UniCredit: a pan-European winner. Consolidated Interim Report as at 31 March 2019

UniCredit successfully concluded first of a number of comprehensive financial measures to prepare for new strategic plan

As stated in its press release on 8 May 2019, UniCredit announced that it had sold 17 per cent of Fineco's issued share capital to institutional investors for gross proceeds of €1,014 m. Fineco will be deconsolidated and the placement will lead to an increase in the Group's CET1 ratio of +21 bps in 2Q19. The remaining stake of ca. 18 per cent will be classified as a financial asset.

The placement is the first step in a comprehensive set of financial measures, to prepare for the wider 2020-2023 business strategy to be presented later this year. Specifically:

• Targeting to be at the upper end of the 200-250 bps MDA buffer by year end 2019 through the disposal of certain assets, including those already executed (e.g. real estate in 1Q19, 17 per cent of Fineco in 2Q19);
• Gradually align over time UniCredit's domestic sovereign bond portfolio with the domestic bond holdings of its Italian and European peers on a relative basis;
• Further acceleration of the Non Core rundown, which is expected to meaningfully beat the FY19 €14.9 bn target. 2021 Non Core runoff fully on track;
• Evolution of Group structure to increase optionality and flexibility, in particular optimising the cost of funding under different potential macroeconomic scenarios.

Details of these measures, as well as the accompanying new business strategy for 2020-2023, will be presented at the UniCredit Capital Markets Day on 3 December 2019 in London.

UNICREDIT: A PAN-EUROPEAN WINNER

Strong 1Q19 performance puts UniCredit well on track to successfully achieve Transform 2019 targets

Record 1Q19 results benefitting from exceptional items ¹:
-    Group stated net profit of €1.4 bn, up 24.7 per cent Y/Y ². Adjusted net profit of €1.1 bn, up 1.5 per cent Y/Y ²
-    Group adjusted RoTE at 9.4 per cent, up 0.5 p.p. Y/Y2. FY19 RoTE target >9 per cent confirmed
-    Good commercial dynamics in CEE partially offsetting slower start in Western Europe

Core bank performing well in 1Q19, benefitting from release of provisions for US sanctions:
-    Adjusted RoTE at 11.3 per cent, up 0.8 p.p. Y/Y ²
-    Net operating profit of €2.0 bn, down 1.3 per cent Y/Y
-    Gross NPE ratio of 4.1 per cent ³, down 73 bps Y/Y, well below FY19 4.7 per cent target

Continued strong execution of Transform 2019 in 1Q19 delivering consistent and tangible results:
-    104 per cent of FTE, 95 per cent of branch reduction targets achieved. Both targets expected to be exceeded in 2019
-    Costs at €2.6 bn, down 4.2 per cent Y/Y
-    CoR seasonally low at 40 bps
-    Non Core gross NPEs at €17.7 bn, down €5.1 bn Y/Y. Group gross NPE ratio 7.6 per cent, down 1.9 p.p. Y/Y
-    2021 Non Core runoff fully on track. Non Core rundown further accelerated to meaningfully beat FY19 €14.9 bn gross NPE target

1Q19 strong capital position and successful execution of mitigation actions:
-    CET1 ratio of 12.25 per cent. Fully loaded MDA buffer of 219 bps
-    CET1 ratio includes +7 bps from real estate disposals and -10 bps of regulatory headwinds
-    TLAC subordination ratio 18.41 per cent ⁴, buffer of 134 bps ⁴
-    Executed €5.7 bn of TLAC funding. Subordinated funding plan de facto done
-    Tangible equity up 2.2 per cent Q/Q to €48.8 bn, TBVpS up 2.2 per cent Q/Q to €21.9

FY19 key group targets:
-    Revenues of €19.8 bn confirmed
-    Costs of €10.4 bn confirmed
-    CoR 55 bps confirmed
-    net profit €4.7 bn confirmed, RoTE >9 per cent and Core RoTE >10 per cent confirmed
-    CET1 ratio at year end 2019 between 12.0-12.5 per cent ⁵ confirmed and MDA buffer now at the upper end of the target range of 200-250 bps. Trough expected in 2Q19, above 12 per cent
-    TLAC subordination ratio buffer of 50-100 bps
-    Tangible equity to continue to grow throughout FY19

Milan, 9 May 2019: on 8 May 2019, the Board of Directors of UniCredit S.p.A. approved the 1Q19 Group's consolidated financial accounts as of March 31, 2019.

Jean Pierre Mustier, Chief Executive Officer of UniCredit S.p.A., commenting on the 1Q19 Group results said:

"As we enter the last stretch of Transform 2019, I am very pleased with UniCredit's underlying performance at the start of 2019. This was the best first quarter results in a decade for the second time in a row, underpinning the success of our current strategic plan, and confirming we are well on track to achieve our Transform 2019 objectives by the end of this year, that are all confirmed.

Once again we have taken decisive action and on 7 May 2019 we announced four comprehensive financial measures that will lay the foundation of our new 2020-23 business strategy to be presented in December. The announced successful disposal of 17 per cent of Fineco was the first step and will be followed by additional actions such as accelerated 2019 NPE sales to support the 2021 full runoff of the Non Core division, the realignment of our sovereign domestic bond portfolio with our European peers and an evolution of our Group structure to allow us to increase flexibility and optimise our funding costs.

The core objectives are to ensure the Group benefits from an MDA buffer at the higher end of our announced range of between 200-250bps by year end 2019 and thus allow us to further strengthen our lending capabilities, improve our ability to support the local economy and to actively develop our client business across our countries of operation.

We are within reach of the finishing line of our Transform 2019 marathon and working together as One Team, One UniCredit, we shall ensure UniCredit is and remains a true pan-European winner."

Notes:

^[1] Disposal of real estate assets (+€258 m in 1Q19) and release of provisions from US sanctions settlement (+€320 m net impact in 1Q19).

^[2] Group and Group Core adjusted net profit and RoTE exclude IFRS9 FTA tax effect (+€887 m in 4Q18) and disposal of real estate (+€258 m in 1Q19).

^[3] Weighted average "NPL" ratio of EBA sample banks is 3.2 per cent. Source: EBA risk dashboard (data as at 4Q18). UniCredit's definition of "NPE" ratio is more conservative than EBA. Comparable "NPL" ratio for UniCredit at 1Q19 would be 3.6 per cent.

^[4] Managerial figures under current regulatory assumptions.

^[5] Assuming BTP spreads remain at current levels. BTP represents the whole Italian sovereign bond portfolio (BTPs, BOTs, et al).

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