OREANDA-NEWS. On 11 August 2009 was announced, that UniCredit Group approved consolidated results for first half 2009: Net profit of Euro 937 million, Operating profit up 24.6% YoY on a like-for-like basis, Core Tier I at 6.85%.

FIRST HALF 2009

Net profit attributable to the Group of Euro 937 million

Operating profit Euro 6,636 million, +24.6% YoY on a like-for-like foreign exchange and perimeter basis

Solid performance of commercial banking[1] continues accompanied by the recovery of  Markets and Investments Banking (MIB)

The Group’s ability to absorb the effects of the difficult macroeconomic situation is  confirmed: profit before tax close to Euro 2 billion despite an increase in the cost of risk to 136 bp

Reduction of total assets, trading activities and risk weighted assets continues

Core Tier 1 up at 6.85%. Tier 1 at 7.66%

SECOND QUARTER 2009:

Net profit attributable to the Group of Euro 490 million, an increase of 9.6% QoQ

Operating income up QoQ at Euro 7,764 million, with strong recovery in net trading income and solid progress in all other components

Operating costs total Euro 3,868 million with a cost/income ratio below 50% (-8 p.p. QoQ)

Operating profit Euro 3,896 million, the highest level since second quarter 2007

Profit before tax shows an increase of 9.2% QoQ

The Board of Directors of UniCredit approved the consolidated results for first half 2009 which show a net profit of  Euro 937 million (mn), Euro 490 mn of which recorded in the second quarter.  Profit before tax rises 9.2% QoQ thanks to a solid operating performance despite an increase in loan provisions which, in line with the macroeconomic conditions, rise to Euro 2,431 mn.

Operating profit in first half 2009 reaches Euro 6,636 mn, Euro 3,896 mn of which reported in the second quarter (an increase of more than Euro 1 billion (bn) QoQ).  The improvement of the second quarter with respect to the first quarter is attributable, above all, to an increase in revenues with strong acceleration in net trading, hedging and fair value income, as well as to a rise QoQ in both net interest and net commissions. The focus on efficiency continues with a cost/income ratio that drops below 50% in second quarter 2009.

In both the first and second quarters the solid trend in operating profit reflects how important diversification is for the Group, as the commercial banking activities report solid results (operating profit  +0.8% QoQ) and the Markets & Investment Banking (MIB) Division shows a further improvement with an operating profit of Euro 870 mn in second quarter 2009 versus Euro 330 million in first quarter 2009.

UniCredit Group’s operating income, equal to Euro 14,326 mn in second half 2009, rises 7.1% YoY on a like-for-like perimeter and foreign exchange basis, and Euro 7,764 mn in second quarter 2009, an increase of 6.6% QoQ on a like-for-like basis.  This result is primarily due to the recovery of net trading, hedging and fair value income but of note is also the growth QoQ of both net interest and net commissions (which begin to rise again after a six quarter declining trend).

Net interest amounts to Euro 9,360 mn in first half 2009 which shows solid progress YoY (+5.6%, +10.8% on a like-for-like foreign exchange and perimeter basis).  The quarterly trend is also positive with net interest reaching Euro 4,710 mn in second quarter 2009, an increase of 1.3% over the previous quarter (1.6% on a like-for-like foreign exchange and perimeter basis).

Net commissions total  Euro 3,735 mn in first half 2009, compared to Euro 4,802 mn in the same period of the prior year. The drop YoY is once again due to the decline in commissions from asset management, custody and administration which reflects a sector wide drop in volumes. Net commission’s performance QoQ, however, shows signs of recovery with commissions from asset management, custody and administration rising 1.9% QoQ while other commissions report an increase of 2.6%. At June 30th, 2009 the volume of the assets managed by the Group’s Asset Management Division amounts to Euro 160.3 bn.

Net trading, hedging and fair value income  comes in at Euro 864 mn in first half 2009, a noticeable improvement over the -Euro 199 mn reported in first half 2008. The quarterly performance is also positive with net trading, hedging and fair value income  reaching Euro 957 mn, an improvement of more than  Euro 1 bn versus the -Euro 93 mn reported in first quarter 2009, testimony to the Group’s ability to take advantage of the benefits offered by the improved market conditions, even while paying close attention to reducing risk.

Other net income, which in first half 2009 amounts to Euro 209 mn (Euro 104 mn of which recorded in the second quarter), is slightly down YoY.

Operating costs total Euro 7,690 mn in first half 2009, a decided drop over first half 2008 (-8.0% YoY and –4.9% YoY on a like-for-like foreign exchange and perimeter basis). Operating costs in second quarter 2009 rise to Euro 3,868 mn over the Euro 3,822 million reported in first quarter 2009 due entirely to non-recurring items of Euro 102 mn. Testimony to the great attention paid to efficiencies, net the non-recurring items and on a like-for-like foreign exchange and perimeter basis, the Group’s operating costs fall by 1.6% QoQ in second quarter 2009.

Payroll costs drop in first half 2009 by 7.7% YoY on a like-for-like basis to Euro 4,545 mn. In second quarter 2009, net non-recurring items and on a like-for-like foreign exchange and perimeter basis, payroll costs drop by 3.5% over the previous quarter thanks primarily to the optimization of human resources and the reduction in variable compensation linked to results.

