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Ad-hoc-Meldung/Ad hoc Release nach § 15 WpHG/pursuant to § 15 of the German Securities Trading Act - UniCredit's 2005-2008 Strategic Plan approved

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

UNICREDIT'S 2005-2008 STRATEGIC PLAN APPROVED: STRONG VALUE GENERATION THROUGH GROWING REVENUES AND IMPROVED OPERATING EFFICIENCY

  • EARNINGS PER SHARE GROWTH OF APPROX. 27% CAGR FOR THE THREE YEAR PERIOD
  • EARNINGS PER SHARE OF €0.56 CONFIRMED FOR 2007
  • STRONG VALUE CREATION: EVA (1)MORE THAN TRIPLED IN THE PERIOD 2005-2008
  • INCREASE IN THE RETURN ON RISK-WEIGHTED ASSETS AND SIGNIFICANT IMPROVEMENT IN COST/INCOME RATIO REACHING APPROX. 52% IN 2008 (FROM 60.7% IN 2005)
  • IMPRESSIVE RECOVERY IN PROFITABILITY FOR HVB GROUP: ROE (2)OF APPROX. 18% IN 2008
  • CONTINUOUS GROWTH IN PER SHARE DIVIDENDS DURING THE PLAN PERIOD
  • CORE TIER I RATIO AT 6.8% IN 2008


UniCredit's Board of Directors approved the Group's 2005-2008 Plan.

The 2005-2008 Plan forecasts compound annual growth of earnings per share of approx. 27% in the three year period and confirms the earnings per share target of €0.56 in 2007, announced when the UniCredit and HVB Group deal was launched.

With a market capitalisation of approx. €66 billion (3), that places it among the largest European financial groups, UniCredit is present in 20 countries worldwide, has over 28 million clients and 7,000 branches, approximately 134 thousand employees (4) with loans equal to approximately €426 billion at the end of 2005.

UniCredit presents a new plan that unveils consistent elements of strength stemming from its strong competitive positioning in the main businesses and from the presence of strong global product factories.

The Group is primarily present in three countries in continental Europe: Italy, Germany and Austria, where it successfully carries out commercial banking activities. In the retail business, UniCredit can count on a network of over 3,600 branches distributed throughout the three countries and a business model that has become an example of excellence in Italy, both in terms of commercial strength and cost efficiency. In terms of corporate business, UniCredit reaches over 350,000 corporate clients in the three countries, while in private banking it is leader in on-shore operations, supported by its position among the first three operators in each of the three markets.

UniCredit has a historic presence in Central Eastern European countries (hereinafter CEE), where it is by far the largest banking group, with a well diversified asset portfolio.

UniCredit stands out for its strategic decision to commit itself to the development of highly specialised global product factories, used to service both the Group's commercial activities and third party clients. In terms of investment banking, the Group is strengthened by its competitive positioning in Italy, Germany and Austria and a well rooted diversified presence in CEE. In this area of business the Group has around 3,500 employees in 34 countries. UniCredit is a global asset management player with a significant presence in Europe, as well as a recognized brand and an effective, integrated global investment platform. With a presence in 16 countries, UniCredit is the second European operator in leasing.


The reference macroeconomic scenario (see Table 1)

The 2005-2008 Plan will cover a period of relatively favourable macroeconomic and sector environment due to both cyclical and structural factors, of which UniCredit will be able to take full advantage of, thanks to its geographic positioning and lines of business.

The cyclical factors include the recovery of the GDP in the Euro zone (average annual growth of 1.7% in the 2006-2008 period, compared to 1.4% in the previous three year period), driven by Germany and, above all, recovery of domestic demand in the Euro zone, and the consolidation of average annual GDP growth in the CEE area in excess of 5%.

The structural factors include:

  • in the households segment, the low incidence of debt on the GDP in both Italy and the CEE area (below the Euro zone average), that sustains growth in mortgages and consumer credit;
  • in the corporate segment, the positive effects of the recently concluded restructuring of German corporations, as well as the recovery of Italian corporate competitiveness, that encourage loan growth.


In light of the above, we expect to see a positive evolution of the banking sector dynamic in the main client segments.

Based on this hypothetical scenario, UniCredit estimates compound annual growth of the banking sector's pre-tax profit in 2005-2008 of 13.3% in Austria, Italy and Germany and 15.2% in CEE.


Key financial targets
The plan also provides for the organisational model based on divisions, successfully implemented as from 2003, to be extended to the Group formed following the HVB deal.

