UniCredit : 2Q15 and 1H15 Group Results

Net profit reaches €819 m in 2Q15 (-6.9% Q/Q, +7.9%Y/Y) and €1.7 bn in 1H15 (-3.9% H/H) with a RoAC of 8.9% in 2Q15. Main contributors to 2Q15 net profit are Commercial Bank Italy with €570 m (+0.6% Q/Q, +5.9% Y/Y and 27.9% RoAC), CIB with €252 m (-29.0% Q/Q, +27.6% Y/Y and 15.4% RoAC) and CEE with €152 m [9] (-14.8% Q/Q, -46.2% Y/Y and 7.2% RoAC) or €252 m excluding the impact of €100 m of impairment related to Ukrsotsbank (+41.2% Q/Q, -10.8% Y/Y and 11.9% RoAC).

Net operating profit decreases to €1.8 bn in 2Q15 (-4.9% Q/Q, -6.6% Y/Y), slightly increased to €3.6 bn in 1H15 (+0.5% H/H) thanks to revenue generation at €5.7 bn in 2Q15 (+0.1% Q/Q and Y/Y) and at €11.4 bn in 1H15 (+1.9% H/H) almost compensating an increase in operating costs and LLP.

Continued progression in revenues in 2Q15 is driven by Commercial Bank Italy with €2.2 bn (+1.0% Q/Q, +2.8% Y/Y), CIB with €993 m (-5.9% Q/Q, +10.3% Y/Y) and CEE with €982 m (+8.1% Q/Q, +0.8% Y/Y).

Net interest income stands at €3.0 bn in 2Q15 (+1.8% Q/Q, -4.4% Y/Y) and at €5.9 bn in 1H15 (-3.5% H/H) with the positive dynamics of lower cost of funding mitigating the negative trend of loan/deposit volumes and customer rates.

Customer loans down to €432.6 bn (-1.7% Q/Q), with commercial loans increasing (+0.5% Q/Q) thanks to Commercial Bank Germany and Commercial Bank Austria (+0.1% and +0.6% Q/Q, respectively) and CIB (+4.1% Q/Q). Institutional and market counterparties down to €36.2 bn (-20.9% Q/Q).

New medium-long term lending in Commercial Banks reaches €15.4 bn (+37.6% H/H): in Italy (+45.3% H/H) supported by mid-corporates (+99.2% H/H), in Germany (+32.2% H/H) supported by household mortgages (+80.3% H/H) as well as in Austria (+19.9% H/H) by household mortgages (+84.2% H/H).

Direct funding [10] reaches €473.6 bn (+1.8% Q/Q) with commercial funding growing up to €405.9 bn (+1.0% Q/Q) as well as institutional and market counterparts up to €67.6 bn (+7.5% Q/Q).

Fees and commissions are stable at €2.0 bn in 2Q15 (-0.1% Q/Q, +3.1% Y/Y), reaching €3.9 bn in 1H15 (+5.2% H/H), sustained by investment service fees at c. €1 bn in 2Q15 (-1.2% Q/Q, +10.6% Y/Y) and transactional fees at €566 m in 2Q15 (+3.9% Q/Q, +0.1% Y/Y) mainly driven by credit card business in CEE & Poland.

Trading income reduces to €462 m in 2Q15 (-25.5% Q/Q, +38.3% Y/Y) reflecting market conditions (-€152 m Q/Q, -€38 m Y/Y) and customer driven activities (-€115 m Q/Q, +€48 m Y/Y). Trading income reaches €1.1 bn in 1H15 (+33.3% H/H).

Dividends and other income [11] increase at €275 m in 2Q15 (+72.7% Q/Q, -13.6% Y/Y) reaching €435 m in 1H15 (-8.8% H/H). Yapi Kredi contributes to dividend generation to €87 m in 2Q15 (+23.8% Q/Q and +30.5% Q/Q at current and constant FX respectively).

Total costs reach €3.3 bn in 2Q15 (+1.6% Q/Q, +3.6% Y/Y) and €6.5 bn in 1H15 (+2.0% H/H), with higher staff expenses both in 2Q15 and in 1H15 driven by accrual of variable compensations, while other administrative expenses in 1H15 are down thanks to lower discretionary costs partially mitigating the growth of staff expenses and depreciation. Cost/income ratio at 58.0% in 2Q15 (+1pp Q/Q).

LLP stand at €615 m in 2Q15 leading to a cost of risk of 56bps, driven by a portfolio stabilization, increase coverage in Russia and a single ticket in CIB. Confirmed low and sustainable trend in cost of risk in Germany, Austria and Poland.

Other charges and provisions amount to €313 m as of 2Q15, including additional costs related to SRF and Deposit Guarantee Scheme for a total of €139 m.

Income taxes for the periodamount to €379 m, corresponding to an effective tax rate of c. 26%.

Loss from non-current assets held for sale, after tax sets at €121 m in 2Q15, mainly related to Ukrsotsbank (€100 m impairment and c. €40 m 2Q15 loss).