UNICREDIT GROUP: CONSOLIDATED RESULTS FOR FIRST QUARTER 2009 APPROVED
NET PROFIT OF €447 MILLION, OPERATING PROFIT UP 27.3% YoY AND 51.9% QoQ ON A LIKE-FOR-LIKE BASIS THANKS TO DIVERSIFICATION AND COST CONTROL
- Net profit attributable to the Group of €447 million
- Operating profit of €2,740 million, +27.3% YoY and +51.9% QoQ on a like-for-like foreign exchange and perimeter basis, sustained by the solid performance of commercial banking (1) and Markets and Investment Banking (MIB) recovery
- Good control of operating costs, down 2.8% YoY and 6.4% QoQ on a like-for-like foreign exchange and perimeter basis
- Cost of risk 109 bp, a slight increase compared to the 105 bp (2) recorded in fourth quarter 2008, reflecting net write-downs of loans equal to €1,650 million; NPLs unchanged QoQ
- Measures to contain risk continue: total assets, trading activities and RWAs down QoQ
- Core Tier 1 of 6.38% (without any Government bond)
The Board of Directors of UniCredit approved the consolidated results for first quarter 2009 which show a net profit of €447 million (mn), down with respect to the €505 mn recorded in fourth quarter 2008 primarily due to the lack of non recurring tax benefits. Profit before tax, in fact, amounts to €922 mn, a rise of more than €1 billion (bn) QoQ.
Operating profit in first quarter 2009 reaches €2,740 mn, an increase with respect to €2,311 mn in first quarter 2008 and €1,903 mn in fourth quarter 2008. The improvement over the previous quarter is attributable to both greater revenues (thanks to the recovery in net trading income which in fourth quarter 2008 was impacted by the severe financial crisis) and to effective cost control (operating costs decline by 6.4% QoQ on a like-for-like foreign exchange and perimeter basis).
The solid trend in operating profit reflects the importance of diversification for the Group which benefited from the sound performance of commercial banking and recovery, with respect to previous quarters, of the Markets & Investment Banking (MIB) Division. More in detail, commercial banking shows a steady operating profit (-0.4% QoQ), while MIB recovered from the exceptionally turbulent markets in fourth quarter 2008, reporting a positive operating profit of €367 mn in first quarter 2009, a net improvement over the -€690 mn reported in first quarter 2008 and the -€953 mn reported in fourth quarter 2008.
UniCredit Group's operating income, equal to €6,562 mn in first quarter 2009, rises 1.8% YoY and 8.0% QoQ, primarily due to the recovery of net trading, hedging and fair value income which offsets the unfavorable trend of a few currencies. The foreign exchange effect, in fact, weighed quite heavily on operating income: on a like-for-like foreign exchange and perimeter basis there would have been a decided growth trend, +8.1% YoY and +11.8% QoQ.
Net interest amounts to €4,650 mn in first quarter 2009 which shows solid development YoY (+4.2%, +10.2% on a like-for-like foreign exchange and perimeter basis) and steadiness QoQ (-3.6%, -0.5% on a like-for-like foreign exchange and perimeter basis). The trend with respect to fourth quarter 2008 reflects primarily the foreign exchange dynamic and fewer floating days. Net these effects, the renegotiation of conditions affecting assets and the good performance of MIB (benefiting also from stronger trading related interest) effectively offset the negative impact of the decline in market interest rates in a scenario where volumes were slightly off.
Net commissions total €1,846 mn in first quarter 2009 compared to €2,460 mn in first quarter 2008 and €2,090 mn in fourth quarter 2008. The drop YoY is primarily attributable to the decline in commissions from asset management, custody and administration which reflects a sector wide drop in volumes. At March 31st, 2009 the volume of the assets managed by the Group's Asset Management Division amounted to €154.2 bn. The QoQ trend in commissions is explained primarily by a slowdown in corporate services, which in the fourth quarter 2008 enjoined the best quarter of the year.
Net trading, hedging and fair value income is negative (-€93 mn) in first quarter 2009 though to a much smaller extent than in first quarter 2008 (-€683 mn) and in fourth quarter 2008 (-€1,258 mn) showing a positive reaction to market conditions which were less extreme than in previous quarters.
Other net income amounts to €105 mn compared to €134 mn in first quarter 2008 and -€11 mn in fourth quarter 2008.
Operating costs of €3,822 mn are down decidedly down both YoY (-2.8%) and QoQ (-6.4%) on a like-for-like foreign exchange and perimeter basis. The positive trend is linked to both continued efficiencies in terms of staff and to the Group's strong commitment to contain other expenses.
Payroll costs drop by 4.2% YoY and by 1.8% QoQ on a like-for-like basis to €2,296 mn in first quarter 2009, thanks above all to the optimization of human resources and the reduction in variable compensation linked to results.
