UniCredit: Second Quarter 2017 Results confirm early progress of Transform 2019. 2Q17 and 1H17 Group Results
|2Q17 Highlights||Revenues at €4.9 bn (+0.4 per cent Q/Q, -7.8 per cent Y/Y) thanks to resilient NII and strong fees generation|
|Fees at €1.5 bn, on track to reach 2019 target|
|Operating expenses further down to €2.9 bn (-1.0 per cent Q/Q, -4.2 per cent Y/Y) and Cost/Income ratio improved to 56.2 per cent from 57.0 per cent in 1Q17 at Capital Markets Day (CMD) perimeter . Stated Cost/Income at 58.9 per cent in 2Q17|
|Improved LLP at €564 m (-15.8 per cent Q/Q, -36.1 per cent Y/Y). Low cost of risk at 50 bp with guidance revised for 2017 to low 60s while confirmed for Transform 2019 at 49 bp|
|Stated net profit at €945 m and €1.3 bn excluding the currency effects of Bank Pekao disposal. 2Q results impacted by (i) +€170 m of one-offs in Germany and (ii) -€135 m of write-down on the Atlante Fund. CEE, CIB and Commercial Bank Italy main contributors to net profit|
|Stated RoTE at 8.2 per cent. RoTE at CMD perimeter at 9.5 per cent |
|1H17 Highlights||Revenues at €9.7 bn (-2.5 per cent H/H) with NII slightly down due to low interest rates environment. fees increased in both quarters due to underlying strong sales. Trading profit benefitted from large client driven transactions in 1Q17|
|Strong focus on operating expenses, down to €5.7 bn (-3.6 per cent H/H) and lower Cost/Income ratio at 56.6 per cent from 59.8 per cent in 1H16 at CMD perimeter. Stated Cost/Income at 59.3 per cent in 1H17|
|Improved LLP at €1.2 bn (-24.9 per cent H/H) with low cost of risk at 55 bp|
|Reported net profit of €1.9 bn with sound operating performance from all divisions. Net profit of ca. €2.2 bn excluding the effects from Bank Pekao disposal|
|Stated RoTE improved at 8.7 per cent. RoTE at CMD perimeter at 8.3 per cent|
|Capital||Fully loaded CET1 ratio at 12.80 per cent in 2Q17|
|Fully loaded leverage ratio at 5.09 per cent in 2Q17|
|Asset Quality||Lower risk profile, with Gross NPE  further reduced to €53.0 bn in 2Q17, down by ca. 30 per cent Y/Y|
|Gross NPE ratio of 11.0 per cent and net NPE ratio of 5.1 per cent in 2Q17|
|NPE coverage ratio flat at 56.3 per cent in 2Q17|
|Continued focus on asset quality with expected loss improved to 0.39 per cent in 2Q17 from 0.43 per cent in 4Q16|
|Transform 2019 Update||Bank Pekao disposal successfully completed in june, with a capital benefit for fully loaded CET1 ratio of 72 bp in 2017.|
|An additional 84 bp will come from Pioneer disposal which closed in July, expected to be largely offset by higher RWA due to business growth and model changes & procyclicality in 2H17 and by IFRS9 first time adoption starting from January 2018|
|Continuous balance sheet de-risking with further NPE reduction through ca. €1.5 bn of NPE sales in 2Q17. The disposal of the majority stake of FINO was successfully closed in July|
|Cost cutting initiatives are progressing (achieved 49 per cent of branch closures planned and 42 per cent of fte reduction target)|
|A simplified governance between Group Corporate Center (GCC) and the corresponding local functions led to an improvement in the organizational effectiveness with swifter decision making and execution|
Milan, 3 August 2017: yesterday, the Board of Directors of UniCredit S.p.A. approved 1H17 results. After the Board of Directors, Jean Pierre Mustier, Chief Executive Officer of UniCredit S.p.A. commented:
"UniCredit's good 2017 second quarter results confirm the early positive impact of Transform 2019 already seen in Q1. All our teams remain focused on the execution and the successful delivery of the plan. In Q2, as scheduled, we closed the sale of Pekao and in July we finalised the first phase of FINO by divesting a majority stake in a 17.7 billion portfolio of Non Performing Exposures . In particular, Pekao disposal, in addition to our organic earnings generation, had a positive impact of 72 bps on our fully loaded CET1 ratio, which in Q2 stands at 12.80 per cent. We also saw encouraging signs of the roll out of the plan throughout the Group with strengthened commercial activity in all key divisions, resulting in resilient Net Interest Income at 2.7 billion euro, up 3.4 per cent quarter on quarter. Adding strong fee performance up 1.8 per cent quarter on quarter, cost containment and risk discipline, we report a net profit of 1.3 billion euro, excluding Pekao, up 38.4 per cent quarter on quarter".
