OREANDA-NEWS. May 20, 2010. The Unicredit Group in first quarter 2010: net profit of  ˆ520 million, an increase both QoQ and YoY. Solid performance of revenues, loan loss provisions down.

The Group’s portion of net profit:  ˆ520 million,+40.1% QoQ and +16.5% YoY

Operating income: ˆ6,806 million, +5.6% QoQ and +3.7% YoY; the quarterly trend confirms growth in net commissions and the stabilization of net interest, with trading income more than triple the 4Q09 level

Operating costs: ˆ3,878 million, with the cost/income ratio showing improvement both QoQ and YoY at 57.0%

Operating profit: ˆ2,928 million, +10.9% QoQ and +6.9% YoY

Loan loss provisions decline further to ˆ1,791 million, with cost of risk dropping for the third quarter in a row to 127 bp, 37 bp below the 2Q09 peak

Solid balance sheet structure: equity (net of intangible assets) per share back to pre-capital increase levels, the leverage ratio shows further improvement coming in at 21.6

Core Tier 1 ratio of 8.45%, basically unchanged QoQ

The Board of Directors of UniCredit approved the consolidated results for first quarter 2010 which show  the Group’s portion of net profit at ˆ520 million, increasing both QoQ (+40.1%) and YoY (+16.5%). UniCredit Group’s exposure to sovereign bonds of Greece, Spain, Ireland and Portugal, as of March 31, 2010, was of around ˆ1,6 billion overall. Furthermore, the UniCredit Group announces that it has appointed BofA Merrill Lynch and its Corporate and Investment Banking Division to explore all strategic options to maximise Pioneer’s overall franchise value.

First quarter 2010 features the consolidation of several positive elements that emerged in previous quarters, which include: the growth of net commissions, stabilization of net interest, and a decline in loan loss provisions. The quarter also stands out for the significant increase in net trading, hedging and fair value income which is more than triple with respect to the prior quarter.

In first quarter 2010 operating income rises 5.6% QoQ to ˆ6,806 million, with all the main components recording a solid performance. With respect to the same quarter in 2009 there is also an increase of 3.7% YoY.

Net interest amounts to ˆ3,917 million in first quarter 2010, a drop YoY when compared to the  ˆ4,650 million recorded in first quarter 2009, but basically unchanged with respect to the ˆ4,017 million recorded in fourth quarter 2009.

Net commissions in first quarter 2010 continue to show gradual strengthening, rising both QoQ (+2.6%) and YoY (+17.5%) to ˆ2,169 million. As in the prior quarter, both commissions from asset management, custody and administration and other commissions record an increase QoQ (+6.1% and +0.2% respectively). At March 31st 2010, the assets managed by the Group’s Asset Management Division amount to ˆ185.4 billion, an increase of 5.5% QoQ and with a positive trend in net sales.

Net trading, hedging and fair value income in first quarter 2010 amounts to ˆ560 million, a significant increase with respect to the ˆ151 million reported in fourth quarter 2009 and the -ˆ94 million reported in the same period of the prior year. The excellent quarterly performance is attributable to strong growth in the revenues from Fixed Income and Currencies in Markets business.

Other net income of ˆ99 million are in line with the ˆ105 million recorded in the same period of the prior year.

Operating costs amount to ˆ3,878 million in first quarter 2010, compared to ˆ3,803 million in fourth quarter 2009 and ˆ3,822 million in first quarter 2009. The increase QoQ of +2.0% is primarily attributable to currency and perimeter effects (+1.2% at constant FX and perimeter), variable charges and a drop in the recovery of expenses (which were particularly relevant in fourth quarter 2009). Net of these items, the operating costs show a decline of 0.9% QoQ.

In first quarter 2010 payroll costs amount to ˆ2,322 million compared to ˆ2,277 million in the prior quarter and to ˆ2,296 million in the same period of 2009. The quarterly trend, +1.3% QoQ net the currency effect and on a constant perimeter basis, is explained entirely by variable items (provisions for potential variable compensation and charges linked to future staff reductions), net of those the trend shows a -0.3% QoQ.

Other administrative expenses, net recovery of expenses, reach ˆ1,240 million in first quarter  2010 (compared to ˆ1,176 million in fourth quarter 2009 and ˆ1,226 million in first quarter 2009). The change in the quarter is primarily attributable to currency and perimeter effects and to the decrease of ˆ44 million in recovery of expenses (change QoQ net these items: +0.7%).

Amortization, depreciation and impairment losses on intangible and tangible assets in first quarter 2010 amount to ˆ317 million, compared to ˆ351 million in fourth quarter 2009 and ˆ301 million in first quarter 2009.

The cost/income ratio for first quarter 2010 drops both QoQ (-2.0 p.p.) and YoY (-1.3 p.p.) coming in at 57.0%.

