- dividend increase proposed
by some 20% per ordinary share (from € 0.171 in 2003 to € 0.205)
by 18% per savings share (from € 0.186 to € 0.220)
payout ratio rising to some 60% (55% in 2003)
- strong volume growth (customer loans +10.8% yoy, total assets under management +9.0% yoy)
- improved contribution to group net profit from new europe (+29% yoy) and private and asset management divisions (+59% yoy)
- start of project for merger by incorporation in unicredito italiano of banca dell'umbria 1462 and cassa risparmio carpi, further implementing the group's "nationwide segment banks"
- free capital increase of € 670,740 approved for issue of 1,341,480 ordinary shares (performance shares) for allocation to group top management under the medium-term incentive scheme launched last year
Today UniCredit's Board of Directors approved the Group's consolidated 2004 year-end financial statements(1).
In 2004 the UniCredit Group achieved net profit of € 2,131 million (mn), as compared with € 1,961 mn in 2003, with growth of 8.7% YoY. The fourth quarter of the year (4Q04) ended with strong profit acceleration (€ 627 mn, +65% YoY). ROE rose to 17.9% vs. 17.7% in 2003, whilst EPS increased to € 34 cents, vs. € 31 cents in the previous year.
2004 year-end net interest income amounted to € 5,200 mn, growing by 4.3% YoY, with growth of 15.2% YoY in 4Q04. The basic driver of the positive trend in net interest income was growth of volume intermediated - a trend underway since midway through the previous year. This made it possible to offset the adverse effect of interest-rate reduction both on spread and on the return on investment of free capital.
Customer loans, which totalled € 140.4 bn, increased by +10.8% vs. December 2003. Among the various lending segments, mortgages continued their robust growth (+4.8% in 4Q04 vs. 3Q04 and +18.9% YoY vs. 2003 year-end), positively influenced by the real estate market's trend and by low interest rates. Conversely, trend of loans for financial leasing contracts was affected by the securitisation transaction completed by Locat on October 1st 2004 (€ 2,525 mn).
Market share of the units active in Italy rose to 10.83% progressing by about 0.10% points in the year. Share in medium-/long-term loans showed further progress, rising from 10.80% at 2003 year-end to 11.06% at the end of 2004.
Total net customer doubtful loans amounted to € 4,901 mn, increasing by 4.0% over the beginning of the year. This was primarily due to non-performing loans (€ 2,621 mn, +10.5%), the increase of which was accompanied by a decrease in watchlist loans (€ 1,991 mn, -7.7%) and an increase in loans undergoing restructuring. The net flow of performing loans to doubtful loans during the year totalled € 1,925 mn - significantly down compared with the previous year (€ 2,208 mn, -12.8%).
The total net doubtful loans/total loans ratio improved in the year, decreasing from 3.72% in December 2003 to 3.49% in December 2004. The ratio of net non-performing loans to total loans remained stable in the year at 1.87%. The coverage ratio for total doubtful loans was 48.2% whilst that for non-performing loans was 60.2%, with both ratios showing improvement versus December 2003
Direct deposits amounted to € 156.9 bn, increasing by 7.2% in 4Q04 and by 16.0% YoY on a full-year basis.
Indirect deposits totalled € 253 bn, growing by 4.7% in the quarter and by 6.9% YoY on a full-year basis. With deposits as a whole, there was a positive trend in both managed assets (+9.5% YoY) and administered assets (+4.5% YoY).
Operating profit amounted to € 4,434 mn and featured a dip of 5.8% YoY, accompanied by a fourth quarter showing clear recovery over the previous year (+9.6%).
The trend in operating profit was due to a marginal YoY decrease of total revenues (-0.7%) but up by +5.3% in 4Q04, accompanied by operating costs up by 3.5% YoY (and by 2.5% YoY in 4Q04). Revenue and cost dynamics led to a full-year cost/income ratio of 57.3%, as compared with 55% in 2003.
Net non-interest income amounted to € 5,175 mn, -5.3% lower than in the previous year. This downturn was ascribable to the marked decrease in profits from financial transactions (-22.8% YoY), whereas the trends of other items substantially offset each other
The decrease in profits from financial transactions (€ 993 mn in 2004 vs. € 1,287 mn in 2003) is explained mainly by the shrinkage in sales of derivatives to corporate customers. This latter revenue item had featured major acceleration in the first part of 2003, also driven by market conditions featuring major rates volatility.
