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UNICREDIT (UCG): UniCredit: 1Q13 Group Results - raport 30

Raport bieżący nr 30/2013

Podstawa Prawna: Art. 56 ust. 1 pkt 2 Ustawy o ofercie - informacje bieżące i okresowe
Net Profit €449 million in 1Q13, sustained by strong NOP growth GOP up 9.7% Q/Q with resilient core revenues (+0.4% Q/Q) New gross flows to impaired loans in Italy slowing down Q/Q and Y/Y

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 Net Profit back to a positive €449 million, with revenues up and loan loss provisions down to a lower level; Western Europe grows significantly, with positive contribution to bottom line

 Revenues materially increasing by 5.6% Q/Q net of buy-backs; Net Interest resilient (-0.6% Q/Q) thanks to effective re-pricing actions on deposits and despite decreasing loans, 1Q13 fees up (+2.1% Q/Q) and

buoyant trading income (+125.5% Q/Q net of buy-back)

 Strict control on Other Administrative Expenses (-3.1% Q/Q) confirms efforts to contain costs; Staff Expenses increase by +5.5% Q/Q, but are down by 1.4% excluding extraordinary items. Overall, Operating Costs down by 1.8% Y/Y, supported by a yearly reduction in FTE of almost 4,000

 Slowdown of credit deterioration in Italy: new flows to impaired loans down for the second quarter in a row and below 1Q12. 1Q13 LLP back to a lower level after an exceptionally high 4Q12 impacted by coverage

enhancement in Italy

 Balance Sheet Management: bonds buy-back in April 2013 resulting in a gain of circa €258 million to be booked in 2Q13; sound capital position confirmed with CT1 ratio at 11.03%

 Western Europe soundly contribute to revenues generation (+10.1% Q/Q; core revenues +2% Q/Q); the new perimeter of Commercial Bank Italy reached break even with lower cost of deposits; outstanding performance of Asset Gathering with €2.1 billion net inflows, and of Pioneer, with €2.5 billion non-captive net inflows; Return on Allocated Capital in CIB at 17%

 Continuing business refocusing: sale of Kazakh operations finalized; signed sale of insurance businesses in Turkey and subsequent commercial agreement with Allianz; CIB run-off portfolio - €7.7 billion on a yearly basis; customer loans in CEE & Poland +2,5% Q/Q

1Q 2013 KEY FIGURES

 Group Net Profit: €449 million, up by 2.8% Y/Y net of buy-backs1 and versus a loss of €124 million in 4Q12

 Revenues: €6.1 billion (-5.2% Y/Y, +5.6% Q/Q net of buy-backs)

 Operating Costs: €3.8 billion (-1.8 % Y/Y, +2.1% Q/Q)

 Cost/Income ratio at 61.8% (+2.1 p.p. Y/Y and -2.2 p.p. Q/Q net of buybacks)

 Gross Operating Profit: €2.3 billion (-10.1% Y/Y and +11.8% Q/Q net ofbuy-backs)

 Loan Loss Provisions: €1.2 billion (-9.3% Y/Y and -73.3% Q/Q)

The Board of Directors of UniCredit approved the 1Q13 results on May 10th.

Federico Ghizzoni, CEO of UniCredit, said: “In the first quarter of 2013, UniCredit had a Net Profit of €449

million, thus confirming the ability to improve profitability despite a still challenging macroeconomic

environment, mainly in Italy. This satisfactory performance was thanks to increasing revenues, normalized

loan loss provisions, a buoyant trading income and the continuous implementation of the Strategic Plan

actions. The new Group organizational structure is starting to show the first positive results and the focus on

cost containment and business refocusing in the CEE continue. UniCredit’s model of large commercial bank,

based on a strong capital position and a solid international dimension, allows us to play an increasingly

important role in Europe to support the real economy, households and enterprises. The bulk of the growth of

net profit took place in Western Europe. In Italy, for the second quarter in a row, the new flows to impaired

loans decreased.”