Other administrative expenses, net recovery of expenses, in first half drop with respect to the Euro 2,662 reported in the same period in 2008 to Euro 2,539 mn. In second quarter 2009 the item amounts to Euro 1,314 mn, an increase over the prior quarter of Euro 89 mn due primarily to non-recurring and cyclical elements.

Amortization, depreciation and impairment losses on intangible and tangible assets  rise 1.6% YoY on a like-for-like foreign exchange and perimeter basis in first half  2009 to Euro 606 mn, Euro 305 mn of which recorded in the second quarter.

The cost/income ratio comes in at 53.7% in first half 2009, an improvement over the 59.5% recorded in first half 2008. The quarterly trend is also positive with the cost/income ratio in second quarter 2009 coming in at less than 50.0% (49.8%), an impressive 8.4 percentage points below first quarter 2009.

The provisions for risks and charges in first half 2009 increase by Euro 95 mn YoY to Euro 223 mn (Euro 155 mn of which recorded in the second quarter).

Net write-downs of loans and provisions for guarantees and commitments total Euro 4,081 mn (Euro 2,431 mn of which reported in the second quarter) in first half 2009, equivalent to a cost of risk of 136  basis points.

Gross impaired loans at the end of June 2009 total Euro 49.6 bn, an increase over the Euro 44.8 billion recorded at the end of March 2009. As in first quarter 2009 the restructured loans and the less severe categories show the most growth while the increase in gross NPLs, which rise 7.6% QoQ to Euro 30.9 bn in second quarter 2009,  is more contained.

The coverage ratio of total gross impaired loans at June 2009 is 50.1%, reflecting a coverage ratio of NPLs of 64.2% and of other problem loans equal to 27.0%.

Integration costs amount to Euro 309 mn in first half 2009, attributable primarily to second quarter 2009 (for some Euro 242 mn).  The increase in 2009 is linked largely to the continued commitment to greater staff efficiencies: in the first half of the year charges of Euro 264 mn linked to FTE rationalization were recorded. This rationalization has yet to be finalized and, when completed, will result in an annual savings in operating costs of approximately  Euro 190 mn.

Net investment income totals -Euro 94 mn in first half 2009, with a contribution to income which is noticeably less with respect to the Euro 365 recorded in first half 2008.  Second quarter 2009 also benefits less from the contribution of this component  with net investment income reaching -Euro 61 mn compared to -Euro 33 mn in first quarter 2009.  The negative impact on the second quarter’s net profit amounts to Euro 67 mn.

Income tax for the period amounts to Euro 697 mn in first half 2009 (Euro 1,088 mn in the same period of the prior year) with a tax rate of 36.1%. With regard to second quarter  2009, income tax reaches Euro 363 mn with a tax rate of 36.0%.

Minorities in first half 2009 amount to Euro 166 mn compared to Euro 303 mn in first half 2008, which still did not reflect the purchase of the minority interests in Bayerische Hypo- und Vereinsbank (HVB) and UniCredit Bank Austria. In second quarter 2009 minorities amount to  Euro 90 mn (Euro 76 mn in the previous quarter).

The impact of the Purchase Price Allocation drops with respect to the -Euro 164 mn in first half 2008 and amounts to -Euro 129 mn in first half 2009,  -Euro 64 mn of which attributable to the second quarter.

In first half 2009 the Net profit attributable to the Group totals Euro 937 mn, a decline compared to the Euro 2,975 mn recorded in the same period of the prior year, which reflects a decidedly more difficult macroeconomic scenario. The quarterly trend, rather, shows improvement with the Net profit attributable to the Group in second quarter 2009 rising from the Euro 447 mn reported in first quarter 2009 to Euro 490 mn.

Total assets amount to Euro 983 bn (Euro 1,028 bn at March 2009), a further decline of 4.4% QoQ which brings the drop from the beginning of 2009 to 6.0% (-Euro 63 billion). Of note is the progress made in reducing the Trading assets, equal to Euro 157 bn at June 2009, Euro 59 bn net derivatives, a drop of Euro 8.3 bn QoQ. There was a decided reduction in net interbank funding in second quarter 2009 which comes in at Euro 50 bn compared to Euro 82 bn at the end of the first quarter (a drop of almost  40% QoQ).

Core Tier 1 ratio moves to 6.85% at June 2009 from 6.69% at March 2009, showing good capacity for organic cash generation which in second quarter 2009, thanks to the income generated and the continuous reduction in RWAs (which fall further by Euro 17.8 bn to Euro 485.8 bn), contributes 29 basis points to the increase of Core Tier 1 ratio. The Tier 1 ratio comes in at 7.66% and the Total Capital Ratio at 11.33%.

At the end of June 2009, the Group’s organization consists of a staff[2] of 168,007, a further reduction of 2,725 over March 2009 and of 6,512 over December 2008.  The reduction in the first half involves all the main business divisions with the largest decreases in Retail, the CEE area and the Corporate Centre.

The Group’s network at the end of June 2009 consists of 9,974 branches (10,131 at March 2009 and 10,251 at December 2008).