UniCredit underlying 2011 results resilient in a very challenging economic and global environment
Q4 2011 Key Figures
Financial Year 2011 key figures
The Board of Directors of UniCredit approved the 2011 results on March 27th, with a Group Loss of €9,206 million. The profitability of 2011 has been affected by several non-operating and one-off items, amounting to -€10,317 million (of which -€133 million in 4Q11) mostly related to: Goodwill and Trademark Impairment, Losses on Investments and Integration Costs (1).
The Board will propose to the Annual Shareholders' Meeting a zero dividend payment for both ordinary and saving shares for 2011.
Federico Ghizzoni, CEO of UniCredit says: 'The underlying performance in 2011 showed the resilience of the Group in a very challenging environment, that and the significant rebound of the results of our Italian business, proves the pertinence of our actions and our targeted strategic approach.
After our very successful capital increase, a seamless execution of our Strategic Plan, focusing on increasing the client business and cross selling in our franchise as well as stricter management of our resources and risks will allow us to deliver a higher profitability to our shareholders.'
In 4Q11 Net Profit amounts to €114 million net of taxes, while adjusted Net Profit amounts to €247 million, calculated net of one-offs due to Greek bonds impairment (€70 million net of taxes) and severance costs (€63 million net of taxes). Although quarterly results are affected by financial markets volatility, due to Sovereign debt crisis and negative macroeconomic environment, the main operating lines are showing improvements.
Revenues reach €25,200 million in 2011 (-3.4% y/y) and €6,092 million in 4Q11 (+6.4% Q/Q), with a sound contribution from core revenues: Net Interest is stable down only 0.4% Q/Q despite the Sovereign debt crisis, Net Commissions and Fees are up by 1.8% Q/Q and Net Trading rebounds to +€204 million from -€285 million in 3Q11.
Net Interest accounts for €15,433 million in 2011, -1.8% y/y. 4Q11 shows resilience, quasi stable at -0.4% Q/Q to €3,816 million. In detail, in CEE and Poland Net Interest is negatively affected by FX effect down by 0.8% Q/Q, but +1.8% Q/Q at constant FX, whereas it is almost flat in Western Europe down by 0.2% Q/Q, with Italy up compensating Germany and Austria: the Asset and Liability spread improved in Italy in 4Q11. Ongoing re-pricing actions helped offset higher cost of funding, which was helped by access to cheaper and less volatile customer-based funding.
Net Commissions are equal to €8,307 million in 2011, -1.8% on a yearly basis, with a good recovery of Financing Services (+10.0% y/y) compensating the decrease of Investment Services due to lower upfront fees on investment products. Net Commissions in 4Q11 amount to €2,040 million, +1.8% Q/Q with a significant contribution from Financing Services (+16.5%), up mainly in Italy and more than offsetting the decrease in Investment Services related to market volatility. At December 31st 2011, the volume of assets managed by the Asset Management division of the Group are equal to €162.1 billion, with a declining quarterly trend (-1.7%) in an extremely challenging market environment, despite positive performance and favorable FX trend.
Net Trading, Hedging and Fair Value Income total €909 million in 2011, decreasing from €1,053 million of 2010. Yearly results are affected by the Sovereign debt crisis, with a reversed outcome in 4Q11, in which Net Trading Profit increases to +€204 million, from -€285 million of 3Q11.
Operating Costs amount to €15,460 million in 2011, slightly increasing y/y (+0.9%). Net of Bank Levies, the result is flat y/y. In 4Q11 Operating Costs show an encouraging drop of 2.1%, down to €3,799 million, and are decreasing even when excluding some positive non-recurring items of 4Q11.
Staff Expenses are flat y/y in 2011 reaching €9,209 million. 4Q11 records a Q/Q decrease by 7.6%, down to €2,177 million, helped by the trend in variable compensation and non-recurring items.
Other Expenses reach €5,116 million in 2011, increasing by 2.4% compared with 2010. In 4Q11 this item amounts to €1,323 million, +6.1% Q/Q, mainly due to seasonality effects.
Amortization, Depreciation and Impairment Losses on Intangible and Tangible Assets are equal to €1,136 million in 2011, increasing by 1.0% y/y. This item is equal to €298 million in 4Q11, increasing by 8.6% from the previous quarter, mainly related to IT investments.
The Cost/Income ratio is 61.4% in 2011, whilst 4Q11 is at 62.4%, decreasing from 67.8% in 3Q11.