NOP GROWING: STRONGER REVENUES AND LLP BACK TO A LOWER LEVEL

The Group’s Net Profit reached €449 million in 1Q13 sustained by a material increase in revenues (+5.6%

Q/Q net of 4Q12 buy-backs) and Loan Loss Provisions back to lower levels (-73.3% Q/Q). Net Operating

Profit grew to €1.1 billion in 1Q13. From a geographic point of view, Western Europe posted a Net

Operating Profit of €463 million, a renewed positive contribution after several difficult quarters; at the

same time, CEE and Poland contributed €626 million, confirming the importance of geographic

diversification.

Revenues materially increased in the quarter by 5.6% net of buy-backs, with Core revenues2 growing (+0.4%

Q/Q) thanks to Western Europe (+2.0% Q/Q). In a challenging environment, with persistently low interest

rates and weak commercial loan demand leading to declining volumes in Western Europe, Net Interest

Income stabilized at €3.3 billion in 1Q13 (-0.6% Q/Q) thanks to strong re-pricing actions on liabilities. Fees

increased by 2.1% Q/Q (+0.7% Y/Y) to €2.0 billion, mostly thanks to Investment Services in Italy, and an

increase of Financing Services in CIB mainly in Germany. Trading income totaled €650 million, a good result

thanks to good markets performance early in the quarter.

The overall trend of Operating Costs confirms management effort to contain costs, with a reduction of 1.8%

on an annual basis, supported by a reduction in FTEs of almost 4,000. Operating Costs were up by 2.1%

Q/Q: Staff Expenses increased by 5.5% Q/Q, as 4Q12 benefitted from one-off bonus releases; excluding

these extraordinary items, Staff Expenses are down by 1.4% Q/Q. Strict discipline on Other Administrative

Expenses was driven by IT and Real Estate costs, delivering a decrease of 3.1% on a quarterly basis. Staff

reductions continued also in 1Q13: total FTEs declined by 877 across the Group, mostly in Commercial Bank

Italy and Germany, despite external hires in all regions. Other actions implemented in the quarter to

improve efficiency include the insourcing of activities via re-deployment of internal workforce.

SLOWDOWN OF CREDIT DETERIORATION IN ITALY

Management actions to minimize future inflows into impaired loans are starting to show the first positive

results. In 1Q13 credit deterioration showed a slowdown: gross inflows into impaired loans in Italy were

down by 18.3% Q/Q, thus registering the second decreasing quarter in a row. Also, inflows were lower than

those shown in 1Q12.

NEW REGIONAL BUSINESS ORGANIZATION

As of the 1st of January 2013, the new group organization is up and running. As a consequence, starting

from 1Q13 results, segment reporting has been switched from Divisions to Regions, thus bringing more

visibility to profitability by geographic area rather than by specific business segment. In detail, the new

structure entails the following business segments: Commercial Bank Italy, Commercial Bank Germany,

Commercial Bank Austria, CEE & Poland and a global approach on selected cross border businesses, i.e.

Corporate and Investment Banking (CIB), Asset Gathering, Asset Management and Global Banking Services

(GBS).

The new segment reporting highlights the positive dynamics of some business segments which present high

value creation potential. Commercial Bank Italy reached break even and effectively lower cost of deposits;

Asset Gathering confirmed to be a high growth business, delivering €2.1 billion net inflows in 1Q13,

reaching a base of Total Financial Assets of €71.0 billion with high Return On Allocated Capital; Asset

Management leveraged on the strengthening of non-captive channels, with €2.5 billion net inflows, and

delivered significant enhancement of Return On Allocated Capital; Corporate and Investment Banking

achieved 17% Return on Allocated Capital.

BALANCE SHEETMANAGEMENT

Stable Capital Ratios and Ongoing Actions

At the end of March 2013 the Group’s Core Tier 1 ratio (CT1) is equal to 11.03%, improving by 19 bps versus

December 2012, mainly thanks to retained earnings and to RWA reduction (with Credit Risk RWAs down by

€4.7 billion). Also, the impact of the sale of 9.1% stake in Pekao (+21 bps) fully offset the regulatory change

on the consolidation of insurance companies. Capital ratios already include 9 cents dividend per share in

2013 for accrual purposes, in line with the 2012 dividend. Also, the following actions will increase CT1: the

sale of ATF will add 10 bps from de-consolidation of RWAs, at closing the sale of Yapi insurance business will

add 6 bps, and the bond buy-back of April 2013 will add 4 bps. Finally, fully loaded Basel 3 Common Equity

Tier 1 ratio (CET 1) is equal to 9.46%, while it is 9.64% including the above mentioned actions, whose impact

under Basel 3 is equal to 18 bps.

