Decisive Actions Taken on Legacy and Operational Issues to Transform Bank and Build on Existing Competitive Advantages

Revenues and Underlying Gross Operating Profit Resilient, Underpinned by Ongoing Cost Savings

Transform 2019 - Early Progress Achieved:

Fully Underwritten €13bn Rights Issue Underway, Closing before March 10, 2017

Comprehensive Trade Union Agreements Signed Covering All 14,000 Planned Redundancies in the Group

Project FINO is in Execution Phase with Pimco and Fortress

All Plan Targets Confirmed

Underlying Fully Loaded CET1 Ratio Post Capital Increase at 11.15 per cent and Above 12 per cent Including Pioneer and Bank Pekao Disposals

Milan, 9 February 2017: today, the Board of Directors of UniCredit S.p.A approved preliminary 4Q16 and FY16 results consolidated financial accounts as of December 31, 2016.

After the Board of Directors Jean Pierre Mustier, Chief Executive Officer, UniCredit S.p.A. commented: "2016 was a pivotal year for UniCredit. We took a number of decisive actions regarding legacy and operational issues to ensure the future success of the Group. We will continue to  strengthen our simple Pan-European Commercial Bank business model which benefits from a fully plugged in CIB, whilst continuing to deliver our unique Western, Central and Eastern European network to our 25 million strong client franchise. Transform 2019 is already progressing. Since the beginning of February, our fully underwritten 13 billion euro capital increase was launched, we have signed agreements with our unions securing the planned 14,000 redundancies between now and the end of 2019, and Project FINO has commenced active execution. The whole Group is fully focused on the successful implementation of our plan. The underlying business held up well in 2016, supported by active cost savings measures and positive inflows, which underlines the strength of the UniCredit brand."

All Transform 2019 plan targets confirmed

The implementation of Transform 2019 has commenced, with the main focus on Group's capital optimization, reduction of balance sheet risk profile, improvement of profitability, ensuring continuous transformation of operations to allow for additional cost efficiencies and cross-selling across Group entities, whilst maintaining flexibility to seize value creating opportunities together with further improved risk discipline.

Transform 2019 is already showing tangible results:

