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UNICREDIT (UCG): UniCredit Group Results 3Q14 - raport 54

Raport bieżący nr 54/2014

Podstawa Prawna: Art. 56 ust. 1 pkt 2 Ustawy o ofercie - informacje bieżące i okresowe
GROUP NET PROFIT AT €722 M IN 3Q14 (+79.0% Q/Q OR +16.7% EXCLUDING THE REVISED TAX CHARGE

ON BANKIT STAKE) AND AT €1.8 BN IN 9M14 (+81.3% 9M/9M)

GROUP ASSET QUALITY CONFIRMED WITH STABLE IMPAIRED LOANS AND

HIGH COVERAGE RATIO AT 51% IN LINE WITH BEST EUROPEAN PEERS

SOUND CAPITAL POSITION WITH CET1 RATIO FULLY LOADED AT 10.4% AND 10.8% TRANSITIONAL

UCG AMONG THE WINNERS OF THE COMPREHENSIVE ASSESSMENT WITH ONE OF THE LOWEST AQR IMPACTS AND A CET1 CAPITAL BUFFER IN EXCESS OF €10 BN

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COMMERCIAL BANK ITALY NET PROFIT AT €0.6 BN (+6.7% Q/Q) WITH €2.8 BN NEW MEDIUM-LONG TERM

LOANS GRANTED IN ITALY IN 3Q14 FOR A TOTAL OF C. €9 BN IN 9M14 (+51.9% 9M/9M)

TLTRO TAKE-UP OF €7.8 BN CONFIRMING UCG COMMITMENT TO SUPPORT REAL ECONOMY

CEE & POLAND KEY CONTRIBUTORS TO GROUP RESULTS WITH €0.4 BN NET PROFIT IN 3Q14 (+6.6% Q/Q)

NON-CORE GROSS LOANS FURTHER DOWN BY €1.3 BN IN 3Q14 (-1.6% Q/Q AND -9.4% 9M/9M)

Positive quarterly performance in all divisions with 3Q14 Group net profit of €722 m leading to a 9M14 net

profit of €1.8 bn (+81.3% 9M/9M) with an annualised RoTE1 of 6.0%, fully on track versus target.

CET1 ratio fully loaded2 at 10.4% and CET1 ratio transitional at 10.8%. Total capital ratio transitional at

14.9% and leverage ratio increase to over 4.7% on a fully loaded basis and to 5.2% on a transitional basis.

The Comprehensive Assessment confirmed the solidity of UniCredit’s balance sheet validating the quality

of the risk control system. UniCredit is among the winners with an AQR impact significantly lower than the

SSM pool3 and a CET1 ratio transitional 2016 in the Adverse Scenario equal to 7.9% post capital

strengthening measures carried out in 3Q14, corresponding to a capital buffer in excess of €10 bn.

Group asset quality holding up well with gross impaired loans broadly stable in the quarter. The yearly

growth rate of the stock of gross impaired loans is steadily declining since 1Q13. LLP lowered in the quarter

by some one-off items accounting for c. €500 m but the coverage ratio on impaired loans remains high at

51.0%, in line with best European peers.

The Core Bank posts a net profit of €1.1 bn also in 3Q14, reaching €3.1 bn as of 9M144 (+13.0% 9M/9M)

with revenues affected by 3Q seasonality but strongly up on a yearly basis, declining costs and lower LLP.

All divisions positively contributed to the Core Bank’s result. Commercial Bank Italy confirms its role as

largest contributor followed by CEE & Poland and CIB.

New medium-long term lending volumes in Italy remain strong with €2.8 bn granted in 3Q14 despite

seasonality for a total of €8.7 bn in 9M14 (+51.9% 9M/9M) mainly driven by household mortgages

(+139.4% 9M/9M) and corporate loans (+65.3% 9M/9M).

Non-Core portfolio run-down on track, with gross loans at €79.7 bn (-€1.3 bn Q/Q and -€8.2 bn Y/Y).

1 RoTE = Net profit/ Average tangible equity. Tangible equity net of €1.9 bn Additional Tier 1 and annualized net profit.

2 CET1 ratio fully loaded estimated pro-forma on the basis of understanding of the regulatory framework which will be in force starting from

2019, hence anticipating all the effects that will gradually be factored in. Regulatory capital ratios pro-forma for

3 Q14 earnings net of dividend. CET1 ratios pro-forma for DAB disposal.

3SSM pool comprises 130 banks involved in the Comprehensive Assessment.

4Core Bank’s net profit does not include the revised tax charge on the valuation of the stake in Banca d’Italia booked in 2Q14 (€215 m).