Gross Operating Profit comes to €9,740 million in 2011 (-9.4% y/y); €2,294 million in 4Q11 up by 24.2% Q/Q.
Provisions for Risks and Charges amount to €718 million in 2011 (down by 6.2% y/y); €48 million in 4Q11, down from €266 million in 3Q11.
Net write-downs of loans and provisions for guarantees and commitments (LLP) amount to €6,025 million in 2011 (-12.6% y/y), equivalent to a Cost of Risk of 108 bp, decreasing by 15 bp y/y, mainly thanks to lower provisioning in Germany and CEE & Poland. In 4Q11 LLP are equal to €1,492 million, -19.3% Q/Q mainly decreasing in Italy after exceptionally high provisioning in 3Q11 and higher provisioning in CEE, due to net write backs in 3Q11 in Russia. On a quarterly basis the Cost of Risk is equal to 106 bp, down by 25 bp Q/Q, despite a persisting, uncertain and difficult economic context.
Gross Impaired Loans at the end of December 2011 account for €72.5 billion, +1.2% Q/Q mainly because of Italy and CEE, with an opposite trend in Germany. Non Performing Loans stand at €42.2 billion, almost flat Q/Q (+0.4%), whereas other impaired categories increase by 2.4% Q/Q to €30.3 billion.
The Coverage Ratio of Total Gross Impaired Loans at December 2011 decreases to 44.6% (45.5% in 3Q11) mainly due to write-offs in Italy. The Coverage is composed of 57.1% on Non Performing Loans and of 27.1% on Other Impaired Loans.
Integration Costs, mainly related to severance, amount to €270 million in 2011. Integration costs for 2011 were recorded mainly in 3Q11 (€174 million) and are down to €90 million in 4Q11 (€63 million net of taxes).
Net Income from Investments is equal to -€666 million in 2011; 4Q11 shows Losses from Investments of €123 million. The most important component of this item is due to Greek bonds, with a total impairment for 2011 equal to €399 million (€310 million net of taxes), of which €92 million in 4Q11 (€70 million net of taxes).
Tax in the period is equal to -€1,416 million in 2011. Tax rate rises to a high 68.7% versus 21.4% in 2010. 2011 is mainly impacted by 3Q11 non-deductible participations impairment, 2H11 DTA write-offs on the back of the Strategic Plan; 2010 was characterized by a low 21.4% tax rate, helped by write-ups in Germany and tax benefits in Italy . In 4Q11 tax amounts to -€248 million (+66.7% Q/Q) and the tax rate comes at 45.9%.
Minorities in 2011 account for -€365 million, with respect to -€321 million in 2010. In 4Q11 Minorities amount to -€78 million, slightly improving from -€81 million in the previous quarter.
The effect of Purchase Price Allocation reaches -€809 million in 2011 with respect to -€175 million in 2010. In 4Q11 this item is equal to -€92 million (-€687 million in 3Q11, of which -€662 million related to the write-down of brands such as HVB, Bank Austria, Banco di Roma, Banco di Sicilia and Ukrsotsbank).
Goodwill Impairment records the exceptional level of €8,677 million in 2011, booked in 3Q11. UniCredit revised its financial forecasts and strategies embedded in the Strategic Plan, which led to the write-down of the goodwill related to acquisitions made over the past years. Despite its high level, this item has no impact on either cash or regulatory capital ratios.
Net Loss for 2011 amounts to €9,206 million. Net of one-offs, Net Profit for 2011 is equal to €1,110 million vs €1,528 million in 2010. Net Profit for 4Q11 shows a significant improvement to €247 million net of one-offs (€114 million stated), from -€474 million net of one-offs in 3Q11.
At December 2011 Customer Loans are almost stable, closing at €559.6 billion (€562.4 billion at September 2011). More specifically, CEE and Poland show an increase by 4.3% Q/Q, whereas Western Europe records a decrease by 1.4%.
Customer Deposits at December 2011 stand at €398.4 billion, increasing by 1.5% with respect to September 2011. CEE & Poland increase faster, by 2.6% Q/Q, whereas Western Europe increase by 1.2% Q/Q.
Securities Issued amount to €163 billion at December 2011 (-€3.7 billion vs September 2011). Net Interbank position records a negative balance for €75.4 billion at December 2011 (€67.0 billion at September 2011) due to a quarterly increase in ECB funding, which at December 31st amounts to about €30 billion in 4Q11 (stable year to date).
Loans to Deposits ratio improves by 3 percentage points, decreasing from 143% in 3Q11 to 140% in 4Q11.
