UniCredit: 4Q15 and FY15 Group Results

Significantly Improved Capital Generation (c. +92bps Y/Y) with CET1 Ratio Fully Loaded Pro-Forma at 10.94%

Net Profit Above €2.2 bn in FY15 Excluding Non-Recurring Items, Stated Net Profit at €1.7 bn

12 Eurocent Dividend per Share to Be Proposed With Cash/Scrip Option

Continued Reduction in Gross Impaired Loans (-1.2% Q/Q, -5.5% Y/Y). Net Bad Loan Ratio at 4.2% in 4Q15 and Solid Coverage Ratio at 61.0%

Core Bank Revenues Increased to €5.6 bn in 4Q15 (+5.9% Q/Q, +1.6% Y/Y) and to €22.3 bn in FY15 (+0.6% FY/FY), Due to Robust Fee Generation (+3.2% Q/Q, +4.7% FY/FY)

Significant Growth in Group TFA, Sustained by Solid Net Sales at €31.8 bn (+28.0% FY/FY)

New Medium-Long Term Lending Origination Strongly Up Above €50 bn in FY15

Strategic Plan Achievements in the First 3 Months of Implementation

Agreement on Restructuring of Austrian Retail Business

Agreement for the Disposal of Ukrsotsbank

CEE Sub-Holding Repositioning on Track

Reduction of 1.3k FTE and Closure of 121 Branches in 4Q15 Across All Geographies

Today, the Board of Directors of UniCredit approved 4Q15 and FY15 results. Federico Ghizzoni, CEO of UniCredit, comments:  

"Organic capital generation is confirmed with an increase of over 90 bps in 2015 which further strengthens our capital ratios. CET1 fully loaded pro-forma is close to 11%, already above our current regulatory requirements for 2018. UniCredit recorded a net profit above €2.2 bn during 2015, before non-recurring items to implement our Strategic Plan and extraordinary contributions to the rescue of four Italian banks. This is a remarkable result considering the challenging macroeconomic environment in Europe, in particular in the banking sector. The implementation of our Plan is well on track. In recent months, we finalized some important agreements in Austria and Ukraine; at the same time, we are strongly committed to cost reduction. Asset quality is constantly improving, impaired and bad loans are firmly under control with high coverage ratios."

Group net profit reaches €1.7 bn in FY15 and above €2.2 bn excluding c. €540 m of net non-recurring items mainly related to Strategic Plan restructuring charges, agreement for the disposal of Ukrsotsbank, extraordinary contributions to new systemic charges in Italy and Poland and higher LLP for CHF loan conversion in Croatia ^[1]. RoTE ^[2] at 4.1% in FY15 (5.4% excluding non-recurring items).

CET1 ratio fully loaded pro-forma ^[3] improves to 10.94% with a significant capital generation of 92bps Y/Y. CET1 ratio transitional pro-forma is up to 10.73% (+32bps Y/Y), Tier 1 ratio transitional pro-forma at 11.64% and Total Capital ratio transitional pro-forma at 14.36% ^[4]. Basel 3 Leverage ratio transitional pro-forma at 4.69% and fully loaded pro-forma at 4.53% ^[5].

Group asset quality continues to improve in 4Q15, with gross impaired loans further down to €79.8 bn (-1.2% Q/Q, -5.5% Y/Y) with a solid coverage ratio at 51.2% (at 52.5%, excluding 2015 impaired loan sales). Gross bad loans are substantially stable Q/Q at €51.1 bn, mainly supported by portfolio disposals, with a coverage ratio of 61.0% (at 62.2%, excluding 2015 impaired loan sales). Net bad loan ratio amounts to 4.2% in 4Q15 ^[6]. Other gross impaired loans further shrink by -4.7% Q/Q and -11.0% Y/Y, mainly due to lower inflows from performing. In Italy, asset quality continues to experience positive progress with impaired loans trend of UniCredit S.p.A. consistently better than the Italian banking system (ABI sample ^[7]) at the end of December 2015, with the highest coverage ratio on gross impaired loans at 50.9% (at 52.5%, excluding 2015 impaired loan sales).

The Core Bank posts a net profit of €894 m in 4Q15 (excluding c. €254 m of non-recurring items) and above €3.7 bn in FY15 (excluding €492 m of non-recurring items). Revenues record a positive generation (+5.9% Q/Q, +0.6% FY/FY) thanks to a strong fee income (+3.2% Q/Q, +4.7% FY/FY). TFA ^[8] increase at €916 bn thanks to positive net sales generation (+€31.8 bn or +28.0% FY/FY) supported by AUM products and deposits.

Remarkable new origination is due to new medium-long term lending strongly up above €50 bn in FY15, driven by both corporates and household mortgages.

At the Annual General Meeting, the Board of Directors of UniCredit will propose for the financial year 2015 a distribution of a 12 €cent dividend from reserves of profits per ordinary and saving share with share option (scrip dividend), via a newly issued shares assignment or, upon shareholders' request, cash payment. The ex-dividend date has been set on April 18^th 2016, the record date on April 19^th 2016 and payment date on May 3^rd 2016. Terms and conditions of the scrip dividend will be communicated in the Report of the Board of Directors to the Shareholders' Meeting which will be made available not later than 30 days before the Shareholders' Meeting itself scheduled on April 14^th  2016.

Strategic Plan achievements in the first 3 months of implementation

-     The retail and corporate banking franchise is strongly performing with over 32 m clients in FY15 (+1 m FY/FY) and growing market shares in most countries.

-     Cost reduction is a key pillar of the Strategic Plan. FTE decreases by 1.3k in 4Q15 and by 3.5k in FY15, while branches shrink by 121 units in 4Q15 and by 582 in FY15. On February 5^th, UniCredit reached an agreement with the Trade Unions in Italy for the exit of 2.7k FTE on a voluntary basis.