• Strengthen and optimize capital: on February 6 2017, €13 bn rights issue launched, fully underwritten, at terms and conditions in line with market practice for similar transactions, by a consortium of leading international banks. The rights issue  will be settled before March 10, 2017. The capital increase is the first tangible step in terms of strengthening and optimizing UniCredit's capital position, leading to a post rights issue fully loaded CET1 of 11.15 per cent in 4Q16 ^(1). CET1 ratio above 12% including Pioneer and Pekao disposals (c.1.5p.p.).
  The CET1 ratio target for end 2019 is confirmed above 12.5 per cent, as per Transform 2019 thus aligning UniCredit's capital ratios with other best in class "Global Systemically Important Financial Institutions" (G-SIFIs).
  Confirmed 20-50 per cent cash dividend payout policy as of FY17, as disclosed in Transform 2019. The Board of Directors has resolved not to propose any payment of dividends for FY16.
•  Improve asset quality: decisive actions on legacy issue mainly related to the Italian portfolio, with €8.1 bn of extraordinary loan loss provisions (LLP) in 4Q16, actively de-risking the balance sheet.
  Group non performing exposures (NPE) ² down to €56.3 bn and NPE ratio reduced from 15.1 per cent to 11.8 per cent Q/Q. Non Core gross NPE decreased to €31.5 bn (-36.6 per cent Q/Q, -39.4 per cent Y/Y) accelerating the run-down of the Non Core with improved coverage ratio on bad loans at 65.6 per cent (+5.1p.p. Q/Q) and unlikely to pay at 44.6 per cent (+11.2p.p. Q/Q).
  On February 1, 2017, Project FINO moved into the first execution phase with Pimco and Fortress. This phase is scheduled to complete in the second half of 2017, in line with the guidance given at the Capital Markets Day. Project FINO is a proactive initiative undertaken by UniCredit aimed at accelerating the reduction of the Group's gross amount of non-performing exposures in line with the Transform 2019. Group asset quality ratios as at 31st December 16, including the Fino portfolio correspond to: gross NPE ratio of 14.8 per cent; net NPE ratio of 6,1 per cent; NPE coverage ratio of 62.9 per cent; gross bad loans ratio of 9.9 per cent; net bad loans ratio of 2.9 cent; bad loans coverage ratio of 73.1 per cent.
•  Transformation of the operating model: the push on a sustainable lower cost structure supported by  the reduction of 2,800 FTE ³. Among other factors, this leads to €362 m of reduction in staff expenses in 2016.
  In addition, on February 4, 2017, an agreement was signed with the Italian Trade Unions, for the remaining 3,900 FTE. Transform 2019 full target of 14,000 exits have now been secured throughout the Group.
  The business transformation also progressed through the renegotiation of IT contracts and sponsorships with 28 per cent of Transform 2019 costs savings related to Non HR expenses already identified and contractually agreed. These savings will be delivered during the Plan period.
  Further, the Group progressed with branch reductions with 273 closures in Western Europe in 2016, 29 per cent  of the targeted closures already executed.
• Maximize commercial bank value: the priority continues to be to deliver UniCredit's quality products and services to its extensive client franchise and provide access to the Group's unique Western, Central and Eastern European network. Leveraging on UniCredit's "go-to" bank status for corporate clients the CIB confirmed leadership positions in "EMEA Corporate Loans EUR-denominated" and "Sponsor driven Acquisition Finance EMEA" ⁵. Also, UniCredit was ranked number one in Italy, Germany, Austria and CEE in syndicated loans activity ⁶.
  Cross-selling through an efficient and fully plugged in CIB Division with processes in place to enhance cross-selling synergies between CIB-Commercial Banks and International clients.
  UniCredit ranked as "Best Trade Finance Provider" in Western Europe as well as in Central and Eastern Europe by the Euromoney Trade Finance Survey 2017.  
  The Group's leadership position in the CEE was further strengthened thanks to the acquisition of over 700,000 new clients.
• Adopt a lean but strong steering Group Corporate Center: managerial steering executed through cascading of Key Performance Indicators (KPIs) throughout the Group.

4Q16 Group Key Financial Data

•    Net Loss: €13.6 bn. Excluding €13.2 bn one-offs, Group net loss ⁷ at €352 m.
•    Revenues: €4.2 bn (-9.0 per cent Q/Q, -10.6 per cent Y/Y).
•   Total costs: €3.6 bn (+20.9 per cent Q/Q, +17.5 per cent Y/Y), adjusted cost/income ratio of 64.5 per cent ⁸ (+3.8 p.p. Q/Q, +3.4.p. Y/Y).
•   Asset Quality: LLP at €9.6 bn (above 100 per cent Q/Q and Y/Y), adjusted cost of risk at 132bp ⁹ (+47bp Q/Q, +25bp Y/Y); gross NPE ratio down to 11.8 per cent (-3.4p.p. Q/Q, -4.2p.p. Y/Y) and coverage ratio at 55.6 per cent; net bad loan ratio at 2.5 per cent and coverage ratio at 65.6 per cent.
•  Capital ratio: CET1 ratio fully loaded at 7.54 per cent, CET1 ratio transitional at 8.15 per cent, Tier 1 ratio transitional at 9.04 per cent and Total Capital ratio transitional at 11.66 per cent.
  CET1 Fully loaded including €13 bn rights issue at 11.15 per cent. Capital ratios transitional including €13bn rights issue: CET1 ratio at 11.49 per cent Tier 1 ratio at 12.43 per cent and Total Capital ratio at 15.08 per cent.
  Leverage ratio transitional at 3.61 per cent and fully loaded at 3.24 per cent; figures following €13 bn capital increase at 4.94 per cent and 4.66 per cent respectively.
  
