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UniCredit Group: Results for the first nine months of 2006

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

NINE MONTH NET PROFIT AT €4,480 MILLION, UP 44.7% YOY 
OPERATING PROFIT UP 24.7% YOY AT €7,797 MILLION

Results for the first nine months of 2006:

  • Net profit €4,480 million, up 44.7% YoY (approx. +33% YoY excluding net income from investments)
  • Annualised ROE 16.7% (1)
  • Net income from investments €1,076 million, of which €367 million from the sale of Splitska Banka and €401 million from the third-quarter sale of 2S
  • Operating profit €7,797 million, +24.7% YoY, thanks to progress by all sources of revenue (total revenues up 11.9% YoY to €17,553 million) and good cost control (operating costs up 3.4% YoY to €9,756 million, +1.5% YoY on a like-for-like foreign exchange and perimeter basis)
  • Cost/Income ratio down to 55.6% from 60.1% at September 2005
  • Better asset quality: total net deteriorated loans down by 8.1% on December 2005
  • Assets under management up 11.7% YoY to €242.6 billion at end of September 2006

Results for third quarter 2006:

  • Net profit €1,437 million, up 37.8% YoY
  • Total revenues €5,614 million, up 4.6% YoY
  • Operating costs €3,227 million, up 1.4% YoY
  • Operating profit €2,387 million, up 9.4% YoY


Today UniCredito Italiano's Board of Directors approved consolidated results for the first nine months of 2006 (2) which showed a net profit of €4,480 million (mn) for the Group, an increase of 44.7% on the corresponding period the year before (+40.7% on a like-for-like foreign exchange and perimeter basis). Even excluding net income from investments, the improvement was nonetheless very substantial (approximately +33% YoY). Operating profit (€7,797 mn) was 24.7% higher YoY (+22.0% YoY on a like-for-like foreign exchange and perimeter basis), reflecting higher income from all sources of revenue accompanied by a slight increase in operating costs (+1.5% YoY on a like-for-like foreign exchange and perimeter basis).

The Group's total revenues reached €17,553 mn, an increase of 11.9% YoY (+9.7% YoY on a like-for-like foreign exchange and perimeter basis), due to rises in both net interest income (to €9,383 mn, +5.6% YoY, +4.6% on a like-for-like foreign exchange and perimeter basis), and in net non-interest income (to €8,170 mn, +20.1% YoY, +16.4% YoY on a like-for-like foreign exchange and perimeter basis).

Net interest forming part of net interest income increased by 5.6% YoY to €8,858 mn (+4.5% on a like-for-like foreign exchange and perimeter basis).

In terms of divisional performance, the largest contribution to the growth in net interest came from the Retail Division (+€253 mn, +7.8% YoY) with the Italian operations reporting the best performance (+13.4% YoY) thanks not only to strong demand for credit (loans: +9.4% on end 2005), especially mortgages, but also to a wider mark-down after market rates were raised. The Poland Markets and CEE Division also performed well (+€303 mn YoY), thanks to a major increase in the volume of loans and deposits since the end of 2005 (loans by the Poland Markets Division: +9.6% on the end of 2005, loans by CEE Division: +19.7% on December 2005). The Corporate Division also turned in a solid performance in terms of net interest, which climbed 4.2% YoY to €2,447 mn.

Total Group customer loans increased by 0.7% on December 2005 to €429.6 billion (bn).

Total Group customer deposits and securities came to €487.2 bn, an increase of 5.4% on December 2005.

Net non-interest income (€8,170 mn) grew significantly (+20.1% YoY, +16.4% YoY on a like-for-like foreign exchange and perimeter basis) thanks to improved performance by all its components.

Net commissions rose by 13.1% YoY to €6,193 mn. The best-performing components in this category were investment fund fees (€1,720 mn, +20.5% YoY), fees on segregated accounts (€206 mn up from 94 mn the previous year), fees for the placement of insurance products (€385 mn, +16.3% YoY) and fees linked to payment services (€1,009 mn, +20.7% YoY).