The Board of Directors of UniCredit approved 9M14 results on November 11th. Federico Ghizzoni, CEO of

UniCredit commented: "Third quarter and the nine months’ Group results bring us very close to our target

of €2 billion net profit for 2014 which is now very close. We are pleased with this positive trend, despite a

still difficult macroeconomic context. This result comes mostly from managerial actions embedded in our

Strategic Plan 2013-18 focused on innovation and growth. We are one of the most solid European

commercial banks: the Comprehensive Assessment confirmed our resilience to adverse scenarios and our

capital strength. Starting from November 4th, the ECB is in charge of the Supervision of the major European

banks. This represents a positive change for UniCredit: our international footprint will be more and more a

competitive advantage”.

3Q14 KEY FINANCIAL DATA

GROUP

 Net profit: €722 m (+16.7% Q/Q excluding the revised taxation on BankIT, +254% Y/Y) and 6.8% RoTE

 Revenues: €5.6 bn (-3.2% Q/Q, -2.0% Y/Y)

 Total costs: €3.4 bn (-0.3% Q/Q, -1.2% Y/Y)

 AQ: LLP at €754 m (-24.9% Q/Q, -49.1% Y/Y), net impaired loan ratio 8.7%, coverage ratio 51.0%

 Capital adequacy5: CET1 ratio fully loaded at 10.4%; CET1 ratio transitional at 10.8%; Tier 1 ratio

transitional at 11.6%, total capital ratio transitional at 14.9%

CORE BANK6

 Net profit: €1.1 bn (+11.1% Q/Q, +26.0% Y/Y)

 Revenues: €5.5 bn (-3.2% Q/Q, +2.4% Y/Y)

 Total costs: €3.3 bn (-0.2% Q/Q, -1.2% Y/Y) with a cost/ income ratio of 60%

 AQ: LLP at €244 m (-59.5% Q/Q, -58.2% Y/Y), cost of risk at 23bps

9M14 KEY FINANCIAL DATA

GROUP

 Net profit: €1.8 bn (+81.3% 9M/9M) and 6.0% RoTE

 Revenues: €16.9 bn (-3.9% 9M/9M)

 Total costs: €10.3 bn (-1.7% 9M/9M)

 AQ: LLP at €2.6 bn (-38.0% 9M/9M)

CORE BANK6

 Net profit: €3.1 bn (+13.0% 9M/9M)

 Revenues: €16.6 bn (+0.3% 9M/9M)

 Total costs: €9.9 bn (-1.9% 9M/9M) with a cost/ income ratio of 59%

 AQ: LLP at €1.4 bn (-20.7% 9M/9M); cost of risk at 43bps

5CET 1 ratio fully loaded and CET1 ratio transitional pro-forma for the sale of DAB (+8bps). All capital ratios include 3Q14 earnings net of dividend.

6Core Bank’s net profit does not include the revised tax charge on the valuation of the stake in Banca d’Italia booked in 2Q14 (€215 m). Core Bank’s revenues 2014 adjusted for tender offer proceeds on own debt securities (€49 m) in2Q14. 2013 figures adjusted for tender offer proceeds on own debt securities executed in 2Q13 (€254 m) and for the capital gain from the sale of Yapi Sigorta occurred in 3Q13 (€181 m).

UNICREDIT GROUP - 3Q14 HIGHLIGHTS

Net profit at €722 m, leading to a 9M14 net profit of €1.8 bn (+81.3% 9M/9M) and to an annualised RoTE1

of 6.0%.

Total assets increase to €858 bn (+€19.3 bn or +2.3% Q/Q) mainly driven by loans to banks (+€11.0 bn or

+15.2% Q/Q, partially counterbalanced by the increase in deposits from banks) and by financial assets held

for trading (+€8.9 bn or +10.6% Q/Q) which are up due to the swing in interest rates and are compensated

by a symmetrical change in the financial liabilities held for trading. RWA/ Total assets remain stable at 47%.

Tangible equity increases to €45.9 bn (+€2.4 bn or +5.4% Q/Q) thanks to the issuance of €1.0 bn Additional

Tier 1, €0.6 bn from the IPO of Fineco and to 3Q14 net profit.

Funding gap further shrinking to €23.3 bn (improving by €3.4 bn Q/Q, pro-forma for DAB reclassification

under IFRS 5).

