Ad-hoc-Meldung / Ad hoc Release
nach § 15 WpHG / pursuant to § 15 of the German Securities Trading Act
CONSOLIDATED FIRST QUARTER 2007 RESULTS APPROVED
UNICREDIT'S RESULTS FEATURE ROBUST GROWTH THANKS TO INTEGRATION WITH THE HVB GROUP
NET PROFIT UP 29% YOY, SIGNIFICANT VALUE CREATION IN LINE WITH STRATEGIC PLAN OBJECTIVES
UNICREDIT COMMENTS ON RECENT RUMORS
- Strong growth in the net profit attributable to the Group: €1,780 million, approximately +29% YoY
- EVA (1) of approximately €1 billion
- Excellent operating results (operating profit of €3,191 million, approximately +20% YoY) sustained by the increased revenues reported by all the divisions and good cost control, more in detail:
Operating costs €3,386 million, +1.9% YoY
- Cost/Income Ratio down to 51.5%, - 4 pp YoY
- Significant reduction in total net impaired loans in absolute terms (-5.6% compared to the end of 2006) and on total customer loans (3.0% at March 2007 versus 3.23% at the end of 2006)
- Assets under management by the Group exceed €250 billion (+9.2% YoY)
- Core Tier 1 at 5.99%, an increase of 17 bp on Dec06
The Board of Directors of UniCredit met on May 9th, 2007, and approved the Group's consolidated results for first quarter 2007 (2), which show a net profit of €1,780 million (mn), an increase of 28.8% on the corresponding period in the previous year (+33.1% on a like-for-like foreign exchange and perimeter basis). ROE (3) is 19.7% (compared to 17.0% in first quarter 2006). EVA generated in the quarter of approximately €1 bn (986 mln, +74% YoY). The operating profit (€3,191 mn) rose noticeably by approximately 20% circa YoY (+21.3% YoY on a like-for-like foreign exchange and perimeter basis), attributable to a positive contribution from all Divisions (including the Markets & Investment Banking (MIB) Division: +19.5% YoY, the Retail Division: +17.5% YoY, the Private & Asset Management Division: +11.6% YoY) and the decidedly robust performance in the CEE area (the Poland Markets Division rose by +20.4% at constant FX, while the Central Eastern Europe (CEE) Division was up by +28.2% at constant FX).
The Group's operating income reached €6,577 mn, approximately +10% YoY (+11.6% YoY on a like-for-like foreign exchange and perimeter basis), due to growth in both net interest income (€3,347 mn, +9.1% YoY, +10.8% on a like-for-like foreign exchange and perimeter basis) and net non-interest income (€3,230 mn, +10.7% YoY, +12.5% on a like-for-like foreign exchange and perimeter basis).
Net interest, forming part of net interest income, grew by 9.3% YoY (+11.0% on a like-for-like foreign exchange and perimeter basis) to €3,237 mn thanks primarily to a rise in the volumes intermediated with customers and to an increase in the market interest rates that resulted in a widening of the spread above all in terms of deposits.
Net customer loans for the Group totaled €449 billion (bn) (+1.7% when compared to the end of 2006).
The growth in the quarter was sustained by the Corporate and MIB Divisions, while the reduction in the allocation of non strategic assets to the German Corporate Centre continued.
The positive trend in consumer credit (+4% in the quarter, +33% over March 2006) and leasing (+8% as of December 2006, +13% in the last twelve months) continued; the stock of mortgages was basically unchanged, due to a slowdown in new production and the sale of assets in Germany.
Total Group customer deposits (excluding securities) amount to 294 bn, an increase of approximately 2% on December 2006.
Net commissions (€2,275 mn) rose by 6.7% YoY (+8.5% YoY on a like-for-like foreign exchange and perimeter basis), particularly in the CEE area (CEE Division: +22.5% YoY, Poland's Markets Division: +10.0% YoY, both changes on a like for like foreign exchange basis) and in the Corporate Division (+8.1% YoY). The most dynamic components in this category were fees linked to collection and payment services (€362 mn, +29.7% YoY) and fees from forex dealing (€154 million, +23.2% YoY). Fees from asset management, rather, grew by 3.2% YoY and reflect a drop in up-front and performance fees, though the positive trend in recurring fees linked to the increase in volumes under management continues.
