CORE BANK - 3Q14 RESULTS
Net profit at €1.1 bn (+11.1% Q/Q, +26.0% Y/Y)  leading to a net profit of €3.1 bn as of 9M14 (+13.0% 9M/9M) and to an annualised risk adjusted profitability  (RoAC) of 12%. Main contributors to 3Q14 net profit are Commercial Bank Italy with €617 m (+6.7% Q/Q and 33% RoAC), CEE & Poland with €418 m (+6.6% Q/Q and 21% RoAC) and CIB with €275 m (+29.4% Q/Q and 18% RoAC).
Net operating profit  up to €2.0 bn (+10.4% Q/Q, +34.6% Y/Y) supported by resilient revenues, strong cost discipline and lower LLP. Net operating profit totalled €5.4 bn as of 9M14 (+12.5% 9M/9M).
Revenues (12) amount to €5.5 bn in 3Q14 (-3.2% Q/Q due to 3Q seasonality, +2.4 % Y/Y) and to €16.6 bn as of 9M14 (+0.3% 9M/9M). Key contributors to 3Q14 revenues are Commercial Bank Italy with €2.0 bn (-6.0% Q/Q, +4.1% Y/Y), CEE & Poland with over €1.5 bn (+5.9% Q/Q and -7.5% Y/Y) and Asset Management with €0.2 bn (+3.9% Q/Q, +11.0% Y/Y).
Net interest income stands at €3.1 bn exceeding €9.2 bn as of 9M14 (-1.9% Q/Q, +4.5 Y/Y and +4.6% 9M/9M) with quarterly dynamics mainly affected by the cut in market rates, partially mitigated by the re-pricing of liabilities.
Customer loans broadly stable at €420.8 bn (-0.7% or -€2.8bn Q/Q ), with institutional and market counterparts declining (-3.7% Q/Q) and commercial loans holding up well (-0.4% Q/Q) despite seasonality.
New medium-long term lending flows in Italy confirm the positive trend registered in the past quarters, with over €2.8 bn new loans granted in 3Q14 (-9.9% Q/Q due to seasonality but +50.9% Y/Y). Total new lending in 9M14 reached €8.7 bn (+51.9% 9M/9M) driven by household mortgages (+139.4% 9M/9M) and corporate loans (+65.3% 9M/9M).
Direct funding  stable at €444.7 bn (-0.2% Q/Q) with commercial funding growth (+1.4% or +€5.5 bn Q/Q) offsetting the decrease in institutional and market counterparts (-10.1% Q/Q or -€6.2 bn Q/Q).
Fees and commissions amount to €1.8 bn (-4.6% Q/Q, +4.6% Y/Y), in excess of €5.5 bn as of 9M14 (+4.8% 9M/9M) with quarterly dynamics affected by seasonality.
Dividends and other income  land at €203 m (-34.3% Q/Q, -29.6% Y/Y), €0.7 bn as of 9M14 (-16.3% 9M/9M) with quarterly evolution impacted by seasonality (e.g. in 2Q14 dividends on Banca d'Italia stake amounted to €84 m). Yapi Kredi reports a strong quarterly performance (€93 m  vs. €86 m in 2Q14).
Trading income increases to €388 m (+23.5% Q/Q, -0.4% Y/Y) thanks to the resilience of the customer business.
Total costs further down to €3.3 bn (-0.2% Q/Q, -1.2% Y/Y) leading to €9.9 bn as of 9M14 (-1.9% 9M/9M) and to a cost income ratio of 59%. In line with the Group's cost reduction targets. In 3Q14 the number of branches decreased by 100 units (-377 Y/Y, excluding Yapi Kredi) and the number of FTE decreased by c. 600 (c. -2,200 Y/Y). Main contributors to the cost reduction in 3Q14 are Commercial Bank Italy with total costs of €978 m (-1.6% Q/Q, -4.1% Y/Y) with 168 branches closed since 3Q13 and a reduction in the number of FTE of 318 in 3Q14 (-465 since 3Q13), and Commercial Bank Austria with total costs of €351 m (-3.9% Q/Q, +1.4% Y/Y) thanks to the reduction in staff costs.
Loan loss provisions (LLP) decrease to €244 m (-59.5% Q/Q, -58.2% Y/Y) embedding a net positive contribution of c. €200 m from one-off effects, including among others a big ticket recovery in Germany and the recalibration of the coverage on doubtful loans in Italy. LLP reach €1.4 bn as of 9M14 (-20.7% 9M/9M) leading to a cost of risk of 43bps.
Risk and charges amount to €146 m. As of 9M14, risk and charges amount to €287 m, including €107 m booked as a result of the new law establishing the abolition of the bid/offer spreads applied to retail foreign-currency loans in Hungary. Restructuring costs amount to €2 m and profit from investments stands at €46 m.
Income taxes amount to €545 m in the quarter corresponding to an effective tax rate of c. 29.3%.