CONSOLIDATED RESULTS FOR FIRST HALF 2011: NET PROFIT AT €1,321 MILLION, OR €1,426 MILLION EXCLUDING THE IMPAIRMENT ON GREEK GOVERNMENT BONDS, DOUBLED COMPARED WITH FIRST HALF 2010, THANKS TO THE GROUP'S GEOGRAPHIC AND BUSINESS DIVERSIFICATION.
OPERATING INCOME AND COSTS LARGELY UNCHANGED YoY (DOWN NET OF BANK LEVIES); SHARP DECLINE IN WRITE-DOWNS OF LOANS.
BALANCE SHEET AND REGULATORY CAPITAL (CORE TIER I (1) AT 9.12%): SOLID STRUCTURE CONFIRMED.
FIRST HALF 2011:
- The Group's portion of net profit reaches €1,321 million (+97.5% YoY), or €1,426 million net of the impairment of €105 million on Greek Government securities
- Operating income amounts to €13,383 million, +1.6% YoY, supported by the exceptional contribution from trading profits and almost stable net interest income
- Operating costs basically unchanged (+0.5% YoY), in terms of both payroll costs (+0.5% YoY) and other administrative expenses (+0.7% YoY)
- Net write-downs of loans drop considerably (-23.4% YoY). Asset quality gradually improving in Germany and Austria and stabilising in Italy
SECOND QUARTER 2011:
- The Group's portion of net profit reaches €511 million, €616 million net of the €105 million impairment on Greek Government bonds
- Operating income amounts to €6,455 million, showing a quarterly decline (-6.8% QoQ) due to the exceptionally high trading income recorded in the previous quarter. Interest income is largely unchanged (+0.5% QoQ)
- Operating costs come in at €3,925 million, a slight increase QoQ (+1.7%), due to the usual effect of seasonality on other administrative expenses
- Loan loss provisions at €1,181 million, -21.5% QoQ, with the cost of risk at 84 bp (-24 bp QoQ)
The Board of Directors of UniCredit approved the consolidated results for the first half 2011 which show Group net profit at €1,321 million, €511 million of which in the second quarter. This figure was negatively impacted by impairment of €105 million on Greek Government securities (impact shown net of taxes). Excluding this item, net profit would amount to €1,426 million in the first half and to €616 million in the second quarter.
Operating income reaches €13,383 million in the first six months of 2011, an increase of 1.6% YoY, and €6,455 million in second quarter 2011, -6.8% QoQ, primarily due to the drop in net trading, hedging and fair value income which had reached exceptionally high levels in first quarter 2011.
Net interest amounts to €7,787 million in first half 2011 (-0.7% YoY), not yet reflecting the impact of the increase in market rates. Net interest reaches €3,903 million in the second quarter, an increase of 0.5%, with a positive trend in volumes (both in customer loans and deposits) and a positive contribution from a non-recurring item relative to the Corporate and Investment Banking Division.
Net commissions amount to €4,264 million in the first six months of 2011, a drop of 1.0% with respect to first half 2010. Net commissions in second quarter 2011 amount to €2,096 million, -3.3% QoQ. Commissions in the CEE region and Poland recorded solid growth of 4.6% QoQ (+5.4% on a constant currency and perimeter basis), while the other geographic areas where the Group is active were penalized by the uncertainty of the financial markets which had a negative impact on commissions related to investment products. Commissions from investment services, in particular, fell by 4.7%. At June 30th, 2011, Assets under Management managed by the Group's Asset Management Division amount to €184.5 billion, -2.0% QoQ.
Net trading, hedging and fair value income totals €990 million in first half 2011, an increase of 60.2% with respect to the same period in 2010. In the second quarter this figure amounts to €290 million, a drastic decline (-58.6% QoQ) with respect to the prior quarter which benefited from a few positive conditions which were hard to replicate.