Operating profit in the first quarter of 2010 amounts to ˆ2,928 million, a decided increase with respect to both fourth quarter 2009 (+10.9%) and to first quarter 2009 (+6.9%).

The provisions for risks and charges total ˆ156 million, a noticeable reduction with respect to the  ˆ231 million reported in the prior quarter and comparing with ˆ68 million in first quarter 2009.

Net write-downs of loans and provisions for guarantees and commitments in first quarter 2010 amount to ˆ1,791 million, in line with the downward trend that emerged in the two previous quarters (fourth quarter 2009: ˆ2,068 million; third quarter 2009: ˆ2,164 million; second quarter 2009: ˆ2,430 million). The cost of risk comes in at 127 basis points, a drop of a whopping 37 basis points with respect to the peak in second quarter 2009.

Gross impaired loans at the end of March 2010 total ˆ60.1 billion, an increase of 4.3% QoQ (less than the +9.2% QoQ recorded in fourth quarter 2009 net the effect of the cancellation of default interest in Poland). Gross NPLs, the highest risk category, rise 4.2% QoQ, while the growth in the lower risk categories slows (4.5% QoQ versus +20.1% QoQ in fourth quarter 2009 net the effect of the cancellation of overdue interest in Poland).

The coverage ratio of total gross impaired loans at March 2010 is 46.5% (an increase with respect to the 46.1% recorded at December 2009) which reflects a 61.7% coverage of the NPLs (61.3% at December 2009) and a 26.5% coverage of the other problem loans (26.0% at December 2009).

Integration costs amount to ˆ6 million in first quarter 2010, which compares with ˆ63 million release in the previous quarter, and which is down with respect to the ˆ67 million costs recorded in the same period in 2009.

Net investment income totals ˆ68 million in first quarter 2010, a decided drop QoQ (-68.4%) and an improvement over the net loss of ˆ32 million reported in first quarter 2009. The quarterly result is attributable to a series of factors and reflects the capital loss of ˆ72 million from the sale of the holding in Generali which was more than offset by other items (primarily the disposal of other stakes in real estate funds).

Income tax for the period amounts to ˆ403 million in first quarter 2010, compared to ˆ123 million in the prior quarter and ˆ334 million in the same period of the prior year. The tax rate in first quarter  2010 is 38.6%, compared with 36.3% recorded in the same period of the prior year.

Minorities total ˆ63 million in first quarter 2010, in line with the prior quarter and down with respect to the ˆ76 million reported in first quarter 2009.

The impact of the Purchase Price Allocation shows a gradual decrease coming in at -ˆ58 million, compared to -ˆ63 million in fourth quarter 2009 and -ˆ65 million in first quarter 2009.

In first quarter 2010 the Group’s portion of net profit amounts to ˆ520 million, increasing +40.1%  QoQ (profit amounted to ˆ371 million in fourth quarter 2009) and +16.5% YoY (profit amounted to ˆ447 million in first quarter 2009).

Total assets at March 2010 amount to ˆ949 billion (ˆ929 billion at December 2009), an increase QoQ of  2.2% and a drop of 7.7% YoY. Customer loans in the quarter are largely unchanged, while trading assets rise due to an increase in the market value of derivatives.  Net of derivatives, trading assets at March 2010 reach ˆ57 billion, a drop of 3.5% QoQ. Net interbank funding falls by an additional ˆ8 billion versus fourth quarter 2009 (and by ˆ61 billion YoY) coming in at ˆ21 billion.

The Group’s leverage ratio1 shows further improvement in first quarter 2010, reaching 21.6, a drop of 0.5 with respect to the 22.1 recorded in December 2009 (pro-forma the capital increase announced on September 29th, 2009 and completed in February 2010). The tangible net equity per share2 also shows improvement: at March 2010 it amounts to ˆ2.03, above the December 2009 level (which did not include the effects of the capital increase).

The Core Tier 1 ratio at March 2010 reaches 8.45%, largely unchanged with respect to the 8.47% recorded at December 2009 (pro-forma for the capital increase announced on September 29th, 2009 and completed in February 2010), with a positive contribution from the profit generated in the period, offset by dividends accrual and the increase in risk weighted assets. The Risk weighted assets increase slightly (+0.8% QoQ to ˆ456.0 billion), primarily due to a rise in the CEE region driven by the currency effect.

At the end of March 2010 the Group’s organization consists of a staff of 162,3783, a further reduction of 2,683 over December 2009 and of 8,353 over March 2009. The decrease in the quarter is primarily attributable to reductions in Western Europe (-1,862 QoQ) and in the Group’s centralised functions (-548), while there was a drop of 273 heads in the CEE Region primarily linked to a further decrease in Ukraine and in Kazakhstan, which was partially offset by renewed growth in other countries (above all in Turkey and Poland).

The Group’s network at the end of March 2010 consists of 9,637 branches (9,799 at December 2009 and 10,131 at March 2009).