Net commissions totalled € 3,289 mn, substantially in line (-0.5%) with the 2003 result. Performance was significantly affected by the reduction of up-front fees (€ 404 mn, -37.7% YoY) - largely offset by the growth of other commissions (€ 2,885 mn, +8.5% YoY) relating to management of customers' assets in a longer-term perspective. 4Q04 performance showed recovery over 4Q03 (+1.4%).
Reported operating costs, totalling € 5,941 mn in the year, increased by 3.5% vs. 2003, but by just 2.2% YoY based on constant exchange rates.
In the 12-month period personnel costs increased by 3.3% over 2003 at current exchange rates and by 2.2% at constant exchange rates. The increase was partly due to the resources acquired with the mortgage division of Abbey National Bank of Italy (ANBI). Based on comparable consolidation, the change would in fact have been about 2.75% YoY (and 1.7% YoY at constant exchange rates).
Other administrative expenses increased by 5.5% YoY at current exchange rates and by 4.3% at constant exchange rates. They reflected increases in costs relating to real estate, services by third parties, maintenance and instalments for furniture, machinery and plant, as well as in postal and telephone costs. The increase in these latter items, besides the increase in postal tariffs, was also due to higher expenditure for communication and transparency, following implementation of recent new regulations concerning these aspects.
Amortisation of goodwill and positive consolidation differences totalled € 276 mn (€ 12 mn more than in 2003), of which € 91 mn relating to the Pioneer Group and € 69 mn to Pekao. The increase is substantially explained by amortisation for new acquisitions amounting to a total of € 19 mn (in particular for ANBI and ING and for the further equity interests acquired in Cassa di Risparmio di Carpi and Locat).
Provisions for risks and charges totalled € 273 mn, vs. € 230 mn in 2003. The amount includes provisions for revocations, legal proceedings underway, and other risks.
Write-downs of loans and provisions for guarantees and commitments, net of write-backs, amounted to € 891 mn, vs. € 957 mn in 2003. The reduction was concentrated in the Corporate Division (€ -104 mn), due to the presence in 2003 of write-downs of loans to Parmalat, and to a lesser extent in New Europe (€ -14 mn), whereas the Retail Division showed an increase of € 37 mn, also relating to an increase of positions moving to non-performing status.
Extraordinary items in 2004 generated net income of € 218 mn vs. € 215 mn in 2003. Contributors to this result were (a) net gains of € 180 mn on disposals (€ 132 mn for the sale of buildings and € 39 mn for divestiture of equity interests), (b) surplus provisions previously made of € 171 mn (of which € 67 mn relating to the so-called "tax cleared accounts", i.e. recovery of amounts previously provisioned for tax purposes and no longer allowed under new Italian company regulations), (c) positive net equalisation of previous years' deferred taxation amounting to € 155 mn, and (d) costs for demanning incentives totalling € 246 mn, mainly connected with the Business Plan.
Income tax, totalling € 1,036 mn, decreased by 22.4% vs. 2003, benefiting from the effects both of (a) new regulatory provisions, in particular those relating to the consolidated tax return which, as from 2004, allows companies to recover taxes in the case of negative taxable income and (b) a favourable mix of gross profit. The tax rate, as a percent of pre-tax profit, thus decreased to 31% compared with 39% in the last set of annual financial statements.
The accrued fund for general banking risks - a net-equity item similar to reserves and formed over time via provisioning of taxed profits to cover latent risks in the banking business - is not envisaged by International Accounting Standards (IAS) now about to be adopted. It is also for this reason that we have returned the fund's entire amount to the profit & loss account, putting it once again at the full disposal of shareholders. This contributed € 130 mn to net profit.
Net profit for the year totalled € 2,300 mn, with a +10.3% increase over the previous year. Minority interests' share of this profit, amounting to € 169 mn, increased by € 45 mn (+36.3% YoY), mainly driven by the increase in the Pekao Group's net profits. Group net profit thus amounted to € 2,131 mn, growing by +8.7% vs. € 1,961 mn in 2003.
The Core Tier 1 Ratio was 7.35% vs. 6.97% in December 2003. The Total Capital Ratio rose to 11.63% (vs. 11.12% in December 2003).
As at the end of December 2004 the Group's organisation(2) consisted of a staff of 68,571 employees (-677 heads vs. June 2004 and -491 heads vs. December 2003) and of a network of 4,442 bank branches (-121 vs. 2003 year-end).
