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1Q12 Group Results

RESULTS SUPPORTED BY SUSTAINED CLIENT ACTIVITY AND STRONG MARKET CONTRIBUTION IN A STILL DETERIORATING ECONOMIC ENVIRONMENT

 

  • Capital ratios further boosted by subordinated bonds buyback, above the 2012 target of CET1 at 9% with  Basel 3 fully loaded
  • Sustained market activity and successful management of the asset-liability spread in Italy supported operating profit
  • Liquidity position improved with 2% quarter-on-quarter deposit growth across the group
  • Strategic plan on track and Italian turnaround continues

 

 

1Q 2012 KEY FIGURES

 

 

  • Group Net Profit: €914 million (+12.8% Y/Y), of which €477 million from buyback of Tier I and Upper Tier II bonds
  • Revenues: €7.1 billion (+2.5% Y/Y,+16.6% Q/Q),of which €697 million from buyback of Tier I and Upper Tier II bonds
  • Operating Costs: €3.8 billion (-0.5% Y/Y,+1.0% Q/Q)
  • LoanLossProvisions: €1.4 billion (-7.0% Y/Y,-6.3% Q/Q)

 

 

The Board of Directors of UniCredit approved the 1Q12 results on May 10th.

 

Federico Ghizzoni, CEO of UniCredit says:"UniCredit's very successful capital increase has given us a rock-solid balance sheet which allows us to confidently face the current environment. Thanks to this and to other capital strengthening measures such as the subordinated bonds buyback in February, we are  ahead of schedule of our 2012 Basel 3 CET 1 target of 9%.  Taking into account the very challenging market and economic conditions, UniCredit shows a strong net profit evolution, an improved liquidity position, and good progress of the implementation of  strategic plan."

 

 

1Q 2012 KEY FIGURES

 

Net profit at the end of March, including one-offs, stood at €914 million, up 12.8% on 1Q11.

1Q12 Adjusted Net Profit, excluding gains from the buyback of Tier I and Upper Tier II securities 1 was up significantly at €444million compared to Q4 2011, jumping 80%, benefiting from good market trading results, repricing in Italy, stringent cost controls and sustained client activity. However, adjusted net profit was down 45% year on year, primarily due to exceptionally strong trading results in 1Q11, volatile financial markets and the continuing deterioration across Europe of the macro-economic environment.

 

Net operating profit excluding one-off gains grew 46% in 1Q12 compared to 4Q11, partially helped by a weak 4Q.  In addition to being supported by the good market trading contribution, the results are underpinned by stable underlying operations with a continuing positive trend in Italy and decreasing loan loss provisions, down 7% in 1Q versus the same period last year and down 6% compared to 4Q11.  Year on year net operating profit decreased 25%, excluding the gains from the buyback, again reflecting the difficult and volatile environment banks are currently operating in.

 

 

STRONG CAPITAL RATIOS - BASEL III TARGET AHEAD OF SCHEDULE

 

In addition to the €7.5 billion rights issue successfully completed in the first quarter, the capital ratio was further boosted by the buyback of Tier I and Upper Tier II securities which added 10 bps, and the active management of Market RWAs which dropped €4.3billion in the quarter, leading to a Basel 2.5 Core Tier I ratio at 31 March 2012 of a solid 10.31%, above the 9% fully loaded CET 1 Basel 3 target for 2012 and in compliance with EBA requirements.

 

 

FUNDING PLAN ALREADY 44% COMPLETED

 

Thanks to the Group's well-diversified funding platform, both in terms of geography and instruments. Year-to-date, UniCreditraised 44% of its 2012 funding.  Specifically, the Group has already executed more than half, 51%, of its Italian 2012 funding plan. As stated in the Strategic Plan, the Group is raising the bulk of its funding through network deposits and bonds as well as covered bonds: €500m in Austria in April, although UCG also tapped opportunistically the wholesale market with a senior bond of €1.5 billionin Italy in February, with a very successful demand.

 

 

LIQUIDITY IMPROVED FURTHER

 

In line with the Strategic Plan objective of reducing the Net Interbank Position, the negative interbank position dropped to €49.4 billion, versus €75.4 billion in the previous quarter. This improvement is in part thanks to positive net liquidity inflows from customers, as well as to the rights issue. The growth in deposits and slightly lower demand for loans in Western Europe both quarter-on-quarter and for the full year, led to an improved loan deposit ratio of 136% compared to 140% at the end of 2011.

 

 

STRATEGIC PLAN ON TRACK

 

The Strategic Plan announced on 14 November 2011 is on track and is being actively implemented across the Group with specific focus on the core four pillars of the plan: solid balance sheet structure, risk control, cost management and business refocusing in particular in Italy.

 

In terms of building a rock-solid balance sheet, in addition to the €7.5 billion rights issue, the Group has taken further measures such as the Tier I and Upper Tier II securities buy back (+10 bps) and active management and reduction of risk weighted assets (Market RWAs down €4.3 billion in 1Q), and the Group is now ahead of schedule to achieve its 2012 CET 1 Basel 3 target of 9%.

 

Cost of Risk quarter on quarter has dropped 5bps and 7bps year on year to 101bps in a still very difficult and uncertain economic context. This is thanks to more stringent risk management across the Group. It includes actions such as collections through faster work-out processes, a dedicated structure to ensure quicker and more effective loan restructurings and a stricter loan origination policy focused on best rating classes.

 

Costs are down year on year (-0.5%) and are being managed very tightly across the board. Since the launch of the plan last year, FTEs (Full Time Equivalent) have already been reduced by over 1000 along the lines of our geographically diverse strategy, including central and support functions.

 

Business refocusing is well under way, with Italy continuing to show positive progress.  In Italy, 1Q12 Profit before taxes was more than  three times higher than in 1Q11 thanks to the contribution of higher revenues (+4.2%year on year), lower costs (-4.7%year on year) and almost flat loan  loss provisions (+0.9%year on year).  These results are supported by the on-going loan repricing and an increase in the profitability of RWAs. The CIB is continuing to reduce RWAs through planned run-offs and is working on improving cross-selling. The strategic agreement with Kepler signed in November 2011 is a success with four major deals having been executed since the beginning of the year.

 

 

Note:

 

 

1 And other minor one-offs detailed in the following pages.

 

 

 

 

Rome, May 10th 2012