' effective commercial policy and development of sales of asset management products (mutual funds +45.5% YoY).
Operating costs (€ 527 mn) featured an increase of 4.6%, mainly due to expenses and investments made to finance the organic growth of banks in areas characterised by a marginal presence.
In terms of efficiency, the cost/income ratio progressed to 50.3%, showing clear improvement over 1H04 (54.4%).
Operating profit totalled € 521 mn, up by 23.5% vs. 1H04.
The slight increase in net write-downs and other provisions (€ 75 mn, +2.7% YoY) seems more than justified by loan growth of some 19%, whilst the 43.8% increase in income tax was almost totally due to tax benefits enjoyed by Pekao in 2004.
As at June 2005 the Division's employees totalled 27,854 (+286 heads vs. December 2004 and +36 heads vs. June 2004) whilst its branches totalled 1,311 (+24 vs. December 2004, unchanged vs. June 2004).

UniCredit informs that the lawsuits started by some companies of the Parmalat Group have been analysed by UniCredit's lawyers and, as things now stand, UniCredit believes there are no grounds to make provisions related to said proceedings

Attached are the Group's reclassified balance sheet and P&L account and the key figures of the Group and Divisions. It is pointed out that this documentation has not yet been certified by the independent auditor.

(1) Net of repos (repurchase agreements)
(2) The Group's consolidation area has not changed significantly in the last 12 months. Creation of the Global Banking Services Division (GBS), which took place in July 2004, has led to reconstruction of figures of the Corporate & Investment Banking Division. The latter, in fact, previously included Uniriscossioni e UniCredito Gestione Crediti, which now form part of the new Division's area. GBS results are aggregated with those of the parent company and of other companies.
(3) In currency markets the US dollar recovered versus the euro in 1H05 (+12.6%), which returned to June 2004 levels, whereas the Polish zloty, the accounting currency of the Pekao Group, was stable in 1H05 but appreciated significantly in the 12-month period (+12%). 
(4) Net of repos the increase was 6.1% in the first half and 9.6% in the 12-month period (respectively +8.2% and +13.8% including also securitised loans).
(5) KFS has been considered at 50%. With KFS on a 100% basis total employees would number 70,258 whilst bank branches would total 4,505.
(6) Net of repos
(7) Net of repos
 (8) Net of repos
(9) KFS is included at 50%. With KFS on a 100% basis total employees would number 29,865 whilst bank branches would total 1,401.

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