UniCredit: 2Q16 and 1H16 Group Results

Adjusted Group Net Profit at €687 m in 2Q16 (+6.4% Q/Q), with All Divisions Contributing Positively to Quarterly Performance. Reported Group Net Profit at €916 m

Adjusted RoTE at 6.6% in 2Q16. Reported RoTE at 8.8%

Excluding DTA impact, CET1 Ratio Fully Loaded at 10.33% in 2Q16 ^[1] (Pro-Forma at 10.53% Including the Positive Impact of 10% Disposals of FinecoBank and Bank Pekao)

Continued Reduction of Net Impaired Loans to €36.7 bn with Coverage Ratio Increasing to 52.4% in 2Q16. Net Bad Loans Ratio at 4.0% in 2Q16 with Coverage Ratio Rising to 61.6%

In Challenging Market Conditions, Core Bank Core Revenues (NII & Fees) at €4.9 bn in 2Q16 (+1.2% Q/Q) Thanks to Positive Dynamics Between Divisions with Cross-Selling Up by 11% Q/Q as a Result of a Well Diversified Product Base

Focus on Cost Management With Core Bank Operating Expenses down by c. 3% Y/Y to €3.2 bn in 2Q16

CEE, CIB and Commercial Banking Italy Largest Contributors to Net Profit

All divisions contribute positively to quarterly performance with adjusted Group net profit reaching €687 m in 2Q16 which excludes c. €230 m of net non-recurring item: -€216 m of capital gain from the disposal of VISA Europe stake, -€100 m of LLP release, -€96 m of trading gain, +€55 m related to restructuring charges and +€128 m of guarantee fees for DTA conversion in Italy. Adjusted RoTE ^[1] stands at 6.6% in 2Q16. Reported Group net profit stands at €916 m in 2Q16 (over 100% Q/Q, +75.3% Y/Y) with RoTE at 8.8%. Adjusted Group net profit equal to €1.3 bn in 1H16 ^[2] (+28.7% H/H) and adjusted RoTE at 6.4%. Reported Group net profit at €1.3 bn in 1H16 (+27.7% H/H) with a RoTE at 6.4%.

Total assets remain stable at €891.5 bn in 2Q16 (-0.1% Q/Q, +1.9% Y/Y). On the asset side, the increase in financial assets & investments (+€10.0 bn Q/Q) and in loans to customers (+€5.9 bn Q/Q) mainly offsets the reduction in loans and receivables with banks (-€17.8 bn Q/Q). On the liabilities side, the reduction in direct funding (-€4.1 bn Q/Q) and in deposits from customers (-€5.5 bn Q/Q) is offset by the increase of financial liabilities held for trading (+€ 8.2 bn Q/Q).

RWA/Total assets ratio is largely stable at 44.8% in 2Q16 (+0.6p.p. Q/Q, -1.6p.p. Y/Y). RWA increase to €399.3 bn in 2Q16 (+€4.9 bn Q/Q, -€6.6 bn Y/Y) as the result of an increase in credit (+€0.6 bn Q/Q) and market RWA (+€5.4 bn Q/Q), partially compensated by a reduction in operational risk (-€1.2 bn Q/Q). In particular, credit RWA growth reflects business volume increase. Market RWA growth is mainly due to the impact of negative interest rates on models.

Asset quality continues to improve in 2Q16 with gross impaired loans declining to €77.1 bn (-2.4% Q/Q, -5.7% Y/Y), on the back of reduced inflows from performing to impaired loans and higher collections, with the net impaired loan ratio down to 7.5% (-0.4p.p. Q/Q, -0.9p.p. Y/Y) and coverage ratio at 52.4% in 2Q16. Gross bad loans decrease to €51.3 bn (-1.4% Q/Q, stable Y/Y) with a coverage ratio of 61.6% (+0.4p.p. Q/Q). Other gross impaired loans further down at €25.8 bn (-4.3% Q/Q, -15.2% Y/Y).

Starting from this quarter, CET1 ratio pro-forma no longer includes the impacts from the full absorption of DTA on goodwill tax redemption and tax losses carried forward and Bank Pekao minority excess capital calculated with 12% threshold [4]. CET1 ratio fully loaded for regulatory purposes stands at 10.33% in 2Q16 ^[5], pro-forma at 10.53% including 20bp generated by the recent disposals (+8bp from FinecoBank ABB ^[6] and +12bp from Bank Pekao ABB) and excluding the potential impact of cards processing activities disposal (+12bp). CET1 ratio fully loaded is the result of (i) 2Q16 earnings generation (+23bp Q/Q), (ii) RWA increase (-12bp Q/Q), (iii) AFS (-6bp Q/Q) and (iv) DBO & other (-17bp Q/Q). On a regulatory basis, CET1 ratio transitional stands at 10.51% (+20bp Q/Q, -1bp Y/Y), Tier 1 ratio transitional at 11.30% and Total Capital ratio transitional at 14.02%. On a regulatory basis, Basel 3 Leverage ratio transitional stands at 4.55% and fully loaded at 4.33%.

The CET1 ratio transitional resulting from the European Bank Authority (EBA) 2016 Stress Test would in 2018 stand at 11.57% under the baseline scenario and at 7.12% under the adverse scenario, embedding +98bp and -347bp impact (vs. an un-weighted average impact of +96bp and -427bp within EBA sample)

Funding plan 2016 for €27.6 bn has been executed for about €12.1 bn as end of July.

TLTRO II take-up amounts to €26.6 bn on a consolidated basis ^[7]. The outstanding amount of TLTRO I was fully reimbursed following the ECB auction in June. Further TLTRO II take-up at the upcoming auctions is being evaluated.