Assets under management by UniCredit's Asset Management Division amounted to €242.6 bn at 30 September 2006 (+11.7% YoY, +8.5% as from the beginning of the year). Net inflows account for 2.2% of the latter increase, market performance for 0.3%, while the remainder is explained by enlargement of the perimeter of consolidation. More specifically, Pioneer reported approximately €4.9 bn in net inflows of which €3.7 bn in the USA, €0.9 bn in the International Division (particularly thanks to Spain and France), €0.5 bn in Germany and €0.4 bn in the New Market Division. Pioneer's mutual funds have a 15.11% market share in Italy (figures calculated using the new method adopted by Assogestioni - Association of Italian Fund Managers - since the start of 2006 which includes foreign funds in the calculation).

Net trading, hedging and fair value reported a significant increase of 33.3% to €1,688 mn at the end of September 2006 (+27.5% YoY on a like-for-like foreign exchange and perimeter basis), thanks to the results achieved by operations in Germany and Austria by the Markets & Investment Banking Division (€1,231 mn +28,2% YoY). 

Other net income was €230 mn higher YoY at €289 mn.

Operating costs amounted to €9,756 mn, +3.4% YoY (but only +1.5% on a like-for-like foreign exchange and perimeter basis). Efforts to keep costs under control were primarily focused on administrative expenses (3.275 mn), which fell 1.4% YoY on a like-for-like foreign exchange and perimeter basis. The biggest cuts were reported by the Retail and Corporate Divisions, whose operating costs fell by 2.2% and 1.8% YoY respectively, thanks to the large reduction in administrative costs by the German business. Staff costs amounted to €5,824 mn, +5.4% on a like-for-like foreign exchange and perimeter basis. Depreciation and amortisation (€842 mn) was 10% lower YoY on a like-for-like foreign exchange and perimeter basis.

The cost/income ratio improved from 60.1% in the first nine months of 2005 to 55.6% at the end of September 2006.

The Group's operating profit was €7,797 mn in the first nine months of 2006, an increase of 24.7% YoY. 

The improvement in operating profit over the first nine months of 2005 was boosted by higher net income from investments, that was only partially offset by higher provisions and net write-downs of loans, as well as by €104 mn in integration costs.

Net income from investments amounted to €1,076 mn in the first nine months of 2006 compared with €456 mn in the corresponding period of 2005. The most significant amounts refer to the capital gains on the sale of Splitska Banka (€367 mn in 2Q06) and 2S Banca (completed on 28 September 2006 and generating a gain of €401 mn).

Provisions for risks and charges came to €199 mn at the end of September 2006, compared with €113 mn in the first nine months of 2005. These provisions mostly refer to the Business Divisions (specifically Corporate, Retail and Private banking).

Net write-downs of loans amounted to €1,825 mn in the first nine months of 2006 (+14.1% YoY). This increase was largely due to the Group's operations in Italy and Austria. In both cases the increase was concentrated in the retail segment. In contrast, net write-downs of loans were slightly lower in Germany, mostly thanks to a favourable corporate climate.

As regards the trend in asset quality, there was a continuation of the improvement already reported at the half year, with the Group's net deteriorated loans falling by 8.1% since December 2005 to €16,678 mn. The total deteriorated loans/net customer loans ratio fell from 4.26% at the end of 2005 to 3.87% at the end of September 2006, providing coverage against 48.1% of exposures (49.4% at December 2005).

Loan disposal transactions in the first half of the year and ordinary loan recovery procedures helped reduce the face value of non-performing and doubtful loans over €3 bn since the start of the year. Since the level of coverage against exposures was largely unchanged (51.6% at the end of September 2006 vs 51.8% at the end of 2005), this reduction helped the incidence of non-performing and doubtful loans on total loans to fall from 3.70% at the end of December 2005 to 3.32% at the end of September 2006. The incidence of doubtful loans came down from 2.10% at the end of 2005 to 1.85% at the end of September 2006, while the incidence of non-performing loans reported a more modest decline over the same period (from 1.61% to 1.47%).