At the end of March 2007, in fact, volumes of the assets managed by the Group's asset management companies exceeded €250 bn, with a significant increase in the last twelve months (+9.2%). Net inflows for the quarter were positive at €2.5 bn, thanks to the decisive contribution of the US and other international markets where the Group is active that more than compensated for the unfavourable Italian market scenario (market share: 15.43% at March 2007, substantially in line since the beginning of the year). The total financial assets of the Private Banking Area amount to €187.4 bn, up 2.1% on December 2006.
Net trading, hedging and fair value income equal to €830 mn, showed a significant increase YoY (+19.8% YoY, +21.0% on a like-for-like foreign exchange and perimeter basis), largely due to fair value valuation of the Generali option, that had a positive impact of €58 mn in first quarter 2007 (- 57 mn in first quarter 2006) and the results reported by the Markets & Investment Banking Division (€609 mn, approximately +10% YoY).
Other net income totalled €125 mn, an increase of €33 mn YoY.
Operating costs came in at €3,386 mn, up 1.9% YoY, due to restructuring and efficiencies, on the one hand, and development projects, on the other. This item includes an increase in staff costs (€2,044 mn, +4.8% YoY) attributable to the decided increase in CEE Division staffing during the previous year (above all in Russia and Hungary) and increased incidence of the variable components linked to business results, in particular in the MIB Division and in the Parent Company.
Other administrative costs (€1,120 mn) were basically in line with the previous year (-0.3% YoY, +1.4% on a like-for-like foreign exchange and perimeter basis). This result comes from the improvement of the efficiency, above all in Austria, as well as the previously mentioned expansion of business in CEE and increased costs attributable to the outsourcing of several back office and IT services in Germany.
Amortisation, depreciation and impairment losses on intangible and tangible assets (€287 mn) dropped 6.2% YoY, (-4.3% on a like-for-like foreign exchange and perimeter basis) thanks primarily to the end of the amortisation and depreciation period of IT investments made in Austria at the time of the Bank Austria and CreditAnstalt aggregation.
The cost/income ratio improved noticeably from 55.5% at March 2006 to 51.5% at March 2007, fully in line with the targets outlined in the strategic plan.
Profit before tax totalled €2,792 mn, a notable increase over the previous year (+23.5%) thanks also to an increase in the contribution from income from investments (€226 mn, +27.7% YoY) that more than offset the provisions for risks and charges (€44 mn compared to €64 mn in first quarter 2006) and integration costs (€16 mn). The latter includes restructuring charges in Poland and in other CEE countries, as well as rebranding expenses.
The most significant amounts comprising net income from investments in first quarter 2007 include gains from the sale of IndExchange in Germany (approximately €140 mn) and the shares held by BPH (approximately €45 mn) in Commercial Union.
Net write-downs of loans and provisions for guarantees and commitments at the end of March 2007 totaled €565 mn (+9.7% YoY). This increase would be less than 1% YoY if the positive non-recurring impact reported in 2006 due to the Purchase Price Allocation were excluded and reflects increased volumes and greater coverage of impaired loans in Germany.
As regards the trend in asset quality, there was a continuation of the improvement started at the end of 2005, with a further reduction in the Group's net impaired loans (equal to €13,479 mn) falling by 5.6% on December 2006 (-25.8% on December 2005) thanks to a drop in non-performing and restructured loans. The most significant contributions came from Austria, Germany and CEE. The total impaired loans/net customer loans fell from 3.23% at the end of 2006 to 3.00% at March 2007 (4.26% at the end of 2005), with an improved coverage ratio to 50.6% (48.9% at December 2006).
