CONSOLIDATED RESULTS FOR THE FIRST NINE MONTHS OF 2009: NET PROFIT OF €1,331 MILLION, OPERATING PROFIT UP 25.1% YoY ON A LIKE-FOR-LIKE BASIS, CORE TIER I AT 7.55% (8.39% PRO-FORMA FOR THE CAPITAL INCREASE (1)) AND IMPROVEMENT IN THE STRUCTURE OF THE BALANCE SHEET
FIRST NINE MONTHS 2009:
- The Group's ability to face the difficult macroeconomic situation confirmed: Group's portion of net profit €1,331 million
- Operating income €21,129 million, +7.0% YoY on a like-for-like foreign exchange and perimeter basis
- Operating profit €9,608 million, +25.1% on a like-for-like foreign exchange and perimeter basis
- Reduction of total assets, trading activities and risk weighted assets continues
- Core Tier 1 up at 7.55%. Tier 1 at 8.39%. Pro - forma the capital increase announced on September 29th, 2009: Core Tier 1 at 8.39% and Tier 1 at 9.24%
THIRD QUARTER 2009:
- Group's portion of net profit €394 million, versus €490 million in 2Q09
- Operating income €6,731 million, with a quarterly trend which shows growth in net commissions, trading income which is once again at solid levels and lower net interest income (also due to lower non-recurring items)
- Operating costs total €3,831 million, down again QoQ, with the cost/income ratio at 56.9%
- Loan loss provisions of €2,164 million, with the cost of risk down from the high of 164 bp in Q209 to 150 bp
- Operating profit €2,900 million, less than the excellent 2Q09 result but up 12.1% YoY
- 70 bp of Core Tier 1 generated in the quarter; increased capital and fewer asset result in a further improvement in the leverage ratio (2), which reaches 25.4 (23.0 pro-forma for the capital increase)
The Board of Directors of UniCredit approved the consolidated results for the first nine months of 2009 which show a net profit of €1,331 million (mn), €394 mn of which recorded in the third quarter. The quarterly performance confirms the Group's ability to generate both profit and capital, but also includes trading income which is less than the exceptional levels recorded in second quarter 2009 and reflects the negative effects on the deposit margin of very low interest rates. Third quarter 2009 also shows a slowdown in the growth of impaired loans and a further improvement in the balance sheet structure, placing the Group in an excellent position to benefit from improvements in the global macroeconomic conditions.
The performance of the third versus the second quarter of the year shows several interesting developments including the increase in net commissions, the solid hold of net trading, hedging and fair value income and a further drop in operating costs. There is, on the other hand, a drop QoQ in net interest income.
Operating income reaches €21,129 mn in the first nine months of 2009, an increase of 7.0% YoY on a like-for-like foreign exchange and perimeter basis, and €6,731 mn in third quarter 2009, an increase of 5.9% YoY on a like-for-like foreign exchange and perimeter basis but down - also linked to seasonal effects and non-recurring items - with respect to the exceptional result recorded in the second quarter.
Net interest amounts to €13,287 mn in the first nine months of 2009, showing a solid trend YoY (+3.0% on a like-for-like foreign exchange and perimeter basis) despite the gradual impact of declining interest rates and the elimination, in third quarter 2009, of overdraft charges. Net interest amounts to €3,927 mn in the third quarter, a decrease of €783 mn with respect to second quarter 2009, due also to the lack of several non-recurring items.
Net commissions total €5,666 mn in the first nine months of 2009, down with respect to the €7,003 mn recorded in the same period of the prior year due to a sector wide drop in the volume of the assets managed (which had a negative impact on commissions from asset management, custody and administration). Net commission's performance, however, QoQ continues to show signs of recovery; both third and second quarter 2009 show growth on the prior quarter (net commissions in third quarter 2009: €1,931 mn; in second quarter 2009: €1,889 mn; in first quarter 2009: €1,846 mn). Furthermore, in third quarter 2009 both commissions from asset management, custody and administration and other commissions record an increase (rising 0.5% QoQ and 3.3% QoQ, respectively). At September 30th, 2009 the volume of the assets managed by the Group's Asset Management Division amounts to €172 billion (bn), an increase of 7.4% QoQ.