TRANSFORM 2019 UPDATE
Transform 2019 implementation is on track and delivering tangible results:
Strengthen and optimize capital: the disposals of Bank Pekao and Pioneer were successfully completed, contributing 72 bp and 84 bp of CET1 ratio in 2Q17 and 3Q17, respectively.
Fully loaded CET1 ratio stood at 12.80 per cent in 2Q17 . CET1 ratio is expected to be negatively affected by higher RWA due to business growth and model changes & procyclicality in 2H17 and IFRS9 first time adoption starting in 2018.
Consistently with Transform 2019, the basis of calculation of the dividend payout ratio is net profit excluding the effects of Bank Pekao and Pioneer.
Improve asset quality: ongoing balance sheet de-risking with gross NPE down to €53.0 bn in 2Q17 from €55.3 bn in 1Q17. The risk profile of the Group improved, with the NPE ratio reduced from 11.4 per cent in 1Q17 to 11.0 per cent at the end of June 2017. The coverage ratio remained flat at 56.3 per cent in 2Q17 .
Gross NPE disposals progressed, amounting to ca. €1.5 bn in 2Q17 and reaching around €1.8 bn in 1H17. Higher sales of NPE are expected in 2H17.
Project FINO is progressing according to plan. UniCredit completed the sale of the majority stake of the FINO portfolio in July 2017. In 2H17 UniCredit will consider the sale of the remaining stake of FINO portfolio, to take it below 20 percent.
Moreover, the expected loss on performing stock is improving from 0.43 per cent in 4Q16 to 0.39 per cent in 2Q17, confirming UniCredit's continuous focus on high quality business. The expected loss on new production reached 0.35 per cent in 2Q17.
Transform operating model: cost cutting initiatives are on track supporting further operating efficiencies.
In 2Q17, the branch closures program progressed and 464 branches were closed since December 2015, corresponding to 49 per cent of 944 branch closures targeted by 2019. Additional 186 branch closures are planned by year end 2017, ahead of plan in Western Europe, of which 90 already achieved in July in Italy.
The push on a sustainable lower cost structure is supported by a further reduction of 1,135 FTE  during the quarter, amounting to ca. 6,000 lower FTE since December 2015, corresponding to 42 per cent of the 14,000 planned reductions by 2019.
A new IT organisation has been in place since the beginning of 2017, focused on strengthening and upgrading the IT systems infrastructures with key external hires.
Maximize commercial bank value: commercial initiatives are ongoing in all geographies:
- the strategic partnership with Amundi has shown the first positive effects supporting higher Asset under Management sales;
- the new partnership with Apple Pay in Italy, allowing 6 m of UniCredit's cardholders to make payments via the "app" and online, confirming a persistent focus in digitalisation;
- the continued focus on multichannel approach with clients, was underpinned by:
o number of remote sales on targeted sales  increased in Italy to 16.9 per cent in 2Q17, up by ca. 50 per cent Y/Y,
o number of online users in CEE increased from 35.9 per cent as of December 2016 to 38.2 per cent as of June 2017, and
o number of mobile users in CEE increased from 20.4 per cent as of December 2016 to 25.8 per cent as of June 2017;
- the end-to-end process redesign is in progress with the release of process reviews on financing receivables, current accounts and credit cards.
UniCredit's fully plugged-in CIB confirmed its strengths as a debt financing house ranking #1 in "Syndicated loans" in Italy, Germany and Austria , #2 in "Syndicated Loans in CEE"  and #1 in "EMEA All Bonds in Euro"  by numbers of deals. In addition synergies have been realised within the Joint Venture CIB-Commercial banking with two Equity Capital Markets deals (IPOs ) in Germany.
Adopt a lean but steering Group Corporate Center: operating expenses of GCC decreased by ca. 9 per cent H/H, combined with a reduction of almost 8 per cent of FTE H/H as consequence of ongoing restructuring initiatives. The ratio of GCC costs to Group total costs  reduced to 4.0 per cent in 1H17 (4.2 per cent in 1H16) versus a target of 2.9 per cent by 2019.