Asset quality dynamics confirm the resilience of the loan book, with gross impaired loans broadly stable at

€83.5 bn (+1.3% Q/Q, flat Y/Y) and a high coverage ratio of 51.0%. NPL slightly up to €50.6 bn (+2.1% Q/Q)

with coverage ratio increasing to 61.8% (+71bps Q/Q). Other impaired loans remain stable at €32.9 bn

(+0.1% Q/Q) with coverage ratio decreasing to 34.3% (-201bps Q/Q) mainly as the effect of the

recalibration of doubtful loan coverage in Italy which decreases from 39.1% to 36.2%, still significantly

above the average of largest Italian banks of 20.7%7.

CET1 ratio fully loaded2 at 10.35%, pro-forma for the sale of DAB (+8bps), with the contribution from

Fineco’s IPO (+16bps) and retained earnings8 (+14bps) partially compensated by the change in RWA (-6bps)

and in reserves and other items (-9bps). CET1 ratio transitional pro-forma stands at 10.81%. Tier 1 ratio

and total capital ratio transitional pro-forma stand at 11.64% and 14.90% respectively.

Leverage ratio Basel 3 further up to above 4.7% on fully loaded basis and to 5.2% transitional, among the

best in Europe, confirming the high solidity of UniCredit’s balance sheet.

TLTRO take-up at first ECB auction amounts to €7.8 bn9 corresponding to the full allotment for Italy.

Redeployment plan on track with c. €3 bn loans granted to corporates and SME since October. Further

take-up at December auction is currently being evaluated.

Funding plan 2014 has been downsized in light of capital market conditions and the liquidity effects

connected with the new ECB facilities. To date, UniCredit has repaid €17.1 bn of LTRO and the remainder

€9 bn will be gradually reimbursed.

Comprehensive Assessment proved the resilience of UniCredit’s balance sheet. The AQR impact on CET1

ratio transitional is significantly lower than the SSM pool3 (-19bps vs. -40bps) and the CET1 ratio

transitional pro-forma 2016 in the Adverse Scenario, including capital strengthening carried out in 9M14,

lands at 7.9%, corresponding to capital buffer in excess of €10 bn.

7Largest Italian banks’ average includes ISP (excluding the “International Subsidiary Banks”), MPS, BP, UBI and BPM. Data as of 2Q14.

8Interim net profit after dividend accrual assumed at 10 €cents in line with 2013. Being unaudited, 3Q14 earnings are not included in interim regulatory reporting.

9TLTRO settlement date 24/09/14. Out €7.8bn, €7.75 bn have been taken in Italy and €74 m have been taken in Czech Republic/ Slovakia.

CORE BANK - 3Q14 RESULTS

Net profit at €1.1 bn (+11.1% Q/Q, +26.0% Y/Y)10 leading to a net profit of €3.1 bn as of 9M14 (+13.0%

9M/9M) and to an annualised risk adjusted profitability11 (RoAC) of 12%. Main contributors to 3Q14 net

profit are Commercial Bank Italy with €617 m (+6.7% Q/Q and 33% RoAC), CEE & Poland with €418 m

(+6.6% Q/Q and 21% RoAC) and CIB with €275 m (+29.4% Q/Q and 18% RoAC).

Net operating profit12 up to €2.0 bn (+10.4% Q/Q, +34.6% Y/Y) supported by resilient revenues, strong cost

discipline and lower LLP. Net operating profit totalled €5.4 bn as of 9M14 (+12.5% 9M/9M).

Revenues12 amount to €5.5 bn in 3Q14 (-3.2% Q/Q due to 3Q seasonality, +2.4 % Y/Y) and to €16.6 bn as of

9M14 (+0.3% 9M/9M). Key contributors to 3Q14 revenues are Commercial Bank Italy with €2.0 bn (-6.0%

Q/Q, +4.1% Y/Y), CEE & Poland with over €1.5 bn (+5.9% Q/Q and -7.5% Y/Y) and Asset Management with

€0.2 bn (+3.9% Q/Q, +11.0% Y/Y).

Net interest income stands at €3.1 bn exceeding €9.2 bn as of 9M14 (-1.9% Q/Q, +4.5 Y/Y and +4.6%

9M/9M) with quarterly dynamics mainly affected by the cut in market rates, partially mitigated by the repricing

of liabilities.

Customer loans broadly stable at €420.8 bn (-0.7% or -€2.8bn Q/Q13), with institutional and market

counterparts declining (-3.7% Q/Q) and commercial loans holding up well (-0.4% Q/Q) despite seasonality.