Ongoing Active Asset-Liability Management: Buy-back

In April 2013, UniCredit executed a very successful buy-back of a number of retail bonds worth €4.2 billion

in nominal value, thus reducing outstanding securities of the same amount. This deal is a proof of the

Group’s liquidity strength and its ability to manage overall cost and maturity of liabilities also via specific

actions. As a result, UniCredit will book a gain of €258 million in 2Q13, and will manage to improve its cost

of funding in the coming months, thus providing further support to the bottom line.

Funding Gap Continues to Improve

The process of Balance Sheet repositioning also progressed in 1Q13, resulting in a further improvement of

the Funding Gap to €60.4 billion at Group level (-€6.2 billion Q/Q). Most important, in Western Europe the

Funding Gap shrank by €3.3 billion in the quarter. The overall improvement in the Funding Gap was driven

by decreasing customer loans (-€9.7 billion Q/Q) reflecting a drop of €6.8 billion in market counterparties,

but also the still weak commercial loan demand in Western Europe. Direct Funding, which includes

customer securities and customer deposits, is equal to €477.0 billion at March 2013, slightly down (-€3.5

billion Q/Q) as some high interest paying deposits expired.

BUSINESS REFOCUSING

Sale of 9.1% in Pekao Leading to Positive Impact on Capital Ratios in 1Q13

During 1Q13, UniCredit sold circa 9.1% of its Polish subsidiary Pekao, with a positive impact of 21 bps to

Group CT1 ratio as of March 2013 (13 bps to CET1 ratio).

Closing of ATF Bank Kazakhstan Sale

In March 2013, the sale of ATFBank JSC to KNG has received the approval of the National Bank of

Kazakhstan, and the final closing of the transaction took place on May 2nd 2013. The transaction is expected

to add circa 10 bps to Group Core Tier 1 (circa 8 bps to Common Equity Tier 1) by the release of ATF’s Risk

Weighted Assets. UniCredit did not record any P&L impact in 1Q13.

Sale of Insurance Business in Turkey and Strategic Partnership with Allianz

On March 26th 2013 Yapi Kredi agreed to sell its insurance businesses to Allianz, still subject to regulatory

approvals and expected to be finalized in 2H13. Also, the parties signed an exclusive distribution agreement

of Allianz products to Yapi Kredi customers in Turkey. The deal will result in a gross capital gain of about

€250 million at Group level, equal to +6 bps on capital ratios under Basel 2.5 and Basel 3 expected in 3Q13.

Discontinuity of Banking Operations in Baltics and Focus on Leasing Business

As part of the Group’s business refocusing in CEE, UniCredit decided to further refine its presence in the

Baltics. Coherently with the stated aim to streamline its organizational structures in the region, the Group

will stop providing banking services and restitute its local banking license. All non-banking assets are going

to be merged into UniCredit Leasing Latvia, which will continue to administrate the transferred portfolio

and offer leasing services in the Baltics.

Corporate and Investment Banking Refocusing

Following the business repositioning in 2012, Corporate and Investment Banking (CIB) is continuing to

optimize its RWAs by actively working among other things on the run-off portfolio announced in the

Strategic Plan. As of 31st March 2013 the new run-off portfolio decreased by €7.7 billion on a yearly basis to

€17.8 billion.

1 Buy-backs mentioned herein and throughout the document are related to tender offers on T1-UT2 in 1Q12 (€697 million) and ABS in 4Q12 (€39 million), all amounts gross of taxes.

2 Core revenues are defined as the sum of Net Interest and Fees and Commissions.

(Full version - see attachment)

PODPISY OSÓB REPREZENTUJĄCYCH SPÓŁKĘ
DataImię i NazwiskoStanowisko/FunkcjaPodpis
2013-05-10 Wioletta Reimer Attorney of UniCredit

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