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Ad-hoc-Meldung/Ad hoc Release nach § 15 WpHG/pursuant to § 15 of the German Securities Trading Act - UniCredit Group: second quarter results

Ad-hoc-Meldung/Ad hoc Release nach § 15 WpHG/pursuant to § 15 of the German Securities Trading Act

SECOND QUARTER RESULTS MARK GOOD PROGRESS TOWARDS UNICREDIT'S GROUP TARGETS
NET PROFIT UP 82.5% YOY, GROWING TO €1,686 MILLION (APPROXIMATELY +47% YOY NET OF GAIN FROM THE SALE OF SPLITSKA BANKA)
OPERATING RESULT OF €2,745 MILLION, UP 38.0% YOY

  • Net profit at €1,686 million, up 82.5% YoY (approximately +47% YoY excl. the contribution resulting from the sale of Splitska Banka)
  • Operating profit equals €2,745 million, +38.0% YoY (+34.4% YoY on a like for like foreign exchange and perimeter basis), thanks also to continued growth in net commission income (+16.6% YoY)
  • Cost/Income ratio improved from 61.3% to 54.0% YoY due to:
    - Significant increase in revenues (total revenues equal €5,969 million, +13.0% on a like for like foreign exchange and perimeter basis)
    - Good cost control (operating costs total €3,224 million, -0.5% YoY on a like for like foreign exchange and perimeter basis)

  • Good asset quality:
    - Total net deteriorated loans down by 5.0% in the quarter and by 7.9% versus December 2005
    - Cost of risk down to 56 bp (-4 bp versus FY 2005)

  • Core Tier 1 Ratio improved (5.94% at June 2006 versus 5.53% at December 2005), due to significant capital generation
  • Strengthening of the Group's position in asset management with an increase over the end of 2005 of the market share in mutual funds (1) in Germany and Austria:
    - Italy: 15.17% (stable); Germany: 5.82% (+38 bp); Austria: 17.36% (+20 bp)


Today the Board of Directors of UniCredito Italiano approved consolidated results for second quarter 2006 (2).

The Group closed the second quarter of the year with a net profit of €1,686 million (mn), an increase of 82.5% compared to the same period in the previous year. Growth appears most significant (approximately +47% YoY) even net of the capital gain realised on the sale of Splitska Banka. Operating profit (€2,745 mn) rose 38.0% over second quarter 2005 (+34.4% YoY on a like for like foreign exchange and perimeter basis).

The HVB Group's net profit, equal to €1,055 mn (before consolidation adjustments), more than quadrupled when compared to the previous year (€230 mn), and the operating profit of €1,195 mn (+67.1% YoY on a like for like foreign exchange and perimeter basis), made a very positive contribution to the Group's results. This performance is primarily attributable to strong growth in revenues (+16.3% YoY on a like for like foreign exchange and perimeter basis) and a substantial reduction in operating costs (-4.8% YoY on a like for like foreign exchange and perimeter basis).

The Group's total revenues reached €5,969 mn, with an increase of 16.3% YoY (+13.0% YoY on a like for like foreign exchange and perimeter basis), due to both a rise in net interest income (€3,195 mn, +3.8% YoY and +1.9% YoY on a like for like foreign exchange and perimeter basis) and in net non-interest income (€2,774 mn, +34.9% YoY and +29.7% YoY on a like for like foreign exchange and perimeter basis).

The trend in net interest income shows growth for UniCredit excluding HVB (€1,599 mn, +8.1% YoY) and a substantially stable situation for the HVB Group (€1,578 mn, -0.1% YoY).

The increase in net interest for UniCredit excluding HVB (€1,493 mn, +10.7% YoY) was sustained by an increase in volumes and improvement in deposit spreads. On an annualised basis, the largest contribution came from the Retail Division (+14.5% YoY) at approximately half of the increase, but all the Divisions reported positive performances. The HVB Group (€1,416 mn) reported a slight decrease (-0.6% YoY).