The Board of Directors also approved the year-end financial statements of the parent company UniCredito Italiano, which reported net profit of € 1,750 mn vs. € 1,793 mn in the previous year. Thanks to this result the Board is proposing to the ordinary shareholder meeting the distribution of a unitary dividend of € 0.205 per ordinary share and of € 0.220 per savings share, with a respective increase of +20% and +18% over the previous year's levels with a total dividend yield(3) of 5.02% (vs. 4.32% as at 2003 year-end). The dividend, in the amount approved by the shareholder meeting in question, will be payable as from May 26th 2005, with coupon detachment on May 23rd 2004.
Retail Division
At 2004 year-end the Retail Division reported a net profit of € 546 mn (-6.7% vs. December 2003).
The 2004 result was also impacted by extraordinary one-off items such as provisioning to set up a fund for demanning incentives - partly offset by tax recover for Clarima and UniCredit Banca per la Casa. Net of this exceptional charge, the Retail Division's contribution to consolidated performance would have shown growth.
Going into greater detail, net interest income totalled € 2,360 mn (+0.9% YoY). Performance was adversely affected by the decrease in market rates (average annual 1-month Euribor down by 27 basis points) and combated by a major increase in volume intermediated, with year-end loans up by +16.1% YoY. The quarterly trend of net interest income featured acceleration. 4Q04 in fact ended with an increase of +12% vs. 4Q03 (+3.5% vs. 3Q04).
Customer loans, which totalled close to € 56.7 bn, increased by +16% YoY, thanks to strong growth by mortgages for families and small businesses (about € 40.9 bn, +18.4% vs. 2003 year-end) and of other forms of customer lending (€ 15.8 bn, +10.7% YoY). A point to note is the rapid development of consumer credit (with nearly € 1.3 bn of personal loans issued) and of revolving cards (270,000), mainly thanks to the activities of Clarima and of UniCredit Banca's sales network.
As regards asset quality, total doubtful loans amounted to € 2,185 mn (+9.4% YoY) with a ratio of 3.86% to total loans (vs. 4.09% in December 2003). The coverage ratio for doubtful loans was 38.2%, improving vs. 2003 year-end (37.8%).
Non-performing loans amounted to € 1,105 mn (+15.1% YoY) and were equivalent to 1.95% of total customer loans (vs. 1.97% at 2003 year-end).
Total assets administered for customers amounted to some € 187.4 bn (+5.8% YoY). Within these assets, direct deposits amounted to € 67.2 bn (+11.6% YoY), driven by bond issues, and <B>indirect deposits</B> rose to € 120.3 bn, growing by 2.8% YoY, with a positive trend for both assets under management (+3.9% YoY) and administered assets (+1.9% YoY).
More specifically, assets under management (discretionary/wrap accounts, mutual investment funds placed, and bancassurance products) amounted to € 53.9 bn (45% of total indirect deposits). A strong commercial boost came from the sale of innovative individual asset management products (Focus Invest) - with a net inflow of over € 3 bn (achieved as from July, when the new product was launched) and of bancassurance products (policies, annual-premium products, etc.), whose stock reserves amounted to close to € 18.7 bn vs. € 15.7 bn at 2003 year-end.
Net non-interest income amounted to € 1,963 mn, down by 2.3% YoY. Within the overall figure, there was a decrease in commissions - reflecting a trend already emerging at the beginning of 2004 - which is the result of a specific strategic approach applied by the Division. This approach, within commissions as a whole, gives preference to the recurrent component at the expense of one-off entry fees. Within the overall figure, performance was firm for AUM commissions, as regards management fees and commission on the sale of mutual funds and discretionary/wrap accounts. Bancassurance products' contribution was slightly lower than in 2003 due to a change in product mix.
Total revenues in 2004 thus totalled € 4,323 mn, slipping marginally on a full-year basis vs. 2003 (-0.6%) but featuring an upward quarterly pace (+ 6.0% in 4Q04 vs. 3Q04).
Operating costs amounted to € 2,958 mn, with a slight YoY increase (+2.6%). More uniform comparison with 2003 (i.e. including ANBI) would limit the increase in operating costs to 1.3% YoY.
Personnel costs - totalling € 1,543 mn - increased by 2.8% YoY. The increase was substantially due to development of Clarima's business, making it necessary to strengthen staffing levels (+44 heads YoY). In the Division's other banks headcount savings achieved as a result of organisational streamlining were offset by pay increases relating to provisions for the new national collective labour contract, to planned pay increases, and to adjustments relating to staff incentives.
The other operating costs, i.e. costs other than personnel costs, totalled € 1,415 mn (+2.4% YoY).