Net non-performing loans totaled €6,424 mn, down 5.7% on December 2006, restructured loans amounted to €2,522 mn, -16.1% when compared to December 2006.
Income tax for the period was 14.5% higher YoY at €821 mn, translating to a tax rate of 29.4%, down compared to 31.7% in 1Q06.
Net profit, therefore, amounted to €1,971 mn (+27.7% YoY).
Minorities totaled €191 mn at the end of March 2007, compared with €184 mn in the corresponding period of 2006.
Net profit attributable to the Group totaled €1,780 mn, an increase of €398 mn (+28.8%) when compared to first quarter 2006, amply achieving the objectives that the Group indicated in the strategic plan presented in July 2006.
The Group's portion of net equity amounted to €40,339 (€38,468 mn at the end of December 2006).
Core Tier 1 equaled 5.99%, an improvement of approximately 17 bp on December 2006 (5.82%). The Total Capital Ratio reached 10.60% (10.50% at December 2006).
At the end of March 2007 the Group's organisation consisted of a staff of 135,857 (-1,340 heads when compared to December 2006). This total is the result of a combination of different factors: on the one hand, the reduction in personnel following the outsourcing of several operations, the exit of companies from the Group (resulting in the reduction of 765 heads), efficiencies in the Retail Division (-353 heads) as well as in the CEE area excluding Russia (-537), in the Corporate Centre and GBS (-534); and on the other hand, an increase in resources due to the inclusion of new companies in the perimeter of consolidation (+335 heads), along with growth initiatives (+514 heads) mainly in Russia, in Leasing and in Retail Italia.
The Group's network consists of 7,414 branches (5) (+57 on December 2006).
UniCredit's Board of Directors also began the process for the incorporation of UBM in the Parent Company and resolved to approve the relative merger plan, approved previously by UBM's BoD last May 2nd.
UNICREDIT COMMENTS ON RECENT RUMORS
In relation to the recent rumors on potential strategic combinations, UniCredit looks regularly at any option that can create value for its shareholders and also Capitalia might have such characteristics. However, currently there are no concrete plans.
1) EVA: Economic Value Added, equal to the difference between the NOPAT (net operating profit after taxes) and the cost of capital
2) The main changes in the scope of consolidation that took place after the close of FY 2006 are attributable to the HVB Group, with the addition of 3 companies in the Retail Division (Planethome AG and the subsidiaries Planethome GMBH and Enderlein) and the exit of Indexchange and HVB Payments & Services GMBH. When compared to first quarter 2006, other most significant changes in the scope of consolidation between March and December 2006 refer to, on the one hand, the entry of HVB Capital Partners AG and the 19 companies controlled by BA-CA, 17 of which comprise the real estate sub-group "Universale International Realitäten GmbH", and on the other, the sale of Splitska Banka, Uniriscossioni, 2S Banca and Banque Monegasque de Gestion. The main assets classified pursuant to IFRS 5 as "Non current assets and disposal groups for sale" in the financial statements at March 30th, 2007 are "BPH200", the business of BPH Bank that will be sold and Istratourist, a subsidiary of Zagrebacka Banka active in tourism and so classified as of December 2006
3) Calculated on the basis of the average shareholders' equity for the period (excluding dividends to be distributed, reserves for AfS assets and hedge cash flows)
4) "Full time equivalent ", calculate according to a new methodology which does not include unpaid leaves. In the figures reported the KFS Group, proportionately consolidated, is included at 100%. If the KFS Group is considered proportionately, the total consolidated amounts to €126,459 at the end of March 2007 and €127,731 at the end of December 2006.
5) In the figures indicated the KFS Group, proportionately consolidated, is included at 100%.
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, May 10th, 2007
UniCredito Italiano S.p.A.
Via San Protaso 1/3
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Attached are the Group's key figures, the Group's reclassified balance sheet and income statement, the Group's reclassified quarterly income statements for 2006 and first quarter 2007 and the main Divisional Results, which are not subject to certification by the Independent Auditors.