Customer loans, equal to €430.2 billion (bn), show an increase of 1.5% versus (vs.) June 2005 (+0.8% vs. December 2005). UniCredit excluding HVB shows significant growth YoY (+11.0% YoY) with positive trends in the three most important divisions (Retail: +14.1% YoY, Corporate: +7.4% YoY, New Europe: +25.1% YoY at constant exchange rates). In terms of products, steady growth in household mortgages (3) (+20.5% YoY) and consumer credit (3)  (+27.0% YoY) for Retail and in leasing for Corporate (+31.2% YoY) continued. 

The HVB Group loans (€258.3 bn) show a decrease (-3.6% YoY, -1.5% vs. December 2005). This result reflects the HVB Group's strategic reduction of real estate loans and the introduction of a more risk correlated pricing policy in Germany. 

Net deteriorated loans for the Group (that includes non-performing loans, watchlist, restructured loans and past due loans) amounted to €16.7 bn, a decrease of 7.9% vs. December 2005 and of 5.0% vs. March 2006. Non performing and watchlisted loans totalled €14.2 bn (-10.1% vs. December 2005 and -8.1% vs. March 2006).
The total deteriorated loans/customer loans ratio fell from 4.26% at the end of 2005 to 3.87% at June 2006, with a coverage ratio of 48.6% (49.4% at December 2005). The incidence of net non performing and watchlisted loans on total loans at June 2006 is down from the 3.70% at December 2005 to 3.29%, with a coverage ratio that improved from 51.8% to 52.4% at June 2006.

Direct deposits amounted to €474.6 bn, an increase of 2.7% vs. December and of 3.9% vs. June 2005. UniCredit excluding HVB came in at €187.0 bn (+5.0% vs. December 2005, +9.5% YoY) and the HVB Group reached €284.9 bn (+1.4% vs. end of 2005, +1.0% YoY).

Net non-interest income (€2,774 mn) grew significantly (+34.9% YoY, +29.7% YoY on a like for like foreign exchange and perimeter basis) due to a strong performance in all segments.

Net commissions (€2,109 mn) grew by 16.6% YoY. UniCredit excluding HVB came in at €1,193 mn (+13.2% YoY), with a particularly positive contribution from the Private Banking & Asset Management Division (+23.8% YoY) and the New Europe Division (+21.7% YoY). The HVB Group also reported significant improvement in commissions over second quarter 2005 (€917 mn, +21.6% YoY).

The Group's net commissions include a significant increase in wealth management and securities in custody fees that came in at €1,002 mn (+22.3% YoY). 

All components of wealth management and securities in custody fees reported growth over second quarter 2005; in particular, investment fund fees (€545 mn, +21.7% YoY), fees on segregated accounts (€61 mn vs. €17 mn in second quarter 2005) and fees for the placement of insurance products (€150 mn, +20.0 YoY).

Fees from trading, placement and other services related to securities administered came in at €246 mn, +7.4% YoY.  Commissions for other activities rose 11.8% YoY for a total of €1,107 mn. More in detail, there was a marked increase in fees linked to payment services (+28.4% YoY) and to currency trading (+20.1% YoY). Fees involving current accounts, guarantees and loans rose +3.7% YoY.

Assets under management by the Group's Asset Management companies amounted to €236 bn, an increase of 5.6% vs. the end of 2005, thanks also to the acquisition of Vanderbilt in the USA (more than €10 bn). More in detail, Pioneer reported growth of 7.4% in the first half, with a more marked increase in the International Division (+34%) and in the US Division (+29.6%), while the HVB Group reported an increase of 1%.