Moreover, a simplified governance between GCC and the corresponding local functions led to an improvement in the organizational effectiveness with swifter decision making and execution.
* * *
The Group has received several awards by Euromoney Magazine. In particular, UniCredit won five awards including "Best Bank in Italy", "Best Bank in Croatia", "Best Bank for Wealth in Central & Eastern Europe" and "Best Bank for Transaction Services in Central & Eastern Europe". Moreover, Jean Pierre Mustier, CEO, was named "Banker of the Year 2017".
UNICREDIT GROUP CONSOLIDATED RESULTS
|Fully loaded CET1 ratio||10.33%||12.80%||+2.5pp||10.33%||11.45%||12.80%||+2.5pp||+1.4pp|
|Loans (excl. repos) - bn||428||421||-1.8%||428||419||421||-1.8%||+0.3%|
|Gross NPE - bn||75||53||-29.6%||75||55||53||-29.6%||-4.2%|
|Deposits (excl. repos) - bn||380||395||+3.8%||380||392||395||+3.8%||+0.8%|
|Cost of risk (bp)||72||55||-17||77||60||50||-27||-10|
Revenues increased to €4.9 bn in 2Q17 (+0.4 per cent Q/Q, -7.8 per cent Y/Y) thanks to the positive progression in core revenues: (i) net interest income resilient at €2.7 bn (+3.4 per cent Q/Q, -0.7 per cent Y/Y), impacted by positive one-off items in Commercial Banking Germany, and (ii) strong fee generation at €1.5bn (+1.8 per cent Q/Q, +7.6 per cent Y/Y). Main contributions to revenues came from Commercial Banking Italy, CIB and CEE. In 1H17, total revenues amounted to €9.7 bn (-2.5 per cent H/H).
Net interest income (NII)  totalled €2.7 bn in 2Q17 (+3.4 per cent Q/Q, -0.7 per cent Y/Y) and €5.2 bn in 1H17 (-1.6 per cent H/H). NII excluding the positive one-off item in Commercial Bank Germany of €90 m was almost flat in 2Q17. Net of days and FX effects, the negative commercial trend of €36 m Q/Q was affected by lower loans dynamics (-€20 m from reduced volumes and -€56 m from the compression on customer rates) and negative deposits dynamics (-€1 m from higher volumes and -5m from re-pricing of deposit rates), more than offsetting lower cost of term funding (+€24 m) and the recognition of TLTRO benefit (+€22 m). On a yearly basis the commercial dynamics contributed ca. €20 m to NII mainly sustained by term funding and reduced deposit rates. The non-commercial evolution was partially affected by the negative dynamics of the investment portfolio and treasury activities (-€7 m Q/Q, -€136 m Y/Y). Guidance of underlying NII confirmed for 2017 at €10.2 bn.
Net interest margin remained flat at 1.37 per cent in 2Q17 .
Customer loans  amounted to €420.7 bn in 2Q17 (+0.3 per cent Q/Q, -1.8 per cent Y/Y). Excluding loans reduction in Non Core, customer loans improved by 0.8 per cent Q/Q and 1.6 per cent Y/Y. The main contributors to customer loans were Commercial Banking Italy with €138.2 bn (+1.9 per cent Q/Q, -0.1 per cent Y/Y), Commercial Banking Germany with €83.1 bn (+0.5 per cent Q/Q, +3.3 per cent Y/Y) and CIB with €74.9 bn (+0.6 per cent Q/Q, +2.6 per cent Y/Y). Loans volumes expect to increase by approximately €5 bn by year end (ca. €7 bn by year end excluding Non Core).
Customer deposits  totalled €394.9 bn in 2Q17 (+0.8 per cent Q/Q, +3.8 per cent Y/Y) with the highest contributions coming from Commercial Banking Italy with €134.8 bn (+1.6 per cent Q/Q, +6.4 per cent Y/Y), Commercial Banking Germany with €84.4 bn(+0.7 per cent Q/Q, -1.6 per cent Y/Y) and CEE with €59.7 bn (-2.1 per cent Q/Q, +5.6 per cent Y/Y).