Other net income/expenses in the first six months of 2011 come in at €99 million (€39 million of which in the second quarter), falling 53.7% with respect to the same period 2010. The second quarter figure includes bank levies of €28 million relative to Germany.
Operating costs amount to €7,783 million in first half 2011, an increase of 0.5% YoY. Excluding bank levies of €77 million in Austria and Hungary, costs fall 0.5% in the same period. With regard to the quarterly trend, operating costs in the second quarter 2011 amount to €3,925 million, an increase with respect to the €3,858 million reported in the prior quarter explained primarily by the item "other administrative expenses".
Payroll costs rise by 0.5% YoY in the first six months of 2011 to €4,675 million. In the second quarter 2011 the figure reaches €2,342 million, an increase of 0.4% QoQ.
Other administrative expenses, net of recovery of expenses, reach €2,545 million in the first six months of 2011, a slight increase with respect to the €2,533 million in the same period 2010. In second quarter 2011 the figure reaches €1,305 million, an increase of 5.2% with respect to the prior quarter, largely attributable to the usual seasonality of this item, related primarily to marketing expenses. The figure includes bank levies of €39 million relative to Austria and Hungary.
Amortization, depreciation and impairment losses on intangible and tangible assets amount to €563 million in first half 2011, compared to €559 million in the same period 2010. In the second quarter 2011 the figure reaches €279 million, down with respect to the €284 million posted in the prior quarter.
The cost/income ratio reaches 58.2% in the first six months of 2011 (60.8% in the second quarter), a slight decline with respect to first half 2010 (58.8%).
Operating profit in the first six months of 2011 reaches €5,600 million, +3.1% with respect to the first half 2010. In the second quarter, operating profit drops -17.6% QoQ to €2,530 million primarily due to the decline in trading income.
The provisions for risks and charges increase YoY, reaching €405 million in the first six months of 2011, €244 million of which in the second quarter (an increase from the €161 million of the prior quarter), related to legal expenses.
Net write-downs of loans and provisions for guarantees and commitments in first half 2011 amount to €2,685 million (down with respect to the €3,507 million posted in the same period 2010), equal to a cost of risk of 96 basis points annualized. In the second quarter 2011 the item falls again with respect to the prior quarter (from €1,504 million in first quarter 2011 to €1,181 million).
Gross impaired loans at the end of June 2011 amount to €69,908 million, a slight increase of 1.4% QoQ. With regard to the geographical breakdown, there is a decrease in impaired loans in Germany and Austria and a slowdown in the deterioration of the Italian portfolio. Gross NPLs rise by 2.7% QoQ, while the other problem loan categories show an encouraging decrease of 0.5% QoQ.
The coverage ratio of total gross impaired loans at June 2011 is 45.3%, which consists of a 58.6% coverage of the NPLs and a 27.2% coverage of the other problem loans. The total coverage of impaired loans rises for the second quarter in a row.
Integration costs amount to €6 million in the first six months of 2011 (€3 million of which in the second quarter), a decrease with respect to the €11 million recorded in first half 2010.
Net income from investments totals €69 million in the first half 2011, down with respect to the €115 million posted in the same period of the prior year. Net income from investments in second quarter 2011 reaches a negative €15 million, compared to €84 million in first quarter 2011. The figure is negatively impacted by an impairment of €135 million on Greek Government securities (€105 million net of taxes), offset by other positive elements such as the revaluation of the equity investment in the Moscow Stock Exchange.
Income tax for the period amounts to €1,018 million in the first six months of 2011 (€724 million in the same period of the prior year), with a tax rate of 39.6%, down with respect to the 40.9% recorded in first half 2010. The tax rate in second quarter 2011 was also relatively high at 42.6%, due also to the increase in IRAP (regional business tax) in Italy following the recent Italian Government's tax measures.
Minorities in first half 2011 total €205 million, compared to €119 million in the same period 2010. In the second quarter 2011 minorities total €99 million (€107 million in the prior quarter).