2Q16 Key Financial Data

Group

• Net profit: adjusted net profit at €687 m (+6.4% Q/Q, +31.5% Y/Y) and RoTE at 6.6% excluding non-recurring items. Reported net profit at €916 m (over 100% Q/Q, +75.3% Y/Y) and RoTE at 8.8%.
• Revenues: €6.1 bn (+12.1% Q/Q, +7.1% Y/Y).
• Total costs: €3.3 bn (stable Q/Q, -4.3% Y/Y), cost/income ratio of 53.6% (-6.5p.p. Q/Q, -6.3p.p. Y/Y)
• Asset Quality: LLP at €914 m (+20.9% Q/Q, +0.1% Y/Y), cost of risk at 75bp (+12bp Q/Q, -1bp Y/Y); net impaired loan ratio at 7.5% (-0.4p.p. Q/Q, -0.9p.p. Y/Y) and coverage ratio at 52.4%; net bad loan ratio at 4.0% and coverage ratio at 61.6%
• Capital adequacy: CET1 ratio fully loaded for regulatory purposes at 10.33%, pro-forma at 10.53%. On a regulatory basis, CET1 ratio transitional at 10.51%, Tier 1 ratio transitional at 11.30% and Total Capital ratio transitional at 14.02%; leverage ratio transitional at 4.55% and fully loaded at 4.33%

Core Bank

• Net profit: adjusted net profit at €1.1 bn and RoAC ^[8] at 11.9%. Reported net profit at €1.2 bn (+69.8% Q/Q, +51.5% Y/Y) and RoAC at 13.4%
• Revenues: €6.2 bn (+13.0% Q/Q, +8.5% Y/Y)
• Total costs: €3.2 bn (+1.7% Q/Q, -2.9% Y/Y), cost/income ratio at 52.3% (-5.8p.p. Q/Q, -6.1p.p. Y/Y)
• Asset Quality: LLP at €513 m (+24.1% Q/Q, -13.9% Y/Y), cost of risk at 45bp (+7.9bp Q/Q, -9.4bp Y/Y)

1H16 Key Financial Data

Group

• Net profit: adjusted net profit at €1.3 bn (+28.7% H/H) and RoTE at 6.4%. Reported net profit at €1.3 bn (+27.7% H/H) and RoTE at 6.4%
• Revenues: €11.6 bn (+1.1% H/H)
• Total costs: €6.6 bn (-4.0% H/H) with a cost/income ratio of 56.6% (-3.0p.p. H/H)
• Asset Quality: LLP at €1.7 bn (-11.8% H/H), cost of risk at 69bp (-10bp H/H)

Core Bank

• Net profit: adjusted net profit at c. €2.1 bn and ROAC at 11.2%. Reported net profit at €2.0 bn (+16.8% H/H) and ROAC at 10.7%
• Revenues: €11.7 bn (+2.4% H/H)
• Total costs: €6.4 bn (-2.7% H/H) with a cost/income ratio of 55.1% (-2.8p.p. H/H)
• Asset Quality: LLP at €926 m (-20.9% H/H), cost of risk at 41bp (-13bp H/H)

Notes:

[1] In 2Q16, CET1 ratio fully loaded for regulatory purposes at 10.33% does not includes the effects related to (i) the full absorption of DTA on goodwill tax redemption and tax losses carried forward and (ii) Bank Pekao minority excess capital calculated with 12% threshold.

[2] RoTE = annualized net profit / average tangible equity (excluding AT1).

[3] Adjusted for: 2Q16 non-recurring items (one-off trading gain, disposal of Visa Europe stake, restructuring charges, guarantee fees for DTA conversion in Italy and LLP release); 1Q16 non-recurring items (net additional impact of DBO in Austria and Strategic Plan integration costs in Italy).

[4] Pro-forma items equal to 40bp as of March 2016 and 43bp as of June 2016. In 1Q16, CET1 ratio fully loaded pro-forma at 10.85%, excluding 40 bp pro-forma at 10.45%.

[5] Within CET1 components, 1H16 net profit is fully recognised in own funds without any dividend deduction for FY16  in line with the decision taken by the Board of Directors on August 3, 2016. The dividend policy for 2016 and for the following years will be re-discussed while reviewing the strategic plan.

[6] Accelerated Book Building.

[7] €18.2 bn have been taken in Italy, €7.0 bn in Germany, €1.0 bn in Austria and €0.4 bn in Czech Republic & Slovakia.

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

[9] Contribution from macro hedging strategy on non-naturally hedged sight deposits in 2Q16 at €376 m (€373 m in 1Q16 and €368 m in 2Q15).

[10] Including mix effect.

[11] Include dividends, equity investments and balance of other operating income / expenses. Turkey contribution based on a divisional view.

[12] Net of expenses recovery and indirect costs.

[13] Referring to the contributions to: (i) Single Resolution Fund of c. €5 m, (ii) guarantee fees for DTA conversion of c. €184 m in Italy, (iii) bank levies of c. €64 m (of which €32 m in Austria, €28 m in Poland and €4 m in CEE) and (iv) Deposit Guarantee Scheme of c. €47 m (of which €13 m in CEE, €19 m in Germany and €15 m in Poland).

[14] Perimeter of impaired exposures hereby shown as per BankIT Circular 272 is substantially equivalent to the perimeter of EBA Non Performing Exposures (NPE).

[15] For CEE, changes at current FX.

[16] Source: Dealogic Loanware, per 6 July 2016. Period: 1 January - 30 June 2016.

Milan, August 3 2016

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