Net trading, hedging and fair value income in the first nine months of 2009 amounts to €1,651 mn, a noticeable improvement on the -€730 mn reported in the same period 2008. In third quarter 2009 net trading, hedging and fair value income amounts to €715 mn, above the quarterly levels recorded in 2008, in first quarter 2009 and only below 2009's exceptional second quarter: thus confirming the Group's ability to take advantage of the benefits offered by the improved market conditions, while continuing to reduce risk.
Other net income in the first nine months of 2009 drops with respect to the €379 mn reported in the first nine months of 2008 to €304 mn (€95 mn of which in the third quarter).
The operating costs amount to €11,521 mn in the first nine months of 2009, a decided drop over the first nine months of 2008 (-8.0% YoY and -4.9% on a like-for-like foreign exchange and perimeter basis). Operating costs in third quarter 2009 amount to €3,831 mn, a decline over the €3,868 mn reported in the second quarter.
Payroll costs drop in the first nine months of 2009 by 6.9% YoY like-for-like to €6,821 mn. With regard to third quarter 2009 there is a drop of 5.1% YoY on a like-for-like foreign exchange and perimeter basis and a slight increase on the prior quarter (which was positively impacted by non-recurring items related to the release of charges booked in 2008).
Other administrative expenses, net of recovery of expenses, reach €3,769 mn in the first nine months of 2009, a clear drop with respect to the €4,026 mn recorded in the same period 2008. In third quarter 2009 the item reaches €1,230 mn, a drop with respect to the €1,314 mn recorded in the prior quarter due, in part, to a decrease in the VAT charged in intra-group operations (down €46 mn QoQ).
Amortization, depreciation and impairment losses on intangible and tangible assets amount to €931 mn in the first nine months of 2009, compared to €959 mn in the same period 2008. In third quarter 2009 the figure reaches €325 mn, compared to €305 mn in second quarter 2009 and €326 mn in third quarter 2008.
The cost/income ratio comes in at 54.5% in the first nine months of 2009 (56.9% in third quarter), an improvement compared to the same period of the prior year (60.2%).
Operating profit in the first nine months of 2009 reaches €9,608 mn, €2,900 mn of which recorded in the third quarter (which is above the first quarter but below the excellent second quarter).
The provisions for risks and charges rise YoY to €377 mn in the first nine months of 2009, €154 mn of which recorded in the third quarter, largely in line with the prior quarter.
Net write-downs of loans and provisions for guarantees and commitments in the first nine months of 2009 amount to €6,245 mn, equivalent to a cost of risk of 141 basis points. In third quarter 2009 the item drops from the €2,431 mn reported in second quarter 2009 to €2,164 mn, despite provisions of €249 mn in the Kazakhstan subsidiary.
Gross impaired loans at the end of September 2009 total €53.5 bn showing a slower growth rate QoQ of 7.8% (compared to 10.7% in second quarter 2009). The lower growth rate relates to both gross NPLs and less severe categories. Compared to the other quarters of 2009, the restructured loans have stabilized, while gross doubtful loans and gross NPLs increase (by respectively 14.4% and 6.2%).
The coverage ratio of total gross impaired loans at September 2009 is 49.1%, reflecting a coverage ratio of NPLs of 62.7% and of other problem loans equal to 27.4%.
Integration costs amount to €321 mn in the first nine months of 2009, attributable primarily to second quarter 2009 (in third quarter 2009 the figure amounts to €12 mn). The increase in 2009 is linked largely to the strong commitment to greater staff efficiencies: at the end of September 2009 future rationalization, which has already been agreed upon and which should be completed by 2010, involving approximately 3,800 heads (3) had already been expensed to the income statement.