The 2004 year-end cost/income ratio was 68.4%.
Operating profit amounted to € 1,365 mn (-6.8% YoY).
Provisions and net write-downs totalled € 334 mn, up by 5.4% YoY. The causes of the increase were due both to increased lending activity (also for items requiring high levels of coverage, such as revolving cards) and to alignment of coverage of performing loans, as well as (to a lesser extent) to losses of an exceptional nature incurred in the year. The cost of risk (net provisions & write-downs/net loans) was 0.50%, stable vs. 2003 year-end.
Extraordinary items had a heavy impact on profit with net extraordinary charges of € 129 mn - burdened, in particular by charges for demanning incentives of about € 135 mn, mainly relating to the 2004 - 2007 business plan.
As at the end of 2004 the Retail Division had 2,742 bank branches (-156 vs. 2003). The number of employees totalled 25,136 (-332 heads vs. 2003).
Corporate Division
The Corporate Division ended the year with net profit of € 950 mn.
Going into greater detail, net interest income amounted to € 1,504 mn (+2% YoY). Net commissions, together with other net income, rose to € 711 mn, growing by 3.2% YoY. The trend in profits from financial transactions (€ 820 mn, -25.7% YoY) was adversely impacted by placement of derivatives, which was affected by the change in market conditions. The Division's total revenues thus amounted to € 3,035 mn, -7.1% than the amount reported in 2003.
Divisional customer loans (net of repos) totalled € 62.9 bn (+0.1% YoY). Taking the impact of 2004 securitisation (about € 3 bn) into account, loans grew by +4.9% YoY, with a particularly dynamic contribution from the medium-/long-term segment (€ 25.6 bn, +9.2% YoY). UniCredit Banca d'Impresa improved its share of wallet among customers (non-financial companies) from 12.3% to 12.4% at 2004 year-end, whilst also maintaining improving levels of spread on loans (2.34% on average in 2004, +8 bp YoY).
Divisional customer deposits, net of repos, totalled close to € 11.8 bn, up by +8.8% over the previous year.
Operating costs (including other expenses and depreciation & amortisation totalling € 487 mn, +2.1% YoY) amounted to € 1,013 mn, down by 0.9% YoY, mainly thanks to the trend in <B>personnel costs</B> (€ 526 mn, -3.5% YoY).
The cost/income ratio was 33.4%.
Operating profit amounted to € 2,022 mn, -9.9% than in 2003.
Total provisions and net write-downs amounted to € 562 mn, € 641 mn less than in the previous year (with a 12.3% decrease). More specifically, net loan write-downs and provisions for guarantees and commitments totalled € 575 mn vs. € 687 mn at 2003 year-end. The year featured loan write-backs of € 99 mn, a figure substantially in line with that of 2003 (€ 107 mn). Tight management of loan quality mitigated the impact of the difficulties engendered by the economic environment on asset quality profile. The Division's doubtful loans amounted to € 1,771 mn (+11.1% vs. 2003, -2,8% vs. September 2004) with a ratio of 2.62% to total loans. The coverage ratio of doubtful loans was 35.7%.
As at the end of 2004 the Corporate Division had 243 branches (+29 YoY). It had 6,334 employees (+14 heads YoY).
Private & Asset Management Division
The Private & Asset Management Division ended 2004 with net profit of € 401 mn, showing strong growth over the previous year (+63.7% YoY).
Operating profit amounted to € 429 mn, increasing by +9.2% YoY.
Total revenues rose to € 1,167 mn (+6.7% YoY), mainly driven by the favourable trend of net commissions (+8% YoY).
More specifically, this latter trend was attributable to an increase in average total assets managed by Pioneer (+11% YoY) accompanied by (i) a better mix, (ii) financial advisors' higher productivity (with per-capita assets administered rising from € 4.6 mn to € 5.9 mn, +28.3%), and (iii) application to ex-ING financial advisors of Xelion's standard mandate.
Operating costs (including depreciation & amortisation of € 30 mn) amounted to € 738 mn, increasing by 4.7% YoY. This trend was due to higher personnel costs (€ 331 mn, +8.9% YoY) as a result of strengthening of staffing levels and to the higher incidence of project and advertising expenses and of expenses relating to business development.
The cost/income ratio improved from 64.2% in December 2003 to 63.2%.
Net profit was significantly enhanced by the contribution of extraordinary items, with net extraordinary income of € 68 mn. This mainly consisted of € 41 mn for deferred tax assets and € 11 mn of insurance claims reimbursed against losses posted in previous years.