As of today, UniCredit has already realized over 30% of its 2012 Group Funding Plan, for a total amount of €9.4 billion, and 36% of the Italian Funding Plan. Leveraging on diversified sources of funding by geography and type and relying on a strong customer-based funding, UniCredit continued to refinance longer maturities, replacing volatile wholesale funding. UniCredit is ready and prepared to seize market funding opportunities as and when they arise, as shown by the recent successful issuance of €1.5 billion 5Y Senior Italian Bond.
Trading Assets amount to €131.0 billion at December 2011, below the €140.0 billion as at September 2011.
Total Assets amount to €926.8 billion as of December 2011, decreasing by 2.5% Q/Q (mainly due to decreasing Trading Assets and Liabilities). The leverage ratio (3) of the Group is equal to 19.8x as of December 2011 (pro-forma for the Rights issue completed in 1Q12), decreasing from 23.4x in the previous quarter.
The Core Tier 1 ratio as of December 2011 is equal to 8.40% (4); including the Rights issue (+157 bp) the ratio becomes 9.97%. In addition, at the beginning of 2012, UniCredit carried out a buy-back of Tier 1 and Upper Tier 2 securities, which will add about 10 bp to Core Tier 1 ratio, thus exceeding 10% pro-forma. The Tier 1 Capital is equal to 9.32% at December 2011 and the Total Capital Ratio is equal to 12.37%. Core Tier 1 is also fully compliant with European Banking Authority (EBA) rules, well above the required 9% threshold. Common Equity Tier 1 (CET1) under the new Basel 3 rules is on track to reach 2012 target of above 9% stated in the Strategic Plan.
Risk Weighted Assets (RWA) at December 2011 increase to €460.4 billion (+2.3% vs September 2011). The impact of BIS 2.5 regulation affected the quarterly trend of Market Risk RWA by almost +€20 billion. Within the Corporate and Investment Banking (CIB) Division, a continuous and proactive management of the Balance Sheet has led to a decrease of RWA of about €19 billion y/y in 2011 (net of BIS 2.5) of which about €4 billion related to the run-off portfolio highlighted in the Strategic Plan.
At the end of December 2011 the Group workforce (5) is equal to 160,360, decreasing by 1,649 with respect to December 2010 and by 192 with respect to September 2011.
The Group's network at the end of December 2011 consists of 9,496 branches (9,508 at September 2011 and 9,518 at June 2011).
1) - 4q11 one-offs post tax: Net Income from Investments (-€70 million for Greek bonds impairment) and Integration Costs (-€63 million);
- 3q11 one-offs post tax: Net Income from Investments (-€135 million for Greek bonds impairment, -€480 million for Goodwill implicit in Strategic Investments), Goodwill impairment (-€8,669 million), PPA (-€662 million for Trademark impairment), Integration Costs (-€121 million) and Taxes (-€100 million for DTA write-off of HVB-BA);
- 2011 one-offs post tax: Net Income from Investments (-€310 million for Greek bonds impairment, +€88 million for Moscow Stock Exchange, -€480 million for Goodwill implicit in Strategic Investments), Goodwill impairment (-€8,669 million), PPA (-€662 million for Trademark impairment), Integration Costs (-€184 million) and Taxes (-€100 million for DTA write-off of HVB-BA);
- 2010 one-offs post tax: Net Income from Investments (-€79 million for unwinding of R.E. fund), Goodwill impairment (-€362 million for Kazakhstan), Integration Costs (-€183 million), Risks & Charges (+€81 million release of R.E. fund, -€292 million Single underwriting in Germany) and Taxes (+€629 million mainly for One4C and HVB).
2) The merger of main Italian Legal Entities of the Group into the parent company (One4C project) allowed to book, for IRAP tax purposes the benefits of the regulation on the tax treatment of goodwill.
3) Calculated as the ratio of Total Assets net of Goodwill and Other Intangible Assets (numerator) and Equity (including Minorities) net of Goodwill and Other Intangible Assets (denominator).
4) The ratio fully embeds the restructuring of CASHES realized in late 2011, with €2.4 billion now included in Capital, fully included in the calculation of Core Tier 1.
5) 'Full Time Equivalent'. FTEs of companies consolidated proportionally, including KFS Turkey, are included at 100%, not proportionally.
Milan, March 27th 2012
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Attached are the Group's key figures, the consolidated balance sheet and income statement, the quarterly evolution of the consolidated income statement and balance sheet, the fourth quarter 2011/2010 income statement comparison and the major divisional results.