UniCredit Consolidated Interim Report as at September 30, 2016

UniCredit will publish a "Consolidated Interim Report - Press Release" on a voluntary basis for 1Q and 3Q each year, in order to grant continuity with previous quarterly reports

In Challenging Market Conditions, Group Revenues at €5.5 bn in 3Q16 (+2.3% Y/Y) Mainly Driven by Trading Income

Group Operating Expenses down 4.6% Y/Y to €3.2 bn in 3Q16 with a Reduction Y/Y of 3,859 FTE ^[1] and 463 Branches

Group Net Profit at €447 m in 3Q16 with Quarterly Positive Contribution by All Key Divisions. Group Net Profit at €1.8 bn in 9M16

 CEE, CIB and Commercial Bank Italy as Largest Contributors to Net Profit 

RoTE at 4.2% in 3Q16 and at 5.7% in 9M16

Net Impaired Loans Further Down to €36.4 bn (-8.0% Y/Y) with Coverage Ratio at 52.6% in 3Q16. Net Bad Loans Almost Stable at €19.6 bn with Coverage Ratio at 61.9% in 3Q16

CET1 Ratio Fully Loaded at 10.82% in 3Q16

All divisions contributed positively to the quarterly performance with Group net profit reaching €447 m in 3Q16 ^[1] (-34.9% Q/Q ^[2], -11.8% Y/Y) and RoTE ^[3] at 4.2%. Group net profit reached €1.8 bn in 9M16 (+14.7% 9M/9M) with RoTE ^[4] at 5.7%.

Total assets reduced to €874.5 bn in 3Q16 (-1.9% Q/Q, +0.1% Y/Y), mainly driven by the drop in loans to customers (-€8.2 bn Q/Q), almost offset by the increase in loans to banks (+€7.7 bn Q/Q), and the reduction in financial investments (-€8.3 bn Q/Q) and financial assets held for trading (-€11.0 bn Q/Q).

Total liabilities were mainly reduced by the drop in deposits from customers (-€2.1 bn Q/Q), almost offset by the increase in deposits from banks (+€1.9 bn Q/Q), and the reduction in debt securities in issue (-€4.2 bn Q/Q) and financial liabilities held for trading (-€11.6 bn Q/Q).

RWA/Total assets ratio ^[6] remained close to 44.7% in 3Q16. RWA shrunk to €390.9 bn in 3Q16 (-€8.4 bn Q/Q, -€9.6 bn Y/Y) thanks to a decrease in credit (-€4.5 bn Q/Q) and market RWA (-€3.9 bn Q/Q). In particular, credit RWA reduction mainly reflected lower volumes. The decrease in market RWA was mainly due to the implementation of new market risk models in 3Q16 following the approval of the competent Authority ^[7]. Operational risk slightly increased by €0.04 bn Q/Q.

Asset quality continued to gradually improve in 3Q16, with gross impaired loans declining to €76.8 bn (-0.4% Q/Q, -4.9% Y/Y) and a net impaired loan ratio at 7.6% (+0.1p.p. Q/Q), thanks to disposals and recoveries offsetting flows from performing to impaired loans. Coverage ratio of 52.6% in 3Q16 (+0.2 p.p. Q/Q). Gross bad loans remained stable to €51.3 bn in 3Q16 with a coverage ratio of 61.9% (+0.3p.p. Q/Q). Gross unlikely to pay loans decreased to €23.4 bn (-1.4% Q/Q, -13.2% Y/Y) due to lower new defaults, with a coverage ratio slightly down at 34.3% (-0.4 p.p. Q/Q). Past due loans amounted to €2.1 bn in 3Q16 (-0.8% Q/Q, -33.7% Y/Y) with a coverage ratio of 28.2% (+0.8p.p. Q/Q).

CET1 ratio fully loaded stood at 10.82% in 3Q16 ^[7]. The increase in CET1 ratio fully loaded was mostly driven by RWA decrease (+23bp Q/Q) and AFS ^[8] dynamics (+6bp Q/Q), compensating DBO ^[9] negative dynamics (-4bp Q/Q). CET1 ratio fully loaded also benefited in 3Q16 from the 10% FinecoBank and the 10% Pekao ABB ^[10] transactions (+20bp Q/Q). CET1 ratio transitional was up at 11.00%, Tier 1 ratio transitional at 11.81% and Total Capital ratio transitional at 14.50%. Basel 3 Leverage ratio transitional stood at 4.70% and fully loaded at 4.49%.

Funding plan 2016 has been executed for about €15.8 bn at the end of October. Including the new amount taken up through TLTRO II of €8.4 bn, the medium long term funding reached c. €24 bn. The outstanding amount of TLTRO II is equal to €26.7 bn on a consolidated basis [11] (vs TLTRO I of €18.3 bn, completely repaid). Further TLTRO II take-up at the upcoming auctions is being evaluated.

******************

When assessing the quarterly results, it should be noted that Unicredit is in the process of preparing a new multi-year plan. The new plan will be presented to the market on the 13th of December and will reflect the outcome of the ongoing review of all Group assets announced in July 2016.

The actions and decisions set out in the new plan could influence, also substantially, the results of the fourth quarter with respect to the evaluation of certain assets and/or to potential market transactions affecting the Group's participations and credit portfolio. 