Customer spreads  reduced at Group level to 2.5 per cent in 2Q17(-7 bp Q/Q, -15 bp Y/Y). Such decrease was mainly due to a reduction in customer spreads across all divisions (excluding Commercial Banking Austria) and is higher in CEE with customers spreads in Russia suffering due to increased competition due to high rate of customer repayments.
Dividends and other income  totalled €183 m in 2Q17 (+7.7 per cent Q/Q, -37.9 per cent Y/Y) and €353 m in 1H17 (-30.3 per cent H/H). Yapi Kredi contributed with €86 m in 2Q17 (-5.3 per cent Q/Q and -14.6 per cent Y/Y excluding the capital gain from the disposal of Visa Europe stake impacting 2Q16 results) . Yapi Kredi contribution was €177 m in 1H17 (-3.1 per cent H/H, improved by +10.2 per cent excluding impact from Visa Europe stake disposal)20 with an increase of both net interest and fee income. Other dividends went up Q/Q, but H/H results were impacted by lower dividends from minority participations.
Fees and commissions increased to €1.5 bn in 2Q17 (+1.8 per cent Q/Q, +7.6 per cent Y/Y) thanks to higher investment and transactional banking fees. Total fees and commissions adjusted excluding the temporary effect of Pioneer classified under IFRS5 further grew by 1.3 per cent Q/Q and by 7.9 per cent Y/Y to over €1.7 bn in 2Q17. The highest contribution to fees generation came from investment services which continued to increase, reaching €729 m in 2Q17 (+1.9 per cent Q/Q, +14.9 per cent Y/Y on a pro forma basis) and benefitted from the extended product offering from the partnership with Amundi. Financing services fees amounted to €448 m in 2Q17 improving by 1.1 per cent Q/Q mainly driven by higher capital markets transactions in CIB, but reduced by 2.3 per cent Y/Y mainly due to lower money supply activity. Transactional fees reached €550 m, with uptrend in almost all products and improving 0.5 per cent Q/Q and 8.5 per cent Y/Y year underlining the low volatility of this business. Fees and commissions at €3.0 bn in 1H17 (+6.0 per cent H/H).
Total Financial Assets (TFA)  rose by over €30 bn Y/Y to €794.4 bn as of June 2017 (almost flat Q/Q, +4.4 per cent Y/Y). In particular:
- Assets under Management (AuM) amounted to €207.2 bn in 2Q17 increasing both Q/Q and Y/Y (+€3.9 bn and +€17.7 bn respectively) with positive contribution coming from all products, especially mutual funds. In particular, Commercial Banking Italy increased the AuM/TFA ratio increasing to 36 per cent as of June 2017 from previous 35 per cent as of March. AuM net sales generation amounted to €6.0 bn in 2Q17 and to ca. €10 bn in 1H17 at Group level with a strong contribution coming from Commercial Banking Italy;
- Assets under Custody (AuC) reduced to €204.2 bn (-€8.7 bn Q/Q, almost flat Y/Y). The decreased quarterly trend was related to i) a significant outflow with low margin attached from a large client, ii) a change of perimeter following a company disposal in Germany (Bankhaus Neelmeyer) and iii) run-offs of retail bonds;
- Deposits totalled €383.0 bn increasing by €2.5 bn Q/Q and by €15.4 bn Y/Y leveraging on the strong UniCredit franchise.
Trading income was at €462 m in 2Q17, decreasing by 21.7 per cent Q/Q due to a relative reduction in client driven transactions as 1Q17 was positively affected by some large client related deals. Trading income reduced by 46.2 per cent Y/Y, on the back of some one-offs in 2Q16 . 2Q17 was affected by the negative impact of value adjustments amounting to €40 m. Trading income totalled €1.1 bn in 1H17 (-12.0 per cent H/H).