Income tax for the period was 18.6% higher YoY at €1,732 mn, translating into a tax rate of 25.7%, down from the rate of 30.6% reported at the end of 2005. The improvement in the tax rate reflects higher capital gains on equity investments (not taxed). Net profit therefore came to €5,013 mn (+44.2% YoY).

Assets in the process of being sold contributed €56 mn to net profit. Profit for the period therefore amounted to €5,069 mn (+44.0% YoY, +39.4% YoY on a like-for-like foreign exchange and perimeter basis).

Minorities totalled €589 mn in the first nine months of 2006, compared with €425 mn in the corresponding period of 2005. The increase is due to the minority interests in the HVB Group, net of the directly held interest in BA-CA.

Net profit attributable to the Group therefore amounted to €4,480 mn, reporting an increase of €1,385 mn (+44.7%) on the first nine months of 2005.

The Group's portion of shareholders' equity amounted to €37,818 mn at 30 September 2006, compared with €35,203 mn at the end of 2005.

Core Tier 1 is an estimated 6.11% at the end of September 2006, having improved from 5.53% at the end of December 2005. The Total Capital Ratio is an estimated 10.62% (3) compared with 10.34% at the end of December 2005.

At the end of September the Group's organisation consisted of a staff (4) of 142,359 employees (3,372 fewer than at the end of 2005). The Group's network consists of 7,246 branches (5) (62 more than at the end of 2005).



Notes:
(1) Net equity used for calculating this ratio is the period average (excluding fair value reserves for available-for-sale assets and dividends payable and including annualised net profit for the period).
(2) There were no major changes in the perimeter of consolidation in the third quarter of 2006. The changes since the end of 2005 are primarily attributable to enlargement of the HVB Group's perimeter, with the addition of 68 companies. In fact, the first quarter of 2006 saw a total of 48 companies join the line-by-line consolidation, of whom the 38 companies in the Immobilien Group, HVB Bank Latvia, Joint Stock Commercial Bank HVB Ukraine, a few companies in the BA-CA sub-Group (including Nova Banjalucka Banka, CAIB International Markets, and BPH Investment Fund Company), as well as other minor companies. The 20 companies joining the HVB Group's perimeter of consolidation in the second quarter included HVB Capital Partners AG and 19 subsidiaries of BA-CA, of whom 17 forming the "Universale International Realitaten GmbH" real estate sub-group. In addition, between March and June 2006, Koçbank increased its interest in Yapi ve Kredi Bankasi, control of which had been obtained in third quarter 2005, from 57.40% to 67.31%. In the balance sheet at 30 September 2006, Indexchange has been classified among "Non-current asset and disposal groups for sale", along with Banque Monegasque de Gestion, already so classified at June 2006.
(3) Calculated on the basis of the new Bank of Italy instructions
(4) "Full time equivalent". In the figures reported the Koç Group, consolidated proportionately, is here included at 100%. Considering Koç proportionately the total comes to 132,480 for September 2006 and 135,573 for December 2005. The figure at 31 December for the HVB Group has been prepared proforma to take into consideration companies consolidated for the first time in the first nine months of the year.
(5) In the figures indicated the Koc Group, proportionately consolidated, is included at 100%.


Attached are the Group's key nine-month figures, the Group's reclassified balance sheet and income statement for the first nine months of the year, the Group's reclassified quarterly balance sheets and income statements for 2005 and 2006 and the key nine-month figures for its Divisions which are not subject to certification the Independent Auditors.


Enquiries:

Media Relations:
+39 02 88628236; e-mail: MediaRelations@unicreditgroup.eu
Investor Relations:
+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.


UniCredito Italiano S.p.A.
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)