-     Group streamlining is on track thanks to the agreement for the disposal of Ukrsotsbank and the transfer of CEE subsidiaries progressing well. The cross divisional synergy between CIB and the commercial banks is delivering strong results with significant gains in market shares across CIB products.

-     CEE division is constantly acting as one of the main contributors to revenue growth and bottom-line. Two clients out of three choose UniCredit as banking partner in CEE.

-     Group fees & commissions are growing on the back of increasing TFA, which have grown more than expected in the Strategic Plan.

-     Digital transformation is advancing. UniCredit has committed c. €200 m to invest in financial start-ups worldwide via a partnership with Anthemis Group, a venture capital and advisory firm that focuses exclusively on fintech. Such strategic investments will turn the fintech threat into an opportunity, enriching the Group business proposition and speeding up the digital evolution program. UniCredit will invest through two dedicated vehicles:

• one, a proprietary equity fund, focused on well-established start-ups and follow-on investments, with committed capital of €175 m, and
• the other investing in early stage start-ups, where UniCredit will act as anchor investor with $25 m committed capital.

-     UniCredit substantially progresses towards capital targets, thanks to a capital generation of 92bps in 2015. Asset quality continues to improve.

4Q15 Key Financial Data

Group

• Net profit: €153 m (-69.8% Q/Q, -10.2% Y/Y) and 1.4% RoTE (4.2% excluding non-recurring items)
• Revenues: €5.6 bn (+4.8% Q/Q, -0.3% Y/Y)
• Total costs: €3.4 bn (stable Q/Q, -1.5% Y/Y), cost/income ratio of 60.5% (-2.9p.p. Q/Q, -0.7p.p. Y/Y)
• Asset Quality: LLP at €1.2 bn (+21.0% Q/Q, -28.3% Y/Y), cost of risk at 103bps (+17.8bps Q/Q, -41.7bps Y/Y); net impaired loan ratio at 8.2% (-0.5p.p. Y/Y) and coverage ratio at 51.2%, net bad loan ratio at 4.2% and coverage ratio at 61.0%
• Capital adequacy: CET1 ratio transitional pro-forma at 10.73% and CET1 ratio fully loaded pro-forma at 10.94%; Tier 1 ratio transitional pro-forma at 11.64% and Total Capital ratio transitional pro-forma at 14.36%

Core

• Net profit: €640 m (-28.5% Q/Q, -25.2% Y/Y) and 7.4% RoAC ^[9] (10.3% excluding non-recurring items)
• Revenues: €5.6 bn (+5.9% Q/Q, +1.6% Y/Y)
• Total costs: €3.3 bn (+1.3% Q/Q, -0.8% Y/Y), cost/income ratio of 58.4% (-2.7p.p. Q/Q, -1.4p.p. Y/Y)
• Asset Quality: LLP at €723 m (+31.9% Q/Q, -4.8% Y/Y), cost of risk at 66bps (+15.7bps Q/Q, -5.8bps Y/Y)

FY15 Key Financial Data

Group

• Net profit: €1.7 bn (-15.6% FY/FY) and 4.1% RoTE (5.4% excluding non-recurring items)
• Revenues: €22.4 bn (-0.7% FY/FY)
• Total costs: €13.6 bn (+0.8% FY/FY), cost/income ratio of 60.8% (+0.9p.p. FY/FY)
• Asset Quality: LLP at €4.1 bn (-4.1% FY/FY), cost of risk at 86bps (-3.6bps FY/FY)

Core Bank

• Net profit: €3.2 bn (-13.2% FY/FY) and 8.9% RoAC (10.3% excluding non-recurring items)
• Revenues: €22.3 bn (+0.6% FY/FY)
• Total costs: €13.1 bn (+1.3% FY/FY), cost/income ratio of 58.7% (almost stable FY/FY)
• Asset Quality: LLP at €2.5 bn (+14.9% FY/FY), cost of risk at 56bps (+6.3bps FY/FY)

Notes

[1]Non-recurring items refer to (i) Strategic Plan restructuring charges (-€214 m net of tax), (ii) impact of the valuation of Ukrsotsbank (-€298 m net), (iii) extraordinary contributions to Single Resolution Funds in Italy and Poland (-€173 m net), (iv) LLP for CHF loan conversion in Croatia (-€138 m net) and (v) taxes (+€287 m net).

[2]RoTE = net profit / Average tangible equity (excluding Additional Tier 1).

[3]Assuming (i) 2015 scrip dividend of 12 €cents per share with expected 75%-25% shares-cash acceptance, (ii) the full absorption of DTA on goodwill tax redemption and tax losses carried forward and (iii) Pekao minority excess capital calculated with 12% threshold.

[4]All ratios assuming 2015 scrip dividend of 12 €cents per share with expected 75%-25% shares-cash acceptance. For regulatory purposes, CET1 ratio transitional stands at 10.59%, Tier 1 ratio transitional at 11.50% and Total Capital ratio transitional at 14.23%.

[5]All ratios assuming 2015 scrip dividend of 12 €cents per share with expected 75%-25% shares-cash acceptance. For regulatory purposes, leverage ratio transitional at 4.63%.

[6]Calculated as €19.9 bn net bad loans divided by €474 bn total net customer loans.

[7]Italian banking association - sample composed by c. 80% of Italian banking system , including exposures towards households and non-financial corporations.

[8]TFA: total financial assets include deposits from customers and assets under administration (AuM and AuC).

[9]RoAC = Net profit/ Allocated capital. Allocated capital is calculated as 9.25% of RWA, including deductions for shortfall and securitizations.

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