3Q16 Key Financial Data

Group

• Net profit: net profit at €447 m (-34.9% Q/Q, -11.8% Y/Y) and 4.2% RoTE
• Revenues: €5.5 bn (-11.1% Q/Q, +2.3% Y/Y)
• Total costs: €3.2 bn (-1.8% Q/Q, -4.6% Y/Y), cost/income ratio of 59.2% (+5.6p.p. Q/Q, -4.3p.p. Y/Y)
• Asset Quality: LLP at €1.0 bn (+10.3% Q/Q, +0.3% Y/Y), cost of risk at 83bp (+8bp Q/Q, -2bp Y/Y); net impaired loan ratio at 7.6% (+0.1p.p. Q/Q, -0.8p.p. Y/Y) and coverage ratio at 52.6%; net bad loan ratio at 4.1% and coverage ratio at 61.9%
• Capital adequacy: CET1 ratio fully loaded at 10.82%, CET1 ratio transitional at 11.00%, Tier 1 ratio transitional at 11.81% and Total Capital ratio transitional at 14.50%; leverage ratio transitional at 4.70% and fully loaded at 4.49%

Core Bank

• Net profit: net profit at €921 m (-17.0% Q/Q [12], +2.7% Y/Y) and 10.4% RoAC [13]
• Revenues: €5.5 bn (-10.9% Q/Q, +3.7% Y/Y)
• Total costs: €3.2 bn (-2.7% Q/Q, -3.2% Y/Y), cost/income ratio of 57.1% (+4.8p.p. Q/Q, -4.1p.p. Y/Y)
• Asset Quality: LLP at €462 m (-10.0% Q/Q, -15.3% Y/Y), cost of risk at 41bp (-5bp Q/Q, -10bp Y/Y)

9M16 Key Financial Data

Group

• Net profit: net profit at €1.8 bn (+14.7% 9M/9M) and 5.7% RoTE
• Revenues: €17.1 bn (+1.5% 9M/9M)
• Total costs: €9.8 bn (-4.2% 9M/9M), cost/income ratio of 57.5% (-3.4p.p. 9M/9M)
• Asset Quality: LLP at €2.7 bn (-7.6% 9M/9M), cost of risk at 74bp (-7bp 9M/9M)

Core Bank

• Net profit: net profit at €2.9 bn (+11.9% 9M/9M) and 10.4% RoAC
• Revenues: €17.2 bn (+2.8% 9M/9M)
• Total costs: €9.6 bn (-2.8% 9M/9M), cost/income ratio of 55.7% (-3.2p.p. 9M/9M)
• Asset Quality: LLP at €1.4 bn (-19.1% 9M/9M)

Note: In this document, 2016 figures related to net profit are calculated as follows:

-   2Q16: Group net profit at €687 m is adjusted for -€229 m of non -recurring items net of taxes (-€96 m of extraordinary trading gain, -€216 m of capital gain from the disposal of VISA Europe stake, -€100 m of LLP release, +€55 m related to restructuring charges in Italy and +€128 m of guarantee fees for DTA conversion in Italy); Core Bank net profit at €1.1 bn is adjusted for -€135 m of non-recurring items net of taxes.

-    3Q16: Group and Core Bank net profit have no adjustments.

-     9M16: stated and adjusted Group net profit equals €1.8 bn (delta stated vs adjusted is substantially immaterial). Core Bank net profit shown on a stated basis.

^[1] Full Time Equivalent.

^[2] The partial write off of DTA on tax loss carried forward derives from the results of updated DTA sustainability test run in September, which takes into account the exclusion of FinecoBank from the  Italian tax consolidation perimeter.  In accordance with fiscal law, the loss of control of majority in FinecoBank, as a consequence of further stake disposal carried out, drives to the exclusion of this legal entity from Italian Fiscal Perimeter since January 1, 2016. Excluding FinecoBank, a lower estimated future tax base is available to calculate the maximum capability to absorb tax losses under a 5 year time horizon. Such a time horizon has been set in order to harmonize the approach within the main Group legal entities.

^[3] Calculated on 2Q16 Group net profit adjusted as indicated in Note above.

^[4] RoTE = annualized net profit / average tangible equity (excluding AT1). Average tangible equity calculated excluding intangible assets (i.e. goodwill and other intangible assets) and AT1. The ratio shows in percentage terms the earning capacity for equity shareholders.

^[5] Density ratio = total risk weighted assets / total IFRS balance sheet assets.

^[6] European Central Bank.

^[7] Within CET1 components, 1H16 net profit is fully recognized in consolidated CET1 capital without any dividend deduction, in line with the decision taken by the Board of Directors on August 3, 2016; while 3Q16 net profit is not included in consolidated CET1 capital as UniCredit S.p.A. has not requested the prior permission from the competent Authority, according to CRR Article 26(2).

^[8] Available for Sale.

^[9] Defined-benefit Obligations.

^[10] Accelerated Bookbuilding.

^[11] €18.2 bn have been taken in Italy, €7.0 bn in Germany, €1.0 bn in Austria, €0.4 bn in Czech Republic & Slovakia and €0.1 bn in Slovenia.

^[12] Calculated on 2Q16 Core Bank net profit adjusted as indicated in Note on page 1.

^[13] RoAC = annualized net profit / Allocated capital. Allocated capital is calculated as 10% of RWA, including deductions for shortfall and securitizations.

Milan, November 10 2016

Enquiries:

Investor Relations:

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

Media Relations:

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