THE UNICREDIT GROUP IN FIRST QUARTER 2010: NET PROFIT OF €520 MILLION, AN INCREASE BOTH QoQ AND YoY. SOLID PERFORMANCE OF REVENUES, LOAN LOSS PROVISIONS DOWN
- The Group's portion of net profit: €520 million,+40.1% QoQ and +16.5% YoY
- Operating income: €6,806 million, +5.6% QoQ and +3.7% YoY; the quarterly trend confirms growth in net commissions and the stabilization of net interest, with trading income more than triple the 4Q09 level
- Operating costs: €3,878 million, with the cost/income ratio showing improvement both QoQ and YoY at 57.0%
- Operating profit: €2,928 million, +10.9% QoQ and +6.9% YoY
- Loan loss provisions decline further to €1,791 million, with cost of risk dropping for the third quarter in a row to 127 bp, 37 bp below the 2Q09 peak
- Solid balance sheet structure: equity (net of intangible assets) per share back to pre-capital increase levels, the leverage ratio shows further improvement coming in at 21.6
- Core Tier 1 ratio of 8.45%, basically unchanged QoQ
The Board of Directors of UniCredit approved the consolidated results for first quarter 2010 which show the Group's portion of net profit at €520 million, increasing both QoQ (+40.1%) and YoY (+16.5%). UniCredit Group's exposure to sovereign bonds of Greece, Spain, Ireland and Portugal, as of March 31, 2010, was of around €1,6 billion overall. Furthermore, the UniCredit Group announces that it has appointed BofA Merrill Lynch and its Corporate and Investment Banking Division to explore all strategic options to maximise Pioneer's overall franchise value.
First quarter 2010 features the consolidation of several positive elements that emerged in previous quarters, which include: the growth of net commissions, stabilization of net interest, and a decline in loan loss provisions. The quarter also stands out for the significant increase in net trading, hedging and fair value income which is more than triple with respect to the prior quarter.
In first quarter 2010 operating income rises 5.6% QoQ to €6,806 million, with all the main components recording a solid performance. With respect to the same quarter in 2009 there is also an increase of 3.7% YoY.
Net interest amounts to €3,917 million in first quarter 2010, a drop YoY when compared to the €4,650 million recorded in first quarter 2009, but basically unchanged with respect to the €4,017 million recorded in fourth quarter 2009.
Net commissions in first quarter 2010 continue to show gradual strengthening, rising both QoQ (+2.6%) and YoY (+17.5%) to €2,169 million. As in the prior quarter, both commissions from asset management, custody and administration and other commissions record an increase QoQ (+6.1% and +0.2% respectively). At March 31st 2010, the assets managed by the Group's Asset Management Division amount to €185.4 billion, an increase of 5.5% QoQ and with a positive trend in net sales.
Net trading, hedging and fair value income in first quarter 2010 amounts to €560 million, a significant increase with respect to the €151 million reported in fourth quarter 2009 and the -€94 million reported in the same period of the prior year. The excellent quarterly performance is attributable to strong growth in the revenues from Fixed Income and Currencies in Markets business.
Other net income of €99 million are in line with the €105 million recorded in the same period of the prior year.
Operating costs amount to €3,878 million in first quarter 2010, compared to €3,803 million in fourth quarter 2009 and €3,822 million in first quarter 2009. The increase QoQ of +2.0% is primarily attributable to currency and perimeter effects (+1.2% at constant FX and perimeter), variable charges and a drop in the recovery of expenses (which were particularly relevant in fourth quarter 2009). Net of these items, the operating costs show a decline of 0.9% QoQ.
In first quarter 2010 payroll costs amount to €2,322 million compared to €2,277 million in the prior quarter and to €2,296 million in the same period of 2009. The quarterly trend, +1.3% QoQ net the currency effect and on a constant perimeter basis, is explained entirely by variable items (provisions for potential variable compensation and charges linked to future staff reductions), net of those the trend shows a -0.3% QoQ.
Other administrative expenses, net recovery of expenses, reach €1,240 million in first quarter 2010 (compared to €1,176 million in fourth quarter 2009 and €1,226 million in first quarter 2009). The change in the quarter is primarily attributable to currency and perimeter effects and to the decrease of €44 million in recovery of expenses (change QoQ net these items: +0.7%).
Amortization, depreciation and impairment losses on intangible and tangible assets in first quarter 2010 amount to €317 million, compared to €351 million in fourth quarter 2009 and €301 million in first quarter 2009.
The cost/income ratio for first quarter 2010 drops both QoQ (-2.0 p.p.) and YoY (-1.3 p.p.) coming in at 57.0%.
Operating profit in the first quarter of 2010 amounts to €2,928 million, a decided increase with respect to both fourth quarter 2009 (+10.9%) and to first quarter 2009 (+6.9%).
