CAPITALIA QUARTERLY REPORT AT SEPTEMBER 30, 2007 APPROVED
RESULTS FOR THE FIRST 9 MONTHS OF 2007:
NET INTEREST INCOME AT €2,357 MILLION, +12.6% YoY
GROSS INCOME AT €4,269 MILLION, +6.4% YoY
INTEGRATION COSTS OF €134 MILLION
GROSS OPERATING PROFIT AT €1,698 MILLION, +5.6% YoY (+13.9% NET OF INTEGRATION COSTS)
VALUE ADJUSTMENTS AND PROVISIONS AT €689 MILLION, +57.0% YoY
NET PROFIT AT €613 MILLION, -23.8% YoY, IMPACTED BY €134 MILLION OF INTEGRATION COSTS
CUSTOMER LOANS STOCK AT €105.4 BILLION, +13.4% YoY
DOUBTFUL LOANS STOCK +0.3% YoY
DOUBTFUL LOANS /TOTAL CUSTOMER LOANS -0.5pp YoY
NEW LIFE BUSINESS AT €2,540 MILLION +14% YoY
BOND SALES BY THE NETWORK AT €3,039 MILLION +9% YoY
The Board of Directors of UniCredito Italiano (UniCredit) approved the consolidated quarterly report at September 30, 2007 of Capitalia S.p.A., company incorporated as of 1 October 2007. For the first nine months of the year the Group reported substantial revenues growth (+6.4% year on year), supported by the excellent performance of net interest income (+12.6%). Gross operating profit progressed 5.6%, including integration costs of €134 million. Excluding integration costs, gross operating profit grew 13.9%.
INCOME STATEMENT DATA FOR THE FIRST 9 MONTHS OF 2007
In the first nine months of 2007 net interest income reached €2,356.6 million, growing significantly (+12.6%) over the same period of 2006. This reflects the positive developments of balance sheet items and the careful management of credit spreads. Net interest income includes about €206 million interest generated by the time value effect of amortized cost, applied primarily to impaired loans.
Net commissions stood at €1,263.6 million versus €1,268.3 million in the first nine months of 2006 (-0.4%).
Net gains on assets and liabilities measured at fair value amounted to €381.2 million (+17.5%).
Dividends and profits from investments accounted for by the equity method amounted to €69.5 million versus €123.9 million in the same period of 2006, when this item included about €33 million nonrecurring income from the sale of Mediobanca shares by Consortium Srl. Other operating income amounted to €198.2 million, down 2.9% over the same period of 2006.
Gross income reached €4,269.1 million, up 6.4% over September 2006.
Operating expenses increased 6.9% to €2,571.0 million, including integration costs of €134 million (+1.3% excluding integration costs). Staff expenses were up 6.5% to €1,570.4 million. Staff expenses reflect certain nonrecurring items, namely a positive balance of €75 million in connection with personnel severance indemnities, and a negative balance of €110 million in connection with the merger with UniCredit. Other administrative expenses amounted to €842.1 million, up 7.4%, and include about €24 million in connection with the merger with UniCredit. Excluding integration costs, staff expenses declined 1.0%, while other administrative expenses increased 4.4%. Depreciation and amortization of tangible and intangible assets (€158.5 million) increased 7.3%.
Gross operating profit amounted to €1,698.1 million, improving 5.6% (+13.9% excluding integration costs) over the first nine months of 2006. The cost/income ratio stood at 60.2% (57.1% excluding integration costs) versus 59.9% at September 30, 2006.
Value adjustments and provisions amounted to €689.3 million versus €438.9 million at the end of September 2006. Specifically, provisions for risks and charges decreased to €90.4 million from €101.3 million in the first nine months of 2006; write-downs of impaired loans amounted to €526.5 million versus €345.1 million at September 30, 2006; and write-downs of impaired financial assets amounted to €72.4 million.
Net operating profit amounted to €1,008.8 million down 13.7% over the past year (-2.2% excluding integration costs).
Gains from disposal of investments amounted to €36.2 million versus €106.9 million in the first nine months of 2006.
Pre-tax profit amounted to €1,045.0 million (-18.1%).
After €430.1 million income taxes for the period (vs. €470.3 million at September 30, 2006) and €1.8 million in minority interests, consolidated net profit amounted to €613.1 million, down 23.8%.
Q3 2007 INCOME STATEMENT DATA
In the third quarter of 2007 the Group reported net interest income of €809.9 million, progressing by over 15% over the same period of 2006. This item benefited from the positive developments in customer loans stock and customer funding, as well as from the careful management of credit spreads.
Net commissions amounted to €397.9 million, declining slightly (-2.0%) from €406.1 million in the third quarter of 2006.
Net gains on assets and liabilities measured at fair value amounted to €36.7 million (-71.9%).
Dividends and profits from investments accounted for by the equity method amounted to €5.2 million versus €8.1 million in the same period of 2006. Other operating income amounted to €58.6 million versus €70.0 million in the same period of 2006.