As far as the plan's financial targets are concerned, the key performance indicators through 2008 are summarised below:

  • Compound annual growth rate (2005-2008) of earnings per share of approx. 27%
  • Compound annual growth rate (2005-2008) of revenues of approximately 8%
  • Cost/income ratio down to approx. 52% in 2008 (60.7% in 2005), thanks to improved efficiency in all divisions and cost synergies of €900 million by 2008
  • Improved return on assets (total revenues/average risk weighted assets) of circa 50 basis points (from 5.2% in 2005 to approx. 5.7% in 2008)
  • Cost of risk stable at 61 basis points in 2008
  • ROE of approx. 17% (5) in 2008 (10.2% in 2005)
  • Core TIER I at 6.8% in 2008
  • Strong value creation: EVA compound annual growth rate of approx. 49%; significant EVA increases are expected for all divisions.


The significant growth in earnings per share is supported by the improvement in the return on risk-weighted assets. This improvement is achieved thanks to the selective growth in volumes and a significant increase in revenues by all divisions, helped not only by the moderately positive macroeconomic environment but also by UniCredit's strategic positioning in its various countries and markets and by the opportunities made available following the HVB Group deal.

Double digit growth in revenues is expected for the Markets & Investment Banking (approx. +13% CAGR), CEE and Poland Markets (approx. +11% CAGR) and Private & Asset Management (approx. +10% CAGR) divisions.

The Markets & Investment Banking division will benefit from its competitive edge in the area of structured products and corporate derivatives as well as the advantages offered by the Group in terms of both CEE market growth and the role of reference investment bank for UniCredit corporate clients.
In the CEE and Poland Markets divisions, UniCredit can leverage on its ideal positioning to further exploit growth opportunities across the region, in particular in some business areas (i.e. consumer lending, credit cards and assets under management).
In Private Banking, UniCredit, in order to increase Group client base penetration and reduce new client acquisition costs, will adapt the business model that has proved successful in Italy to the German and Austrian markets.
In regards to Asset Management, the Group has ample room for growth in the institutional client segment and segregated accounts, thanks also to the acquisitions made over the past few years, while in the retail client segment high quality advisory services will be targeted in order to create long lasting relationships.
Revenues for the Retail division are predicted to increase at a CAGR of approx. 7%, thanks also to the improved sales effectiveness in Germany and Austria, while in Italy the current successful strategy will be further exploited.
A CAGR of approx. 6% for Corporate division revenues is expected. In Germany the division will grow thanks to the penetration of existing clients and to the expansion into new geographic areas. In Italy there is room to increase market share in a few key regions (Lombardy, Tuscany and Lazio). Strong support for growth will also come from leasing and trade finance services in the CEE countries.
The 2005-2008 plan includes significant cost control, also thanks to the synergies deriving from the integration with HVB Group, while still guaranteeing enough resources to initiatives in high revenue growth areas.
UniCredit expects to see an increase in costs with 2005-2008 CAGR of approx. 3%, that appears moderate in light of the significant business growth expected. These results will be obtained thanks to the stabilisation of indirect costs (mainly IT and back-office), equal to approx. €3.8 billion in 2005, made possible primarily due to the centralisation of back office activities, the creation of a common IT platform, the redefinition of certain processes (i.e. loan approval) and the standardisation of procedures (i.e. purchasing).
Cost containment will also be made possible through staff downsizing.
A reduction in personnel during the three year period of approximately 5% is expected (from approx. 133,740 Full Time Equivalent - FTE - at the end of 2005 to approx. 126,900 at the end of 2008).
This result will be made possible by higher levels of efficiency expected for the Retail, GBS, CEE and Poland Markets divisions, that will result in a decrease of approx. 11,850 FTE, only in part offset by approximately 5,000 new hires expected in order to support the development of higher growth businesses (primarily in some areas of the CEE and MIB divisions and consumer credit).
The Board of Directors also gave further execution to the Long Term Incentive Plan 2006 for UniCredit Group Management by resolving the issue of 90,300 stock options for the subscription to an equal number of UniCredit ordinary shares.

Notes:
(1) EVA (Economic Value Added) is calculated as the difference between after tax net operating profit and the cost of capital.
(2) Calculated on allocated capital excluding goodwill
(3) Based on stock price at June 3rd, 2006-07-05
(4) The number refers to Full Time Equivalent
(5) Group ROE calculated on allocated capital ex. Goodwill would be 23
On Wednesday, July 5th the 2005-2008 Plan will be presented by the CEO and UniCredit Division Heads to investors, analysts and financial journalists. The event will be transmitted via a live webcast on UniCredit's corporate website (www.unicredit.it).
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, July 5th, 2006
UniCredito Italiano S.p.A.
Via San Protaso 1/3
20121 Milano
Italien
Securities listed on German regulated markets:
ISIN IT 0000064854
WKN: 850832
Listed: Official Market (Amtlicher Markt), Frankfurt Stock Exchange (General Standard)

Investor Relations:
Ph. +39 02/88628715; mail: investorRelations@unicredit.it

Media Relations:
Ph. +39 02/88623030; mail: mediarelations@unicredit.it