The Private & Asset Management Division managed and administered some € 172 bn of financial assets, drawing on the services of over 3,000 customer account managers in the form of employees and financial advisors with mandates.
The asset management company (Pioneer Investments) and asset gathering company (Xelion) achieved significant results.
Pioneer Investments in fact ended 2004 with net sales of € 3.5 bn thanks above all to the contribution of international business (net inflow in the USA = € 767 mn; International including Italy = over € 2 bn; New Europe = over € 700 mn). The weight of hedge funds increased from 2.1% in December 2003 to 3.0% at 2004 year-end.
Assets managed rose to € 129.8 bn, up by +9% YoY - of which +2.9% YoY coming from net inflow, +4.2% YoY from performance effect, and +1.9% from the Safeco acquisition - despite significant USD depreciation
Xelion repeated its 2003 record in the sector in terms of net inflow, achieving a total of over € 2 bn. This was equivalent to some 25% of market share and to YoY growth of +8.4% over 2003 (based on comparable consolidation).
New Europe Division
During 2004 the New Europe Division further strengthened its leading position in a major region (over 174 mn inhabitants), featuring strong growth prospects, and progressive reduction of the cost of risk due to the process of EU convergence and entry.<br/> <br/> In this environment the Division achieved its best results ever since the start of its creation - in both outright terms and in terms of contribution to Group targets. This outstanding performance is reflected in all business and capital indicators, which we analyse below based on constant exchange rates.
Divisional net profit totalled € 585 mn, of which € 398 mn pertaining to the Group, with an increase in the latter of +22.8% YoY thanks to strong performance by all banks.
Total revenues amounted to € 1,835 mn, growing by 4.8% over the previous year, thanks to the positive contribution of all revenue items.
Going into greater detail, net interest income grew by 2.8% (to € 1,154 mn), also thanks to higher volumes. Profits from financial transactions grew by 9.4% YoY (to € 128 mn) whilst net commissions and other income (€ 553 mn) increased by 8.2%. The progress of the latter item was driven by development of sales of asset-management products in Pekao (Poland).
The Division's <B>customer loans</B>(4) totalled € 14.0 bn, growing by 10.6% YoY (or by 18.6% YoY based on current exchange rates). Customer deposits(5) rose to € 22.3 bn (+2.5% YoY or +10.8% YoY at current exchange rates).
The severe cost control policy adopted by the New Europe banks translated into a limited increase of operating costs (€ 1,013 mn, +3.4% YoY), set against weighted average inflation in the area of about 4%. More specifically, staff costs, which totalled € 492 mn, increased by only 1.9% YoY counterbalancing the increase in other administrative expenses (€ 382 mn, +4.8% YoY), which was in any case in line with weighted average inflation in the area.
Depreciation & amortisation of tangible and intangible fixed assets (€ 139 mn) increased by 4.5% over 2003 mainly because of some investments relating to information systems in Bulbank (Bulgaria).
The cost/income ratio was 55.2%, showing improvement over the previous year (56.0% at 2003 year-end).
Excellent control of credit risk translated into a reduction in net loan write-downs and provisions (€ 125 mn, -19.4% YoY), accompanied by improvement of the coverage ratio for non-performing loans (from 81.4% in 2003 to 84.8% in 2004) and for doubtful loans (from 64.0% to 70.8%).
Doubtful loans amounted to € 888 mn (-21.3% YoY), whilst non-performing loans totalled € 373 mn (-13.9% YoY).
Operating profit amounted to € 822 mn, growing by 6.6% YoY.
As at 2004 year-end, the division's employees(6) totalled 27,568 (vs. 28,039 in 2003, i.e. -471 heads) whilst its bank branches totalled 1,287 (+6 vs. 2003).
THE TRANSITION TO INTERNATIONAL ACCOUNTING STANDARDS
In order to address the introduction of international accounting standards (IAS/ IFRS), the UniCredito Italiano Group has undertaken a project dedicated to studying relevant impact on the various functions of Group companies and to implementing related operating and procedural changes.
Project activities have led to specific initiatives that - cutting across the various Group functions - make it possible to handle the various problems (relating to the business and to management of information and reporting) associated with the transition to IAS.<br/> <br/> This transition has involved, and still involves, a considerable effort to develop the new information system, in parallel with the system currently used for preparation of financial statements according to Italian accounting principles, which will in any case be maintained for the time being. The new system is in the process of completion and testing, whilst work is underway on the design and creation of IT supports, to be developed also on the basis of the new templates and schedules envisaged for the explanatory notes to account and necessary to fuel and process IAS data for the purpose of financial statements.