New medium-long term lending flows in Italy confirm the positive trend registered in the past quarters,

with over €2.8 bn new loans granted in 3Q14 (-9.9% Q/Q due to seasonality but +50.9% Y/Y). Total new

lending in 9M14 reached €8.7 bn (+51.9% 9M/9M) driven by household mortgages (+139.4% 9M/9M) and

corporate loans (+65.3% 9M/9M).

Direct funding14 stable at €444.7 bn (-0.2% Q/Q) with commercial funding growth (+1.4% or +€5.5 bn Q/Q)

offsetting the decrease in institutional and market counterparts (-10.1% Q/Q or -€6.2 bn Q/Q).

Fees and commissions amount to €1.8 bn (-4.6% Q/Q, +4.6% Y/Y), in excess of €5.5 bn as of 9M14 (+4.8%

9M/9M) with quarterly dynamics affected by seasonality.

Dividends and other income15 land at €203 m (-34.3% Q/Q, -29.6% Y/Y), €0.7 bn as of 9M14 (-16.3%

9M/9M) with quarterly evolution impacted by seasonality (e.g. in 2Q14 dividends on Banca d’Italia stake

amounted to €84 m). Yapi Kredi reports a strong quarterly performance (€93 m16 vs. €86 m in 2Q14).

Trading income increases to €388 m (+23.5% Q/Q, -0.4% Y/Y) thanks to the resilience of the customer

business.

10Core Bank’s net profit does not include the revised tax charge on the valuation of the stake in Banca d’Italia in 2Q14 (€215 m).

11 RoAC = Net profit/ Allocated capital. Allocated capital is calculated as 9% of RWA, including deductions for shortfall and securitisations.

122Q14 figures adjusted for tender offer proceeds on own debt securities (€49 m). 2013 figures adjusted for tender offer proceeds on own

debt securities executed in 2Q13 (€254 m) and for the capital gain from the sale of Yapi Sigorta occurred in 3Q13 (€181 m). In the tables at the

end of the present document, figures are not adjusted for the items illustrated above.

132Q14 loans to customers pro-forma for the reclassification of €2.3 bn from loans to customers to loans to banks and for the reclassification

of DAB under IFRS 5.

14Direct funding defined as the sum of customer deposits and customer securities. Data pro-forma for the reclassification of DAB under IFRS 5.

15Includes net other expenses/ income.

16Divisional view.

Total costs further down to €3.3 bn (-0.2% Q/Q, -1.2% Y/Y) leading to €9.9 bn as of 9M14 (-1.9% 9M/9M)

and to a cost income ratio of 59%. In line with the Group’s cost reduction targets. In 3Q14 the number of

branches decreased by 100 units (-377 Y/Y, excluding Yapi Kredi) and the number of FTE decreased by c.

600 (c. -2,200 Y/Y). Main contributors to the cost reduction in 3Q14 are Commercial Bank Italy with total

costs of €978 m (-1.6% Q/Q, -4.1% Y/Y) with 168 branches closed since 3Q13 and a reduction in the

number of FTE of 318 in 3Q14 (-465 since 3Q13), and Commercial Bank Austria with total costs of €351 m (-

3.9% Q/Q, +1.4% Y/Y) thanks to the reduction in staff costs.

Loan loss provisions (LLP) decrease to €244 m (-59.5% Q/Q, -58.2% Y/Y) embedding a net positive

contribution of c. €200 m from one-off effects, including among others a big ticket recovery in Germany

and the recalibration of the coverage on doubtful loans in Italy. LLP reach €1.4 bn as of 9M14 (-20.7%

9M/9M) leading to a cost of risk of 43bps.

Risk and charges amount to €146 m. As of 9M14, risk and charges amount to €287 m, including €107 m

booked as a result of the new law establishing the abolition of the bid/offer spreads applied to retail

foreign-currency loans in Hungary. Restructuring costs amount to €2 m and profit from investments

stands at €46 m.

Income taxes amount to €545 m in the quarter corresponding to an effective tax rate of c. 29.3%.

NON-CORE - 3Q14 RESULTS

Gross customer loans shrink to €79.7 bn (-€1.3 bn or -1.6% Q/Q) in line with targets, of which c. 29% or

€23.1 bn performing and c. 71% or €56.6 bn impaired loans. On a yearly basis, the stock of gross customer

loans decreases by €8.2 bn (-9.4% Y/Y) thanks to the reduction of exposures, impaired loans disposals and

to the reclassification of some exposure in the Core Bank17.

Gross impaired loans slightly increase by €0.8 bn (+1.5% Q/Q, -0.8% Y/Y) due to a natural migration of an

ageing portfolio and no material disposals in 3Q14. Coverage ratio remains high at 51.9%. Gross NPL

amount to €36.4 bn, slightly up Q/Q with a higher coverage of 62.0%.