Total expenses down to €2.9 bn in 2Q17 (-1.0 per cent Q/Q, -4.2 per cent Y/Y), as a result of the management focus on cost efficiency. In particular, a positive progression was registered in staff expenses reduced at €1.7 bn in 2Q17, decreasing Q/Q by 0.6 per cent and Y/Y by 5.0 per cent confirming a rigorous cost control. The focus on cost savings is sustained by a lower number of employees at 95,288 down by 1,135 FTE Q/Q primarily in Western Europe. Branches decreased by 154 units in 2Q17 to 5,109 (of which 3,345 in Western Europe and 1,764 in CEE)  ahead of the 2017 target. Non-HR costs  reduced to €1.1 bn in 2Q17, down by 1.6 per cent Q/Q and by 2.8 per cent Y/Y impacted by a change of perimeter due to the sale and outsourcing of card processing activities which amounts to approx. €15 m per quarter. Cost/Income ratio amounted to 58.9 per cent in 2Q17 (-0.9 p.p. Q/Q, +2.2 p.p. Y/Y) and reduced to 56.2 per cent (-0.8 p.p. Q/Q, -2.7 p.p. Y/Y ) adjusted for the reclassification of Bank Pekao and Pioneer under IFRS5. The cost control progressed in 1H17, with total expenses down by 3.6 per cent H/H to €5.7 bn and C/I adjusted reduced by 3.2 p.p. H/H to 56.6 per cent. Guidance for 2017 confirmed at €11.7 bn.
Gross operating profit reached €2.0 bn in 2Q17 (+2.6 per cent Q/Q, -12.4 per cent Y/Y), resulting at €3.9 bn in 1H17 (-0.9 per cent H/H).
LLP reduced to €564 m in 2Q17 (-15.8 per cent Q/Q, -36.1 per cent Y/Y) and to €1.2 bn in 1H17 (-24.9 per cent H/H). Cost of risk amounted to 50 bp in 2Q17 (-10 bp Q/Q, -27 bp Y/Y) and to 55 bp in 1H17 (-17 bp H/H). Cost of risk guidance revised to low 60s for 2017 and confirmed at 49 bp for 2019.
Solid net operating profit reached €1.4 bn in 2Q17 (+12.2 per cent Q/Q, +2.6 per cent Y/Y) confirming a strong business momentum. Half year figures increased by 16.0 per cent H/H to €2.7 bn.
Other charges and provisions reduced to €135 m in 2Q17 (-70.9 per cent Q/Q, -71.7 per cent Y/Y) with lower systemic charges amounting to €19  m in 2Q17 lower compared to the previous quarter that was impacted by the contribution to the Single Resolution Fund for FY17 booked in 1Q17.
Income tax at €134 m in 2Q17 (-36.8 per cent Q/Q, -12.5 per cent Y/Y) benefitting also from the release of a tax provision of €80 m in Commercial Banking Germany. Adjusting for this one-off item, the normalized tax rate would be ca. 24 per cent. Income tax amounted to €346 m in 1H17 (+2.0 per cent H/H).
Profit from discontinued operations reduced to €79 m in 2Q17 (-79.0 per cent Q/Q, -79.1 per cent Y/Y) including contribution from Pioneer (net income amounting to €74 m), the negative currency effects related to Bank Pekao disposal (-€310 m)  and reflecting the temporary accounting effect of IFRS5 on fees (ca. €220 m) to reverse back on the fee income line starting from 3Q17.
Group net profit increased to €945 m in 2Q17 (+4.2 per cent Q/Q, +3.3 per cent Y/Y) and to €1.9 bn in 1H17 (+40.2 per cent H/H). Excluding impact from Bank Pekao disposal, net profit improved to €1.3 bn in 2Q17 and to 2.2 bn in 1H17. Positive operating performances came from all divisions, with CEE, CIB and Commercial Banking Italy contributing for the most to the earnings generation (with a net profit of €495 m, €398 m and €328 m respectively in 2Q17), followed by Commercial Banking Germany, whose profit included €170 m related to one-off items. Stated RoTE stood at 8.2 per cent in 2Q17 and 8.7 per cent for the 1H17. As of the CMD perimeter, excluding all effects due to the disposal of Bank Pekao and Pioneer, RoTE stood at 9.5 per cent in 2Q17, improving from 7 per cent in 1Q17.
Group gross non performing exposures (NPE) reduced by 4.2 per cent Q/Q and by ca. 30 per cent in the last twelve months to €53.0 bn in 2Q17, with a Gross NPE ratio further down to 11.0 per cent (-0.4 p.p. Q/Q, -4.0 p.p. Y/Y).
Gross NPE disposals progressed, amounting to ca. €1.5 bn in 2Q17 and reaching around €1.8 bn in 1H17 . Higher sales of NPE are expected in 2H17.