  

FY16 Group Key Financial Data

• Net Loss: €11.8 bn. Excluding €13.1 bn one-offs ¹⁰, Group net profit at €1.3 bn.
• Revenues: €18.8 bn (-0.3 per cent FY/FY).
• Total costs: €12.5 bn (+1.5 per cent FY/FY), adjusted cost/income ratio of 61.1 per cent⁸ (-0.7 p.p. FY/FY).
• Asset Quality: LLP at €12.2 bn (above 100 per cent FY/FY), adjusted cost of risk at 91bp⁹ (+8bp FY/FY).

NOTE: In order to provide further information about Group's performance, a number of alternative performance indicators (APIs) has been used (such as Cost/income ratio, net bad loans to customers/loans to customers, net non-performing loans to customers/loans to customers, cost of risk), whose description is included in the Registration Document published last January 30 following the approval by the Commissione Nazionale per le Società e la Borsa (CONSOB), through the note dated 27 January 2017, ref. no 0013115/17.

NOTES

*The final approval of Consolidated Financial Statements will take place next 13 March, date that qualifies as date of authorization for issue according to IAS 10 with reference to potential events after the reporting period. Data and information included in the present document have not been audited.

Note: starting from December 2016, figures included in the press release reflect the classification under IFRS5 of Pioneer and Bank Pekao, accounted as "Held for Sale". Previous data restated accordingly. Group net profit unchanged.

In addition, Fino portfolio has been classified as Held for Sale and none of the figures reported in this presentation include loans related to the Fino portfolio. The Fino portfolio, as communicated during the Capital Markets Day, originally amounted to €17.7 bn gross loans, which decreased to €17 bn as at 31.12.16 thanks to work out activity. The corresponding net amount as at 31.12.16 is €2.2 bn. Group asset quality ratios as at 31^st December 16, including the Fino portfolio correspond to: gross NPE ratio of 14.8 per cent; net NPE ratio of 6,1 per cent; NPE coverage ratio of 62.9 per cent; gross bad loans ratio of 9.9 per cent; net bad loans ratio of 2.9 cent; bad loans coverage ratio of 73.1 per cent.

[1] Including the benefit of capital increase from the reversal of thresholds related to financial participations and DTA (equal to 41bp).

[2] The perimeter of Non Performing Exposures (NPE) as per definition of EBA is substantially equivalent to perimeter of impaired exposures as per BankIT Circular 272. NPE are broken down in gross bad loans, unlikely-to-pay and past due.

[3] Full Time Equivalent.

[4] Source: Dealogic Loanware, per 3 January 2017. Period: 1 Jan - 31 Dec 2016.  

[5] Source: Dealogic Analytics, per 3 January 2017. Period: 1 Jan - 31 Dec 2016.  

[6] #1 in Syndicated loans Italy, #1 in Syndicated loans Germany, #1 in Syndicated loans Austria, #1 in Syndicated loans CEE, Source: Dealogic Loanware, per 3 January 2017. Period: 1 Jan - 31 Dec 2016. 

[7] In addition to -€12.2 bn one-offs disclosed during the Capital Markets Day (CMD) on December 13, 2016, certain further negative on-off items amounting to c. -€1.0 bn are recorded in 4Q16 and are mainly resulting from: a higher write-down of the participation in Atlante Fund, write-downs of DTA for temporary differences, increased provisions to risk and charges related to the National Resolution Fund in Italy and further write downs of participations and subsidiaries. In detail, -€13.2 bn of one-offs registered in 4Q16 is composed as follow: -€8.1 bn LLPS, -€1.7bn integration costs mainly related to Italy and Germany, +€0.4 bn net gain on card processing activities, -€2.2 bn write-down on Group participations and other charges, -€0.3 bn write-down of DTA, -€0.9 bn Ukrsotsbank disposals and Pekao IFRS5 valuation and -€0.5 bn write off of goodwill and other intangibles.