The impact of the Purchase Price Allocation reaches -€29 million in the first six months of 2011, compared to -€96 million in the first six months of 2010, and -€14 million in the second quarter 2011, basically unchanged with respect to the prior quarter.
Group net profit in first half 2011 is €1,321 million, compared to €669 million in the same period of the prior year (+97.5% YoY). Net of the impairment of €105 million on Greek Government securities, first half net profit would have reached €1,426 million. Net profit in the quarter amounts to €511million, a drop of 37% QoQ, as the impact of the lower contribution of trading income is more pronounced.
In second quarter 2011 the Group's customer loans reach €561.8 billion (€558.8 billion at March 2011). The biggest growth driver is Eastern Europe (CEE and Poland), where net loans rise 3.2% QoQ, while Western Europe is unchanged in the period.
Customer deposits at June 2011 amount to €406.7 billion (versus €401.9 billion at March 2011). The growth is driven by Western Europe (+1.5% QoQ), while the CEE region and Poland are unchanged (+0.6% QoQ at constant exchange rates). The growth in customer deposits is greater than the growth in customer loans.
Securities issued fall slightly from the €180.4 billion recorded at March 2011 to €179.2 billion at June 2011. The drop is primarily in short term securities, expiring within a year (in line with the sector trend) which is temporarily compensated for on the interbank market. However, the net interbank position is down in the same period: net interbank funding at June 2011 amounts to €44.1 billion (€45.6 billion at March 2011).
The loan to direct funding ratio at June 2011 comes in at 95.9%, demonstrating the balanced asset/liability structure.
On July 29th, 2011 the Group completed 85% of the funding plan for FY 2011, with securities issued totalling €27,2 billion. 37% of the funding plan was executed in Germany and Austria, and over 90% of the Italian funding plan has already been completed: the Group's geographic diversification allowed to reduce pressure to access the market from Italy. As the funding plan for the entire year is almost completed, in the second half the Group may consider taking advantage of opportunities to issue in the market, not only with the aim of funding growth, but also of pre-funding.
The trading assets amount to €107.2 billion at June 2011, a slight increase QoQ when compared to the €106.4 billion recorded at March 2011, but a drastic drop YoY (-29.5%).
Total assets at June 2011 reach €918.8 billion, a slight increase of +0.9% with respect to March 2011. The high quality of the balance sheet was maintained even in a difficult funding environment. The Group's leverage ratio (2) at June 2011 reaches 20.8 times, an increase versus the 20.7 times reported at March 2011, also due to the payment of the previous year's dividend (which took place, as usual, in the second quarter).
The Core Tier 1 ratio (3) at the end of June 2011 reaches 9.12%, an increase QoQ of 6 basis points, thanks to the positive contribution of the profit posted in the period and the very modest increase in risk weighted assets which more than offset dividend accruals. The risk weighted assets at June 2011 amount to €445.2 billion, compared to €443.7 billion at March 2011. The Tier 1 ratio comes in at 9.92% and the Total Capital Ratio at 13.49%.
At the end of June 2011 the Group consists of 160,562 FTEs (4), a further reduction of 1,295 with respect to June 2010 and of 117 with respect to March 2011. The drop in the second quarter 2011 reaches 550 FTEs if calculated net of the consolidation of a few service companies that have now been included in the Group's central functions (Corporate Centre and GBS).
The Group's network at the end of June 2011 consists of 9,518 branches (9,578 at June 2010 and 9,607 at March 2011).
Milan, August 3rd, 2011
1) Including shares subject to usufruct with Mediobanca and that represent the underlying to the CASHES
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) Including shares subject to usufruct with Mediobanca and that represent the underlying to the CASHES
4) "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 second quarter 2011/2010 consolidated income statement comparison, and the main divisional results. Please note that a limited audit of these documents is underway by the independent auditors who have not yet issued their report.