Net result strongly improving Y/Y and equal to -€382 m as of 3Q14. Revenues amount to €79 m with

quarterly comparison affected by negative one-offs occurred in 2Q14. Costs decline to €141 m (-3.3% Q/Q,

-2.4% Y/Y). LLP total €509 m (+27.2% Q/Q, -43.2% Y/Y) embedding a net positive contribution of c. €300 m

one-off, comprising the recalibration of the coverage on Italian doubtful loans as well as some negative

items including most of the AQR related additional provisions18.

17As of year-end 2013, certain positions have been reclassified in the Core Bank perimeter, having met the strict criteria set by Credit Risk Management for such reclassification.

18Based on the information received during the interaction with Supervisors as of 11 November 2014. At present, the detailed outcome of the credit file review has not been received.

DIVISIONAL HIGHLIGHTS - 3Q14 RESULTS

Commercial Bank Italy is top performer among divisions for the third quarter in a row with a net profit of

€0.6 bn (+6.7% Q/Q) and over 33% RoAC. Revenue generation remains strong despite typical 3Q

seasonality (-6.0% Q/Q but +4.1% Y/Y) and costs continue to register a significant reduction (-1.6% Q/Q, -

4.1% Y/Y) in line with the Strategic Plan targets.

CEE & Poland post a net profit of €0.4 bn (+6.6% Q/Q) and a 21% RoAC thanks to NII growth (+4.1% Q/Q) in

all CEE markets and the positive contribution of trading income (+34.2% Q/Q) which, together with lower

LLP, more than compensate the negative impact from Hungarian FX law. Loans to customers increase to

€84.8 bn (+0.8% Q/Q, +2.4% Y/Y) and direct funding to €79.8 bn (+3.9% Q/Q, +9.8% Y/Y).

CIB’s continued commercial intensity and sound client flows sustain revenue generation despite a

challenging environment and the seasonality typically experienced in 3Q. This has resulted in a significant

improvement in CIB’s market position, with ranking in all EMEA Loan & Bonds in € league tables up to #2

vs. #4 of the previous year19, mainly thanks to the resilience of the syndicated loan activities where CIB’s

market share increased from 4.2% to 4.5% over the course of the year. With ROAC at 18% and cost income

at 52% in 3Q14, the division is one of the most efficient CIB platforms in the market. RWA stable vs.

previous quarter at €70 bn.

RATINGS

MEDIUM AND OUTLOOK SHORT-TERM STANDALONE

LONG-TERM DEBT RATING

Standard & Poor's BBB NEGATIVE A-2 bbb

Moody's Inves tors Servi ce Baa2 NEGATIVE P-2 D+/ba1

Fi tch Ratings BBB+ NEGATIVE F2 bbb+

S&P’s latest rating action was on the 24th of March 2014 when the ratings including the ‘BBB/A-2’ longterm

and short-term ratings with the existing negative outlook were affirmed.

Moody’s on the 9th of September proposed new rating criteria for banks which could have an impact on

the ratings. The negative outlook was assigned on the 29th of May when Moody’s changed the outlook on

82 European banks as the systemic support assumptions are being reviewed.

Fitch’s ratings were confirmed on the 13th of May at ‘BBB+/F2’ with the existing negative outlook.

19Source: Dealogic.

Attached are the Group’s key figures, the consolidated balance sheet and income statement, the quarterly

evolution of the consolidated income statement and balance sheet, the third quarter 2014 income

statement comparison for the Core Bank and for the Non-Core.

Declaration by the Senior Manager in charge of drawing up company accounts

The undersigned, Marina Natale, in her capacity as the senior manager in charge of drawing up UniCredit

S.p.A.’s company accounts

DECLARES

pursuant to Article 154 bis of the ‘Uniform Financial Services Act’ that the accounting information relating

to the Consolidated Interim Report as at September 30th, 2014 as reported in this press release

corresponds to the underlying documentary reports, books of account and accounting entries.

Nominated Official in charge of drawing up Company Accounts

Milan, November 11th 2014

Investor Relations:

Tel.+39-02-88624324; e-mail: investorrelations@unicredit.eu

Media Relations:

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

Please find attached the Press Release.

PODPISY OSÓB REPREZENTUJĄCYCH SPÓŁKĘ
DataImię i NazwiskoStanowisko/FunkcjaPodpis
2014-11-12Wioletta ReimerAttorney of UniCredit

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