Net NPE decreased to €23.2 bn (-4.1 per cent Q/Q, -35.8 per cent Y/Y) progressing towards the target of €20 bn in 2019 as per Transform 2019. Net NPE ratio stood at 5.1 per cent in 2Q17 (-0.2 p.p. Q/Q, -2.7 p.p. Y/Y) and coverage ratio amounted to 56.3 per cent in 2Q17 (flat p.p. Q/Q, +4.3 p.p. Y/Y).
Gross bad loans further down at €29.9 bn in 2Q17 (-3.7 per cent Q/Q, -40.2 per cent Y/Y) with a coverage ratio improved to 66.5 per cent (-0.1 p.p. Q/Q, +5.3 p.p. Y/Y) reflecting the rigorous approach to provisioning. Gross unlikely to pay decreased to €21.8 bn (-4.9 per cent Q/Q, -5.6 per cent Y/Y), with a strong coverage ratio at 43.6 per cent (-0.1 p.p. Q/Q, +9.2 p.p. Y/Y). Past due loans reduced to €1.3 bn in 2Q17 (-3.8 per cent Q/Q, -37.6 per cent Y/Y) with a coverage ratio of 34.4 per cent (+1.2 p.p. Q/Q, +7.0 p.p. Y/Y).
Group asset quality excluding Non Core reported gross NPE at €23.3 bn in 2Q17, gross NPE ratio at 5.2 per cent and coverage ratio at 55.4 per cent. Gross bad loans further reduced to €11.5 bn with a coverage ratio at 69.8 per cent. Gross unlikely to pay went down to €10.7 bn with a coverage ratio at 42.0 per cent.
Net flows improved significantly as a result of lower inflows to non performing (from €1.5 bn in 1Q17 to €1.4 bn in 2Q17) and higher outflows (from €518 m in 1Q17 to €764 m in 2Q17). The default rate reduced Q/Q at 1.3 per cent in 2Q17 from 1.4 per cent in 1Q17 and the cure rate  amounted to 12.3 per cent in 2Q17 (vs 8.3 per cent in 1Q17). Unlikely-to-pay migrating to bad loans continued to improve (€425 m in 1Q17 vs €400 m in 2Q17).
Commercial Banking Italy showed gross NPE lowering at €9.5 bn in 2Q17, with a gross NPE ratio at 6.6 per cent and a solid coverage ratio at 52.3 per cent. Net NPE went down to €4.5 bn with a net NPE ratio at 3.3 per cent in 2Q17. A similar trend was registered also in gross bad loans (-6.1 per cent Q/Q and +15.8 per cent Y/Y) and gross unlikely to pay (-2.8 per cent Q/Q and +14.7 per cent Y/Y) with a coverage ratio of 67.0 per cent and 40.1 per cent respectively in 2Q17.
Inflows to NPE in Commercial Banking Italy reached €672 m in 2Q17, confirming improving asset quality trends, with a default rate flat Q/Q at 2.0 per cent and reduced Y/Y from 2.5 per cent in 2Q16. Cure rate amounted to 12.2 per cent in 2Q17. Unlikely-to-pay migrating to bad loans continued to show a slower pace (23.6 per cent in 2Q17 vs 45.7 per cent in 2Q16).
The rundown of the Non-Core was progressing along the quarter with gross loans reduced to €33.8 bn in 2Q17 (-€2.6 bn Q/Q, -€23.9 bn Y/Y) thanks to: i) back to performing (€1.0 bn), ii) recoveries (€0.3 bn), iii) write-offs (€0.3 bn) and iv) disposals (€0.9 bn). Gross NPE reduced to €29.7 bn in 2Q17 (-3.9 per cent Q/Q and -41.1 per cent Y/Y) and gross NPE ratio moved to 88.0 per cent (+3.0 p.p. Q/Q, +0.5 p.p. Y/Y). Net NPE down at €12.8 bn in 2Q17 (-3.6 per cent Q/Q, -46.2 per cent Y/Y) with a net NPE ratio 76.7 per cent (+5.0 p.p. Q/Q, -0.6 p.p. Y/Y). Coverage ratio amounted to 57.0 per cent in 2Q17 (-0.1 p.p. Q/Q, +4.1 p.p. Y/Y).