Gross income amounted to €1,308.2 million, in line (-0.7%) with the figure reported in the past year (€1,317.0 million).
Operating expenses increased 12.6% to €905.7 million over the same period of 2006. The figure includes integration costs of €67 million. Excluding integration costs operating expenses were up 4.3%. Staff expenses amounted to €562.1 million, up 13.3%, and include €55 million costs connected with the merger with UniCredit. Other administrative expenses amounted to €288.3 million, up 12.2%, and also include integration costs of about €12 million. Excluding integration costs, staff expenses increased 2.2%, and other administrative expenses increased 7.5%.
Depreciation and amortization of tangible and intangible assets (€55.3 million) increased 8.2%.
Gross operating profit amounted to €402.6 million, down 21.5% (-8.4% excluding integration costs) over the same period of 2006.
Value adjustments and provisions amounted to €239.1 million versus €110.7 million in 2006. Specifically, provisions for risks and charges amounted to €45.4 million versus €14.9 million in the third quarter of 2006; write-downs of impaired loans amounted to €184.8 million versus €114.2 million in 2006; and write-downs of impaired financial assets amounted to €8.9 million.
Net operating profit amounted to €163.4 million (€230.4 million excluding integration costs) versus €402.1 million in the third quarter of 2006.
Gains from disposal of investments amounted to €24.7 million versus €13.3 million in 2006.
Pre-tax profit amounted to €188.1 million (-54.7%).
After €105.2 million income taxes for the period (vs. €172.6 million in the third quarter of 2006) and €0.7 million in minority interests, consolidated net profit amounted to €82.2 million versus €241 million in the third quarter of 2006.
BALANCE SHEET DATA AT SEPTEMBER 30, 2007 AND COMMERCIAL ACTIVITIES IN THE FIRST 9 MONTHS OF 2007
As far as Balance Sheet data at September 30, 2007 are concerned, customer loans amounted to €105,408 million, growing 13.4% from €92,980 million at September 30, 2006.
Customer funding reached €99,691 million progressing 10.5% from €90,232 million at September 30, 2006.
Despite the notable increase in customer loans, net doubtful loans (watchlist and non-performing loans) remained almost unchanged year on year (+0.3%) at €4,382 million. Doubtful loans accounted for 4.2% of total customer loans down from 4.7% in the past year. Specifically, compared to September 2006, net watchlist loans declined 5.1% to €952 million, while net non-performing loans slightly increased (2.0%) to €3,429 million. Coverage of doubtful loans declined from 62.9% at September 30, 2006 to 61.6%. Specifically, coverage of non-performing loans was 66.2% and coverage of watchlist loans was 25.8%.
As to the soundness of the equity base, at September 30, 2007, the tier 1 ratio amounted to 6.3%.
For the first nine months of the year the Capitalia Group reported €3,448 million in sales of Wealth Management products. The 19% decline over the first nine months of 2006 was exclusively due to the outflows reported for asset management products (€-2,509 million). The outflows recorded by the Group captive networks in the third quarter confirm the negative trend of the first half of the year and reflect the worsening of the US subprime mortgage crisis and stock market volatility. In the third quarter, the Group continued to refine its product offering by introducing multi-manager solutions for certain UCITIS (Non-European Equity Funds and Flexible Funds), as well as by restructuring products included in discretionary accounts investing in securities.
For the first nine months of the year bancassurance products amounted to €2,540 million progressing 14%. In the life insurance segment, the Group launched initiatives geared to improve the product mix and service level.
Good news came also from bond sales made through the Group networks, which amounted to €3,039 million growing about 9% over the same period of 2006. Also in the bond segment there was an improvement of the product mix with an increase in sales of structured notes.
Ethical credit cards continued to sell well, and they accounted for over 60% of new credit cards issued.
Statement by the Officer responsible for preparing corporate accounting documents
The undersigned, Ranieri de Marchis, the Officer responsible for preparing UniCredit S.p.A. accounting documents
in compliance with the requirements of the second paragraph of section 154 bis of the "Consolidated Finance Act" that, to the best of his knowledge, the Consolidated Quarterly Report at September 30, 2007 reflects the accounting entries, records and the books.
For a more immediate understanding of financial results, the consolidated reclassified income statements for the first nine months of 2007 and for the third quarter 2007 are attached hereto together with the reconciliation of the income statement to the reclassified income statement as well as the Capitalia S.p.A. consolidated income statement with references for reconciliation to the UniCredit S.p.A consolidated income statement. The Quarterly Report at September 30, 2007 (unaudited) will be made available to the shareholders and the market under the terms set forth in art. 82, paragraph 2 of Consob Resolution No. 11971 of May 14, 1999 as subsequently amended.
Milan, November 14, 2007
Tel. +39-02-88628715; e-mail: firstname.lastname@example.org
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Capitalia quarterly report at September 30, 2007 approved
CAPITALIA QUARTERLY REPORT AT SEPTEMBER 30, 2007 APPROVED