Other administrative expenses, net recovery of expenses, amount to €1,225 mn in first quarter 2009, a drop both YoY and QoQ (-1.2% and -12.8%, respectively, on a like-for-like foreign exchange and perimeter basis), due to both cyclical (for example, marketing and entertainment expenses) and structural improvements (for example, optimization of IT costs and expense processing).
Amortization, depreciation and impairment losses on intangible and tangible assets grow 2.6% YoY on a like-for-like basis in first quarter 2009 but down with respect to the prior quarter.
The cost/income ratio comes in at 58.2% in first quarter 2009, a remarkable improvement over both first quarter 2008 (6 percentage points) and fourth quarter 2008 (10.5 percentage points).
The provisions for risks and charges total €68 mn, an increase of €51 mn over first quarter 2008 but down with respect to the €165 mn recorded in fourth quarter 2008.
Net write-downs of loans and provisions for guarantees and commitments total €1,650 mn, a slight increase (+1.4%) over the prior quarter, net the €300 mn of reserves released in fourth quarter 2008 in Germany. The cost of risk is also unchanged QoQ (109 bp in first quarter 2009, 105 bp proforma after the above mentioned adjustments in fourth quarter 2008).
Regarding the trend in cost of risk by business division, the drop in MIB's cost of risk with respect to fourth quarter 2008 offsets the rise in the CEE area and the effects of the macroeconomic slowdown on the Retail and Corporate Divisions.
Gross impaired loans at the end of March 2009 total €44.8 bn, an increase over the €41.8 bn recorded at the end of December 2008, due to further growth in watchlisted loans and the less severe categories overall which reflects the macroeconomic slowdown. Gross NPLs are rather stable QoQ (-0.2% at €28.7 bn).
The coverage ratio of total gross impaired loans at March 2009 is 51.6%, reflecting a coverage ratio of NPLs of 65.3% (improving versus 63.6% at December 2008) and of other problematic loans equal to 27.1% (28.0% at December 2008).
Integration costs amount to €67 mn, an increase over both the €24 mn recorded in first quarter and the €31 mn recorded in fourth quarter 2008, linked largely to the reorganization of the MIB Division.
Net investment income totals approximately -€33 mn, with a contribution to income which is noticeably less with respect to first quarter 2008 (€185 mn) and fourth quarter 2008 (€213 mn).
Income tax for the period amounts to €334 mn in first quarter 2009 compared to €457 mn in first quarter 2008 and the positive tax effect of €849 mn in fourth quarter 2008 (due to a tax benefit of €1,001 mn following a change in Italian regulations regarding the treatment of goodwill for tax purposes). The tax rate in first quarter 2009 amounts to 36.2%, an increase over both first and fourth quarters 2008.
Minorities at the end of March 2009 total €76 mn compared to €161 mn in first quarter 2008, which still did not reflect the purchase of the minority interests in Bayerische Hypo- und Vereinsbank (HVB) and UniCredit Bank Austria, and to €111 mn in fourth quarter 2008.
The impact of Capitalia's Purchase Price Allocation reaches -€65 mn in fourth quarter 2009, down with respect to -€76 mn in first quarter 2008 and -€75 mn in fourth quarter 2008.
The net profit attributable to the Group comes in at €447 mn compared to €1,063 mn in first quarter 2008, which did not fully reflect the impact of macroeconomic deterioration, and €505 mn in fourth quarter 2008.
Total assets amount to €1,028 bn (€1,046 bn at December 2008), a further decline despite the mark-to-market of economic hedging instruments (compensated by a similar trend in terms of liabilities). Total assets net hedging instruments show a decline of 2.9% in first quarter 2009, in addition to the -5.9% recorded in fourth quarter 2008.
Core Tier 1 ratio moves to 6.4% (from 6.5% at December 2008), without any Government bond, due to the unfavorable trend in FX and AFS reserves which had a negative impact of 14 bp (already partially recovered after the close of the quarter). Net these effects the Core Tier 1 ratio is up by 7 bp, sustained by income and the drop in RWAs (still down, 1.7% QoQ). The Tier 1 ratio comes in at 7.2% and Total Capital Ratio at 11.1%.
At the end of March 2009, the Group's organization consists of a staff (3) of 170,732, a decided reduction (-2.2%) over the 174,519 heads at December 2008. In first quarter 2009 the reduction reaches 3,787 heads, with the largest decreases in Retail, the CEE area and the Corporate Centre.
The Group's network at the end of March 2009 consists of 10,131 branches (10,251 at December 2008).
Attached are the Group's key figures, the consolidated balance sheet and income statement, the quarterly progression of the consolidated balance sheet and income statements and the major divisional results.
Milan, May 13th, 2009
1) Retail, Corporate, CEE Region and Private Banking
2) Proforma €300 million of reserves released in Germany
3) "Full time equivalent", calculated according to a new methodology which does not include unpaid leaves. In the figures reported the companies proportionately consolidated, including the KFS Group, are included at 100%.