CAPITAL & FUNDING
The strong actions underpinned by Transform 2019 plan combined with the positive results registered at Group level contributed to strengthening the fully loaded CET1 ratio at 12.80 per cent in 2Q17, an improvement by 135 bp compared to 1Q17. CET1 benefitted from the positive contribution from 2Q17 earnings generation (+35 bp Q/Q), RWA reduction (+28 bp Q/Q, excluding Bank Pekao disposal) and from the revaluation reserves positive dynamics (+2 bp Q/Q), partially offset by dividend accrual and AT1 coupon payments  (-9 bp Q/Q). In addition, Bank Pekao disposal contributed with 72 bp to the quarter capital generation, mainly driven by ca. €25 bn of lower RWA, given that the FX reserve was already deducted from capital ratio.
Additional 84 bp of capital were generated in July thanks to the disposal of Pioneer, which will have a positive impact on 3Q17 CET1, expected to be largely offset by i) the increase of RWA envisaged due to business growth and model changes & procyclicality in 2H17 and ii) IFRS 9 first time adoption starting from 1st January 2018.
In 2Q17, transitional CET1 ratio increased to 12.93 per cent, transitional Tier 1 ratio stood at 14.31 per cent and transitional Total Capital ratio at 17.25 per cent. All ratios are confirmed well above the capital requirements .
RWA transitional moved to €352.7 bn in 2Q17 decreasing by €7.8 bn since March 2017, in addition to ca. €25 bn reduction related to Bank Pekao disposal. In particular, a reduction was registered in operational RWA (-2.0 bn Q/Q) thanks to lower losses, and in market RWA (-€0.2 bn Q/Q) . Credit RWA were down in the quarter as a result of business evolution (-€1.9 bn Q/Q), business actions (-€0.2 bn Q/Q) and FX effect (-€2.6 bn Q/Q) mainly due to currency conversion from Russia and Turkey, partially offset by procyclicality & models and regulation (+€0.6 bn).
Fully loaded leverage ratio amounted to 5.09 per cent in 2Q17 (+47 bp Q/Q, +76 bp Y/Y) mainly thanks to Bank Pekao disposal along with CET1 improvements and AT1 issuance. Transitional leverage ratio at 5.26 per cent in 2Q17 (+41 bp Q/Q, +71 bp Y/Y).
Funding plan 2017 was executed for about €14.7 bn as of end of July, equal to 54 per cent of the total funding plan expected to be executed in FY17. In particular, on 13th June 2017, the first subordinated transaction under new USD Global MTN Program was issued. The Tier 2 instrument, with a size equal to $1 bn, contributed to improve the current Tier 2 capital bucket, which already exceeds the minimum Tier 2 requirement (set at 2 per cent). This issuance, together with the inaugural USD senior unsecured transaction issued in April 2017 contributed to further diversify UniCredit funding sources and to build-up a benchmark curve in USD over time.
The overall outstanding amount of TLTRO II is equal to €51.2 bn on a consolidated basis .
 Cost/Income adjusted for (i) temporary effects of reclassification of Bank Pekao and Pioneer under IFRS5 and (ii) €405 m non-recurring revenues in 2Q16. Stated Cost/Income at 59.7 per cent in 1Q17 and 56.7 per cent in 2Q16. CMD perimeter hereby mentioned considers capital increase and Pekao & Pioneer disposals as at 31 Dec. 2016.
 Return on Tangible Equity: annualized net income / average tangible equity (excluding AT1 and intangible assets related also to companies classified under IFRS5).
 NPE: Non Performing Exposures. The perimeter of NPE as per definition of EBA is substantially equivalent to perimeter of impaired exposures as per BankIT Circular 272. NPE are broken down in bad exposures, unlikely-to-pay and past due.
 Equal to €16.2 bn as at 30-Jun-17.
 Fully loaded CET 1 ratio pro-forma for the disposal of Pioneer at 13.64 per cent.
 Fino portfolio has been classified as Held for Sale in 4Q16. As communicated during the Capital Markets Day, the FINO portfolio originally amounted to €17.7 bn gross loans and decreased to €16.2 bn (€1.8 bn net amount) as at 30 June 2017, thanks to work out activities. Group asset quality ratios including FINO as at 30 June 17: gross NPE ratio of 13.9 per cent (14.3 per cent in 1Q17); net NPE ratio of 5.5 per cent (5.8 per cent in 1Q17); NPE coverage ratio of 64.0 per cent (63.5 per cent in 1Q17); gross bad loans ratio of 9.3 per cent (9.5 per cent in 1Q17); net bad loans ratio of 2.6 per cent (2.8 per cent in 1Q17); bad loans coverage ratio of 74.4 per cent (73.8 per cent in 1Q17).