Net trading, hedging and fair value, equal to €564 mn in second quarter 2006, showed a substantial increase YoY (+€334 mn), thanks to the HVB Group's exceptional performance (€317 mn YoY) and to the growth of 7.6% YoY reported by UniCredit excluding HVB (€254 mn in second quarter 2006). More in detail, the HVB Group's result benefited from the positive trend in business generated by derivatives and the Global Markets desk in HVB excluding BA-CA and the strong contribution from BA-CA (€94 mn), more than doubled compared to the second quarter 2005. The increase reported by UniCredit excluding HVB in the second quarter is primarily due to the positive change in the fair value valuation of the call option issued on Assicurazioni Generali stock of approximately €42 mn, following a decrease in the stock's price during the second quarter. At the end of June the total gain on the Generali stock, classified among available-for-sale (AFS) assets, equalled €290 mn and will be realised only at the time of sale.

Other income totalled €101 mn, an increase of €84 mn YoY, of which €31 mn is attributable to the HVB Group.

Operating costs (€3,224 mn) dropped 0.5% YoY (on a like for like foreign exchange and perimeter basis). This item includes €1.564 mn (+4.3% YoY ) attributable to UniCredit excluding HVB while the HVB Group (€1,642 mn) reported a slight decrease (-4.8% YoY4). Staff costs (€1,948 mn, +5.3% YoY(4)) show an increase that is attributable to both UniCredit excluding HVB (€951 mn, +4.8% YoY(4)) and to the HVB Group (5) (€997 mn, +5.9% YoY4). The latter is due to the variable compensation tied to the excellent commercial results that more than offset the staff reductions made in HVB excluding BA-CA (-600 heads in the quarter). UniCredit excluding HVB's increase is attributable to the national labour contract (approximately +€18 mn YoY) and to the larger variable component of remuneration (+€26 mn YoY). These increases were partially offset by staff reductions (-502 heads YoY, primarily in the Retail Division). 

Total operating costs, equal to €1,276 mn, registered a significant decrease on a like for like exchange and perimeter basis (-8.3% YoY), thanks to the decrease in costs reported by the  HVB Group (-17.9% YoY) attributable to a drop in other administrative expenses and in amortisation and depreciation that more than compensated for the increase reported by UniCredit excluding HVB (+3.6% YoY).
Cost/income ratio fell to 54.0% in second quarter 2006 from 61.3% in the same period of the previous year.

The Group's operating profit in second quarter 2006 reached €2,745 mn, which represents a rise of more than 38.0% YoY (+34.4% on a like for like exchange rate and perimeter basis). This positive evolution reflects the HVB Group's excellent operating performance (€1,195 mn, +77.0% YoY, +67.1% on a like for like exchange rate and perimeter basis) and the growth of UniCredit excluding HVB (€1,551 mn, +17.9%), to which the Divisions Private Banking & Asset Management (+38.3% YoY), Retail (+22.7% YoY) and New Europe (+12.7% YoY) contributed most significantly.

Total provisions and write-downs in the quarter amounted to €628 mn vs. €582 mn in second quarter 2005. More in detail:

  • Provisions for risks and charges equal to €79 mn vs. €4 mn in second quarter 2005
  • Net write-downs of loans and provisions for guarantees and commitments amount to €549 mn vs. €578 mn in second quarter 2005 (-5.0% YoY).

The increase in operating profit YoY was amplified by a rise in net income from investments, that was only partially offset by increases in provisions and net write-downs on loans, along with integration charges of €52 mn.
Net income from investments in the second quarter amounted to €449 mn (€66 mn in second quarter 2005) and can be attributed to the HVB Group for some €420 mn. The largest portion of this item is related to the sale of Splitska Banka to SocGen (finalised by BA-CA on 30 June) that generated a profit in HVB's consolidated income statement of €669 mn, that was also adjusted in Unicredit's consolidated accounts for €302 mn, following valuations completed at the time of first consolidation. The capital gain for the Group, therefore, equals €367 mn (contributing for €332 mn to the net income).
Income tax for the period, equal to €613 mn, shows an increase of 37.8% vs. second quarter 2005, with an incidence on profit before tax of 24.4%, down from the 30.6% for FY 2005, thanks to increased capital gains on equity investments (not taxed) and an increase in the impact of HVB AG's profit, the taxation of which benefits from losses recorded in previous years. Profit before tax, therefore, amounted to €1,901 mn (+84.9% YoY).
Assets in the process of being sold contributed €16 mn to the net profit. Net profit for the period, therefore, amounted to €1,917 mn (+85.6% YoY, +78.9% YoY on a like for like exchange rate and perimeter basis).