Based on the above - and, in particular, on the fact that some options having a major impact have been defined by the European Commission only recently, particularly as regards some aspects of IAS 39 (recognition and measurement of financial instruments), and that some important elements are still being defined - the Group prudently envisages that it will publish quantitative information based on IAS as from its 1st-half interim report for the period ending on June 30th 2005.<br/> <br/> Further details on the process of transition to IAS are provided in the Annual Report approved today.
PROJECT FOR MERGER BY INCORPORATION IN UNICREDITO ITALIANO OF BANCA DELL'UMBRIA 1462 AND CASSA RISPARMIO CARPI
In order to complete the process that, in recent years, has led to reorganisation of the UniCredit Group's banks according to a new "nationwide segment banks" model, we have launched a plan to rationalise the activities of Banca dell'Umbria 1462 SpA and Cassa Risparmio Carpi SpA - both companies currently controlled by UniCredit Banca, the Group's retail bank, which in turn is fully owned by UniCredit. To do this UniCredit's Board of Directors has approved the project for merger by incorporation in UniCredit of the aforementioned banks, after the acquisition of those banks by UniCredit Banca, together with start of the process that will lead to immediate integration of their activities and assets in other Group companies (retail, corporate, private, and real estates) based on their respective business profiles and consistently with the Group's unitary business model.
As part of the merger project in question, UniCredit's Board of Directors has approved - based on the data and information available - the following share exchange ratios:
- 1.03 UniCredit ordinary shares for each ordinary share of Banca dell'Umbria 1462
- 5.48 UniCredit ordinary shares for each preference share of Cassa Risparmio Carpi.
The joint expert appointed pursuant to Article 2501/6 of the Italian Civil Code will express an opinion on the consistency of the aforementioned ratios.
UniCredit's Board of Directors has therefore decided to convene an Extraordinary Shareholders' Meeting - empowering the Chairman to fix the meeting's date on the same dates as those fixed for the Annual General Shareholders' Meeting summoned to approve the 2004 year-end report and accounts - in order to submit the project in question to shareholders and, in particular, to propose a capital increase of a maximum of € 2,796,307, via issue of a maximum of 5,592,614 ordinary shares of the nominal value of € 0.50 each, to service exchange of the shares of the banks that will be merged by incorporation.
The right to withdraw is excluded, since the operation does not come under the provision of Article 2437 of the Italian Civil Code. Moreover, given the limited number of shares that the surviving company (UniCredito Italiano SpA) will issue to service the merge, no appreciable changes are expected in the percent interests owned by major shareholders in UniCredit's voting capital.
We estimate that the merger and simultaneous spin-off of business activities by the parent company to the Group's segment banks/companies will be completed on July 1st 2005.
Conditions for the preparation of the informative prospect do not apply, as per art. 71bis of Regolamento Emittenti Consob (Consob Issuers Rules).
ISSUE OF PERFORMANCE SHARES FOR GROUP TOP MANAGEMENT
The Board of Directors also decided on a nominal capital increase of € 670,740 for the issue of 1,341,480 ordinary shares (i.e. performance shares) to be assigned to Group top management as part of the medium-term incentive plan launched last year to underpin achievement of the 3-year business plan's targets.
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(1) The Group's consolidation area did not feature any significant changes vs. 2003 year-end. We point out, however, that entry of ING Sviluppo Finanziaria, which took place at the beginning of December 2003, has led to reconstruction of P&L figures for the entire year, whereas only one twelfth of such data were included in 2003 reported financial statements. Other changes, in particular in the Private Division, related to integration of the ING group's businesses and equity investments and to the rationalisation and development of the Asset Management sector. Other initiatives in the Corporate Division concerned the merger of UBM and TradingLab and merger of factoring companies and - in New Europe - rationalisation of the Zagrebacka Group.
(2) KFS has been considered on a proportional basis. With KFS considered on a 100% basis total headcount as at December 2004 totalled 70,543 employees whilst bank branches totalled 4,528.
(3) Calculated on the basis of average share prices in 2004.
(4) Net of repos.
(5) Net of repos.
(6) KFS has been considered on a 50% basis. With KFS considered on a 100% basis headcount at 2004 year-end totalled 29,540 employees, whilst bank branches totalled 1,373.
Attached are the reclassified Group balance sheet and P &L account, the key figures of the Divisions and of the parent company. We point out that the documentation has not yet been certified by the independent auditor.