 Retail branches in Italy, Germany and Austria as indicated during the Capital Markets Day.
 Full Time Equivalent. Please consider that Group FTE are shown excluding i) all companies that are classified under IFRS5 and ii) Ocean Breeze.
 Calculated as remote sales (transactions made through ATM, online, mobile or Contact Center) on total Bank products with a direct selling process.
 Source: Dealogic Analytics, per 5th July 2017, Italy per 18th July 2017. Period: 1 Jan - 30 June 2017.
 Source: Dealogic Analytics, per 5th July 2017. Period: 1 Jan - 30 June 2017.
 Source: Dealogic Analytics, per 5th July 2017. Period: 1 Jan - 30 June 2017.
 Initial Public Offerings.
 Adjusted for the temporary effects of reclassification of Bank Pekao and Pioneer under IFRS5.
 Contribution from macro hedging strategy on non-naturally hedged sight deposits in 2Q17 at €378 m (-€2m Q/Q, -€15 m Y/Y).
 Net interest margin calculated as interest income on earning assets minus interest expenses on earning liabilities. 2Q17 net interest margin excluding €90 m one off in Commercial Banking Germany.
 End of period accounting volumes calculated excluding repos and, for divisions, excluding also intercompany items. Customer loans including repos amounted to €450.3 bn as of end June 17 (-0.5 per cent Q/Q, -2.5 per cent Y/Y).
 End of period accounting volumes calculated excluding repos and for divisions, excluding also intercompany items. Customer deposits including repos amounted to €433 bn as of end June 17 (-1.1 per cent Q/Q, -2.5 per cent Y/Y).
 Customer spreads defined as the difference between rate on customer loans and rate on customer deposits.
 Include dividends, equity investments evaluated with equity method. Turkey contribution based on a divisional view.
 All changes at constant FX. Gain from Visa Europe stake disposal amounted to €27 m in 2Q16.
 Commercial Total Financial Assets excluding Non Core. Deposits exclude volumes not related to commercial network activities.
 2Q16 one-offs items referred to i) gain on fixed income securities (ca. €132 m gross) and ii) gain from the disposal of Visa Europe stake (€246 m gross). 2Q16 trading income excluding one offs amounted to €481 m vs €860 m stated.
 Branches at Capital Markets Day perimeter. For number of branches at regulatory view please refer to "UniCredit Group: Staff and Branches" table included in this document.
 Other administrative expenses net of expenses recovery and indirect costs, depreciations and amortizations.
 C/I for 2Q16 adjusted for €405 m non-recurring revenues in 2Q16.
 Referring to: (i) bank levies of €4 m, (ii) Deposit Guarantee Scheme of €7 m and (iii) Single Resolution Fund of €9 m.
 The equity currency effects reclassified through P&L related to Bank Pekao disposal.
 Gross NPE disposal in 1H17 referred to: €1.2 bn in Italy, €546 m in CEE, €60 m in Germany and €5 m in Austria.
 Back to performing (annualized) on stock of NPE at the beginning of the period.
 Dividend accrual for full FY17 will be based on 20 per cent payout ratio on normalized earnings, excluding the net impact from the disposals of Pioneer and Pekao. Coupons on AT1 instruments paid in 2Q17 equal to €65 m gross of tax.
 Transitional capital requirements and buffers for UniCredit Group as of June 30th, 2017: 8.77 per cent CET1 ratio (4.5 per cent P1 + 2.5 per cent P2 + 1.77 per cent combined capital buffer); 10.27 per cent T1 ratio (6 per cent P1 + 2.5 per cent P2 + 1.77 per cent combined capital buffer); 12.27 per cent Total Capital ratio (8 per cent P1 + 2.5 per cent P2 + 1.77 per cent combined capital buffer).
 Calculated excluding Bank Pekao disposal.
 Business evolution: changes related to business development. Business actions: initiatives to proactively decrease RWA (mainly securitizations). Models: methodological changes to existing / new models. Procyclicality: change in macro-economic framework or client's credit worthiness. Regulation: changes in regulation (e.g. CRR or CRD). FX: translation of non-euro denominated exposures.
 Breakdown by country: €33.6 bn have been taken in Italy, €12.6 bn in Germany, €4.0 bn in Austria, €0.9 bn in CEE.