Minority interests' profit in the second quarter totalled €231 mn, compared to €109 mn in second quarter 2005. The increase is primarily due to the minority interests of the HVB Group, net of the directly held interest in BA-CA.

The net profit attributable to the Group equalled, therefore, €1,686 mn, with an increase of €762 mn (+82.5%) vs. second quarter 2005.

The Group's portion of shareholders' equity amounted to €34,771 mn at 30 June 2006 (vs. €35.203 mn at the end of 2005).

Estimated Core Tier 1 came in at 5.94% at the end of June 2006, an improvement over December 2005 (5.53%). Estimated Total Capital Ratio reached 10.25% .

As from the end of June the Group's organisation consisted of a staff of 134,870 employees (+71 vs. December 2005, -502 vs. June 2005). The increase vs. December is explained by the presence of temporary employees working in the tourism industry for the Zagrebacka Group companies (approx. 800 individuals). The Group's network is composed of 7,336 branches (8) (+152 vs. the end of 2005).


Attached are the Group's key figures, the Group's reclassified balance sheet and income statement, the income statements for UniCredit Group excluding HVB, the HVB Group and the BACA Group, and the Group's half-yearly income statement, which are not subject to certification by the Independent Auditors.

Notes:

(1) The comparison in Italy refers to June 2006 vs. January 2006 as per new methodologies introduced by Assogestioni (Italian Association of Asset Managers); German market share: BVI perimeter; Austrian market share: VOIG perimeter
(2) In second quarter 2006 the HVB Group's perimeter of consolidation was expanded to include 20 companies that include HVB Capital Partners AG and 19 companies controlled by BA-CA, of which 17 are part of the sub-group real estate company "Universale International Realitaten GmbH". Additionally in the period between March and June 2006, Koçbank increased its interest in Yapi ve Kredi Bankasi, the control of which was obtained in third quarter 2005,  from 57.4% to 67.31%. As Yapi is proportionally consolidated, the P&L accounts have been restated in order to grant omogeneous comparisons with the previous quarters. In the balance sheet at 30 June 2006, Banque Monegasque de Gestion was classified among "Non current assets and disposal groups for sale", along with Uniriscossioni and 2S Banca, already so classified as at March 2006
(3) Bank of Italy matrix data
(4) On a like for like foreign exchange and perimeter basis
(5) The 2Q06 HVB staff costs include the costs of personnel holding temporary contracts that were previously classified under other administrative expenses
(6) Based on the new BankIT calculation instructions
(7) "Full time equivalent ". The Koc Group is proportionately consolidated in the figures indicated. The HVB Group figure at 31 December has been restated to reflect the changes in the perimeter of consolidation that took place during the first half
(8) In the figures indicated the Koc Group is proportionately consolidated at 100%

Enquiries:

Media Relations:
Tel. +39 02 88628236; e-mail: mediarelations@unicreditgroup.eu
Investor Relations:
Tel. + 39 02 88628715; e-mail: InvestorRelations@unicreditgroup.eu

These assessments are subject to the following disclaimer:
Certain of the statements contained herein may be statements of future expectations and other forward-looking statements that are based on management's current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. UniCredito Italiano S.p.A. assumes no obligation to update any information contained herein.


Milan, 4 August 2006

UniCredit

Via San Protaso 1/3

20121 Milano

Italien


Securities listed on German regulated markets:

ISIN IT0000064854

WKN: 850832

Listed: Official Market (Amtlicher Markt), Frankfurt Stock Exchange (General Standard)