The provisions for risks and charges total €156 million, a noticeable reduction with respect to the €231 million reported in the prior quarter and comparing with €68 million in first quarter 2009.
Net write-downs of loans and provisions for guarantees and commitments in first quarter 2010 amount to €1,791 million, in line with the downward trend that emerged in the two previous quarters (fourth quarter 2009: €2,068 million; third quarter 2009: €2,164 million; second quarter 2009: €2,430 million). The cost of risk comes in at 127 basis points, a drop of a whopping 37 basis points with respect to the peak in second quarter 2009.
Gross impaired loans at the end of March 2010 total €60.1 billion, an increase of 4.3% QoQ (less than the +9.2% QoQ recorded in fourth quarter 2009 net the effect of the cancellation of default interest in Poland). Gross NPLs, the highest risk category, rise 4.2% QoQ, while the growth in the lower risk categories slows (4.5% QoQ versus +20.1% QoQ in fourth quarter 2009 net the effect of the cancellation of overdue interest in Poland).
The coverage ratio of total gross impaired loans at March 2010 is 46.5% (an increase with respect to the 46.1% recorded at December 2009) which reflects a 61.7% coverage of the NPLs (61.3% at December 2009) and a 26.5% coverage of the other problem loans (26.0% at December 2009).
Integration costs amount to €6 million in first quarter 2010, which compares with €63 million release in the previous quarter, and which is down with respect to the €67 million costs recorded in the same period in 2009.
Net investment income totals €68 million in first quarter 2010, a decided drop QoQ (-68.4%) and an improvement over the net loss of €32 million reported in first quarter 2009. The quarterly result is attributable to a series of factors and reflects the capital loss of €72 million from the sale of the holding in Generali which was more than offset by other items (primarily the disposal of other stakes in real estate funds).
Income tax for the period amounts to €403 million in first quarter 2010, compared to €123 million in the prior quarter and €334 million in the same period of the prior year. The tax rate in first quarter 2010 is 38.6%, compared with 36.3% recorded in the same period of the prior year.
Minorities total €63 million in first quarter 2010, in line with the prior quarter and down with respect to the €76 million reported in first quarter 2009.
The impact of the Purchase Price Allocation shows a gradual decrease coming in at -€58 million, compared to -€63 million in fourth quarter 2009 and -€65 million in first quarter 2009.
In first quarter 2010 the Group's portion of net profit amounts to €520 million, increasing +40.1% QoQ (profit amounted to €371 million in fourth quarter 2009) and +16.5% YoY (profit amounted to €447 million in first quarter 2009).
Total assets at March 2010 amount to €949 billion (€929 billion at December 2009), an increase QoQ of 2.2% and a drop of 7.7% YoY. Customer loans in the quarter are largely unchanged, while trading assets rise due to an increase in the market value of derivatives. Net of derivatives, trading assets at March 2010 reach €57 billion, a drop of 3.5% QoQ. Net interbank funding falls by an additional €8 billion versus fourth quarter 2009 (and by €61 billion YoY) coming in at €21 billion.
The Group's leverage ratio (1) shows further improvement in first quarter 2010, reaching 21.6, a drop of 0.5 with respect to the 22.1 recorded in December 2009 (pro-forma the capital increase announced on September 29th, 2009 and completed in February 2010). The tangible net equity per share (2) also shows improvement: at March 2010 it amounts to €2.03, above the December 2009 level (which did not include the effects of the capital increase).
The Core Tier 1 ratio at March 2010 reaches 8.45%, largely unchanged with respect to the 8.47% recorded at December 2009 (pro-forma for the capital increase announced on September 29th, 2009 and completed in February 2010), with a positive contribution from the profit generated in the period,offset by dividends accrual and the increase in risk weighted assets. The Risk weighted assets increase slightly (+0.8% QoQ to €456.0 billion), primarily due to a rise in the CEE region driven by the currency effect.
At the end of March 2010 the Group's organization consists of a staff of 162,378 (3), a further reduction of 2,683 over December 2009 and of 8,353 over March 2009. The decrease in the quarter is primarily attributable to reductions in Western Europe (-1,862 QoQ) and in the Group's centralised functions (-548), while there was a drop of 273 heads in the CEE Region primarily linked to a further decrease in Ukraine and in Kazakhstan, which was partially offset by renewed growth in other countries (above all in Turkey and Poland).
The Group's network at the end of March 2010 consists of 9,637 branches (9,799 at December 2009 and 10,131 at March 2009).
1) Calculated as the ratio of total assets net goodwill and other intangible assets (the numerator) and net equity (including minorities) less goodwill and other intangible assets (the denominator).
2) Calculated as net equity less goodwill and intangible assets/total number of shares.
3) "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 consolidated balance sheet and income statement and the main results by business segment.
Milan, May 12th, 2010
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