Net investment income totals €15 mn in the first nine months of 2009, an increase of €2 mn compared to the same period of the prior year. Net investment income in third quarter 2009 is a positive €181 mn (thanks, above all, to capital gains on the disposal of real estate assets), compared to -€133 mn in second quarter 2009.
Income tax for the period amounts to €885 mn in the first nine months of 2009 (€1,476 mn in the same period of the prior year), with a tax rate of 33.0%. Income tax in third quarter 2009 amounts to €188 mn.
Minorities in the first nine months of 2009 amount to €269 mn compared to €407 mn in the first nine months of 2008, which still did not reflect fully the purchase of the minority interests in HVB and UniCredit Bank Austria. In third quarter 2009 minorities amount to €103 mn (€90 mn in the previous quarter).
The impact of the Purchase Price Allocation drops with respect to the -€226 mn in the first nine months of 2008 and in the first nine months amounts to -€195 mn, -€66 mn of which attributable to the third quarter.
In the first nine months of 2009, the Group's portion of net profit totals €1,331 mn compared to €3,507 mn in the same period of the prior year which benefited, above all in the first two quarters, to a markedly more favorable macroeconomic scenario. The third quarter shows a much more contained drop as net profit falls from the €490 mn recorded in second quarter 2009 and the €447 mn recorded in first quarter 2009 to €394 mn.
Total assets amount to €958 bn at September 2009 (€983 bn at June 2009) with a further decline of 2.5% QoQ which brings the drop from the beginning of 2009 to 8.4% (-€88 bn). Please note that the reduction in the balance sheet items was achieved by paying special attention to certain areas. From the beginning of the year the trading assets have been reduced by €59 bn, reaching €146 bn at the end of September (with a decline of 7.4% QoQ in third quarter 2009) and €58 bn net derivatives. Net interbank funding falls by 72.3% from the beginning of the year to €27 bn (a drop of €70 bn, €23 bn of which in the third quarter). Due to the decline in total assets and the increase in net equity, the Group's leverage ratio (4) in third quarter 2009 shows further improvement reaching 25.4 (23.0 pro-forma the capital increase announced on September 29th, 2009).
The Core Tier 1 ratio for third quarter 2009 shows a decided increase, rising from 6.85% at June 2009 to 7.55% at September 2009, an increase of an impressive 70 basis points QoQ due to the positive performance of net profit, reserves and RWAs. The risk weighted assets show a further decline falling €26.5 bn QoQ to €459.3 bn with a drop QoQ of 35.9% in the assets weighed for market risk, as well as a drop in assets weighted for credit risk (above all in CIB). The Tier 1 ratio is 8.39% with a Total Capital Ratio of 12.08%. Pro-forma the capital increase announced on September 29th, 2009 - and before any decision on dividend distribution - Core Tier 1 is 8.39% and Tier 1 is 9.24%, a level which will makes it possible to finance future recovery.
At the end of September 2009 the Group's organization consists of a staff (5) of 166,421, a further reduction of 1,586 over June 2009 and of 8,098 over December 2008. The reduction in the first nine months of 2009 involves all the business areas.
The Group's network at the end of September 2009 consists of 9,892 branches (9,974 at June 2009 and 10,251 at December 2008).
1) Calculated as Core Tier I as of September 30, 2009 plus capital increase net of estimated costs.
2) Calculated as the ratio of total assets net of goodwill and other intangible assets (the numerator) and net equity (including minorities) net of goodwill and other intangible assets (the denominator).
3) The reduction refers to "Full time equivalent"
4) Calculated as the ratio of total assets net good will and other intangible assets (the numerator) and net equity (including minorities) net goodwill and other intangible assets (the denominator).
5) "Full time equivalent ".In the figures reported the companies consolidated proportionately, including the KFS Group, are included at 100%.
Attached are the Group's key figures, the consolidated balance sheet and income statement, the quarterly progression of the consolidated income statement and balance sheet, the third quarter 2009/2008 income statement comparison, and the major divisional results.
Milan, November 11th, 2009
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