[8] Adjusted Cost/Income for temporary effect due to the classification of Pioneer under IFRS5 and by non-recurring items related to the Transform 2019 impacting costs and revenues (cost/income ratio is equala t c. 84% without taking into consideration such effects).

[9] Cost of risk adjusted for -8.1bn non recurring LLP in 4Q16, related to Transform 2019.

[10] FY16 non recurring items at -€13.1 bn as follow: -€13.2 bn in 4Q16 o/w -€8.1 bn LLP, -€1.7bn integration costs mainly related to Italy and Germany, +€0.4 bn net gain on card processing activities, -€2.2 bn write-down on Group participations and other general provisions, -€0.3 bn write-down of DTA, -€0.9 bn Ukrsotsbank disposals and Bank Pekao IFRS5 valuation and -€0.5 bn write off of goodwill and other intangibles and +€0.1 bn in 9M16 (mainly referring to Deferred Benefit Obligations in Austria, integration costs in Italy, extraordinary trading gain, capital gain from the disposal of VISA Europe stake, LLP release, restructuring charges in Italy and guarantee fees for DTA conversion in Italy).

Enquiries:

Investor Relations:

Tel.+39-02-88621872; e-mail: investorrelations@unicredit.eu

Media Relations:

Tel.+39-02-88623569; e-mail: mediarelations@unicredit.eu

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The securities referred to herein have not been registered and will not be registered in the United States under the U.S. Securities Act of 1933, as amended (the "Securities Act"), or pursuant to the corresponding regulations in force in the Other Countries. The securities may not be offered or sold in the United States unless such securities are registered under the Securities Act, or an exemption from the registration requirements of the Securities Act is available. The Company (as defined below) does not intend to register any portion of any offering in the United States.

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This publication constitutes neither an offer to sell nor a solicitation to buy or subscribe for securities. This communication has been prepared on the basis that any offer of securities in any Member State of the European Economic Area ("EEA") which has implemented the Prospectus Directive (each, a "Relevant Member State"), will be mad on the basis of a prospectus approved by the competent authority and published and notified to the relevant competent authority in accordance with the Prospectus Directive and/or pursuant to an exemption under the Prospectus Directive from the requirement to publish a prospectus for offers of securities.

* * *

The contents of this document are for information purposes only and is not to be construed as providing investment advice. The statements contained herein have not been independently verified. No representation or warranty, either express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness, correctness or reliability of the information contained herein. Neither UniCredit S.p.A. (the "Company" and together with its consolidated subsidiaries, the "Group") nor any of its representatives shall accept any liability whatsoever (whether in negligence or otherwise) arising in any way in relation to such information or in relation to any loss arising from its use or otherwise arising in connection with this document. By accessing these materials, you agree to be bound by the foregoing limitations.

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Due to such uncertainties and risks, readers are cautioned not to place undue reliance on such forward-looking statements as a prediction of actual results. The Group's ability to achieve its projected objectives or results is dependent on many factors which are outside management's control. Actual results may differ materially from (and be more negative than) those projected or implied in the forward-looking statements. Such forward-looking information involves risks and uncertainties that could significantly affect expected results and is based on certain key assumptions.

All forward-looking statements included herein are based on information available to the Group as of the date hereof. No Group company undertakes any obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as may berequired by applicable law. All subsequent written and oral forward-looking statements attributable to any Group company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements.

Pursuant to the Consolidated Financial Act, Legislative decree No. 58 of 24 February 1998 (article 154-bis, paragraph 2) Mr. Francesco Giordano, in his capacity as manager responsible for the preparation of the company's financial reports declares that the accounting information related to preliminary results as at December 31 2016, contained in this document, reflects the Group's documented results, financial accounts and accounting records. The final approval of Consolidated Financial Statements will take place next 13 March, date that qualifies as date of authorization for issue according to IAS 10 with reference to potential events after the reporting period. Data and information included in the present document have not been audited.