UniCredit S.p.A. A joint stock company Registered Office in Rome: Via Alessandro Specchi, 16 Head Office in Milan: Piazza Cordusio Share capital Euro

Transcription

1 Consolidated First Half Financial Report as at June 30, 2011

2 UniCredit S.p.A. A joint stock company Registered Office in Rome: Via Alessandro Specchi, 16 Head Office in Milan: Piazza Cordusio Share capital Euro 9,649,245, fully paid in, Fiscal Code, VAT number with the Company Register of Rome: Registered in the Register of Banking Groups and Parent Company of the Unicredit Banking Group, with cod ; cod. ABI Member of the National Interbank Deposit Guarantee Fund and of the National Compensation Fund 2

3 3 Consolidated First Half Financial Report as at June 30, 2011

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5 Contents Introduction 7 Board of Directors, Board of Statutory Auditors and External Auditors 9 Prefatory Note to the Consolidated First Half Financial Report 10 Interim Report on Operations 13 Highlights 14 Condensed Accounts 16 Quarterly Figures 18 Comparison of Q / Q Segment Reporting (Summary) 21 How the UniCredit Group has grown 22 UniCredit Share 23 Group Results 24 Results by Business Segment 39 Other information 86 Subsequent Events and Outlook 96 Condensed Interim Consolidated Financial Statements 99 Consolidated Accounts 101 Explanatory Notes 111 Condensed Interim Consolidated Financial Statement Certification pursuant to Art. 81-ter of Consob Regulation no of May 14, 1999, as amended 297 Report of External Auditors 301 Notes The following conventional symbols have been used in the tables:. a dash (-) indicates that the item/figure is inexistent;. two stops (..) or n.s. when the figures do not reach the minimum considered significant or are not in any case considered significant;. n.a. indicates that the figure is not available. Any discrepancies between data disclosed in the Interim Report on Operations or between these data and the Condensed Interim Consolidated Financial Statements are solely due to the effect of rounding. 5

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7 Introduction Board of Directors, Board of Statutory Auditors and External Auditors 9 Prefatory Note to the Consolidated First Half Financial Report 10 7

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9 Board of Directors, Board of Statutory Auditors and External Auditors Board of Directors Dieter Rampl Luigi Castelletti Farhat Omar Bengdara Vincenzo Calandra Buonaura Fabrizio Palenzona Federico Ghizzoni Giovanni Belluzzi Manfred Bischoff Enrico Tommaso Cucchiani Donato Fontanesi Francesco Giacomin Piero Gnudi Friedrich Kadrnoska Marianna Li Calzi Luigi Maramotti Antonio Maria Marocco Carlo Pesenti Lucrezia Reichlin Hans-Jürgen Schinzler Theodor Waigel Anthony Wyand Franz Zwickl Lorenzo Lampiano Chairman Deputy Vice Chairman Vice Chairmen CEO Directors Company Secretary Board of Statutory Auditors Maurizio Lauri Cesare Bisoni Vincenzo Nicastro Michele Rutigliano Marco Ventoruzzo Massimo Livatino Paolo Domenico Sfameni Chairman Standing Auditors Alternate Auditors General Manager Roberto Nicastro Nominated Official in charge of drawing up Company Accounts Marina Natale External Auditors KPMG S.p.A. 9

10 Prefatory Note to the Consolidated First Half Financial Report General aspects This Consolidated First Half Financial Report was compiled under Article 154-ter, paragraph 2 of Legislative Decree No. 58 of February 24, 1998, in accordance with IAS/IFRS international accounting standards, as indicated by IAS 34 on Interim Financial Reporting, in the summary version provided for in paragraph 10, instead of the full reporting provided for annual accounts. This First-Half Financial Report was prepared in line with the first update to the Bank of Italy Circular No. 262/2005 of November 18, Press releases on significant events during the period, the market presentation on second quarter results, and the public disclosure under Pillar III of Basel 2 are also available on UniCredit s website. Any discrepancies between data disclosed in the Consolidated First Half Financial Report or between the Interim Report on Operations and the Condensed Interim Consolidated Financial Statements are solely due to the effect of rounding. Preparation criteria The Consolidated First Half Financial Report includes: the Interim Report on Operations using reclassified financial statement formats, including not only comments on the results for the period and on other main events, but also the additional financial information required by the CONSOB; the Condensed Interim Consolidated Accounts, stated in comparison with those for 2010; specifically, as provided for by IAS 34, the balance sheet has been compared with the figures as at December 31, 2010, while the Income Statement, the Statement of Comprehensive Income, the Change in Shareholders Equity and the Cash Flow Statement are compared with the corresponding figures for the first half of the previous year; the Explanatory Notes, which include not only the detailed information required by IAS 34, stated according to the formats adopted in the financial statements, but also the additional information required by the CONSOB and the information deemed useful for providing a true picture of the consolidated corporate standing; the Certification of the Condensed Interim Consolidated Financial Statements pursuant to Article 81-ter of CONSOB Regulation No of May 14, 1999 and subsequent amendments and addenda. the Auditor s Report by KPMG S.p.A. as a limited review. CONSOLIDATED FIRST HALF FINANCIAL REPORT AS AT JUNE 30,

11 >> Introduction Scope of consolidation In the first six months of 2011 there were the following changes in the scope of consolidation. Fully consolidated subsidiaries increased from 735 as at December 2010 to 762 at June 2011, with a rise of 27 companies; Proportionately consolidated entities increased from 19 as at December 2010 to 30 at June 2011, with a rise of 11 companies; Companies consolidated at equity increased from 45 as at December 2010 to 49 at June 2011, with a rise of 4 companies. For further details see Explanatory Notes Part A Accounting Policies- Section 3 Consolidation Procedures and Scope. Non-current assets and disposal groups held for sale The main assets reclassified on the basis of IFRS 5 under non-current assets and disposal groups held for sale on the balance sheet as of June 30, 2011 are mainly those related to the investment in Banca Agricola Commerciale della Repubblica di San Marino S.p.A. and in IRFIS Finanziaria per lo Sviluppo della Sicilia S.p.A.. For further details see: Other information Transactions for rationalizing Group operations and other corporate transactions in Interim Report on Operations; Part B Consolidated Balance Sheet Asset Section 15 in Condensed Interim Consolidated Financial Statements Explanatory Notes. Segment Reporting (Summary) As announced in the 2010 Consolidated Reports and Accounts, starting from 2011 January the 1 st, Segment reporting is presented and commented by new business division, in line with the current practice in management reporting of Group results, as follows: F&SME Network Italy; F&SME Network Germany; F&SME Network Austria; F&SME Network Poland; F&SME Factories; Corporate & Investment Banking (CIB); Private Banking; Asset Management; CEE; Group Corporate Center (the latter includes Global Banking Services, Corporate Centre, and consolidation adjustments not assigned to the single business segments). Profit and loss data are given in the items of the reclassified income statement down to operating profit, except for the CEE, for which a net profit figure is given. Prior-period profit and loss data have been restated to take the changes in scope into account. 11

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13 Interim Report on Operations >> Interim Report on Operations Highlights 14 Condensed Accounts 16 Consolidated Balance Sheet 16 Consolidated Income Statement 17 Quarterly Figures 18 Consolidated Balance Sheet 18 Consolidated Income Statement 19 Comparison of Q / Q Condensed Income Statement 20 Segment Reporting (Summary) 21 How the UniCredit Group has grown 22 UniCredit Share 23 Group Results 24 Macroeconomic situation, banking and financial markets 24 International situation 24 Banking and Financial Markets 25 Main Results and Performance for the period 28 Net operating profit 29 Net profit attributable to the Group 34 Capital and Value Management 36 Principles of value creation and capital allocation 36 Capital Ratios 37 Shareholders Equity attributable to the Group 38 Results by Business Segment 39 Family & Small Medium Enterprise (F&SME) 40 Corporate & Investment Banking (CIB) 62 Private Banking 68 Asset Management 72 Central Eastern Europe (CEE) 76 Other information 86 Rationalization of Group operations and other corporate transactions 86 Certifications and other communications 91 Capital Strengthening 91 Reconciliation of Condensed Account to Mandatory Reporting Schedule 92 Subsequent Events and Outlook 96 Subsequent Events 96 Outlook 97 Unless otherwise indicated, all amounts are in millions of euros. 13

14 Highlights INCOME STATEMENT ( million) H1 CHANGE Operating income 13,383 13, % of which: - net interest 7,787 7, % - dividends and other income from equity investments % - net fees and commissions 4,264 4, % Operating costs (7,783) (7,745) + 0.5% Operating profit 5,600 5, % Profit before tax 2,573 1, % Net Profit attributable to the Group 1, % Starting from Q the PPA related to the acquisition of HVB, formerly classified within different P&L lines, is entirely allocated in the Purchase Price Allocation effect line of P&L (as already done for Capitalia s acquisition). Previous periods has been reclassified. Following the merger in November 2010 which entailed the absorption of certain placement entities by the issuer the result arising from the placement of securities issued by UniCredit S.p.A. recognised by the former in H has been reclassified from net fees and commissions to net interest". BALANCE SHEET ( million) AMOUNTS AS AT CHANGE Total assets 918, , % Financial assets held for trading 107, , % Loans and receivables with customers 561, , % of which: - impaired loans 38,206 37, % Financial liabilities held for trading 98, , % Deposits from customers and debt securities in issue 585, , % of which: - deposits from customers 406, , % - securities in issue 179, , % Shareholders' Equity 64,726 64, % The figures in these tables refer to reclassified balance sheet and income statement. STAFF AND BRANCHES AS AT CHANGE Employees 1 160, ,009-1,447 Employees (subsidiaries are consolidated proportionately) 150, ,183-1,507 Branches 2 9,518 9, of which: - Italy 4,432 4, Other countries 5,086 5, "Full time equivalent" data (FTE): number of employees counted for the rate of presence. These figures include all employees of subsidiaries consolidated proportionately, such as Koç Financial Services Group employees. 2. These figures include all branches of subsidiaries consolidated proportionately, such as Koç Financial Services Group branches. CONSOLIDATED FIRST HALF FINANCIAL REPORT AS AT JUNE 30,

15 >> Interim Report on Operations PROFITABILITY RATIOS H1 CHANGE EPS 1 ( ) ROE 2 5.2% 2.7% Cost/income ratio % 58.8% EVA ( million) 4 (756) (872) Annualised figure. The H EPS calculation used a net profit of 1,238 million instead of 1,321 million due to payments charged to equity relating to the own shares usufruct agreement entered into as part of the Cashes transaction. Calculated on the basis of the average Shareholders' Equity for the period (excluding dividends to be distributed and reserves in respect of AfS assets and cash-flow hedge), net of goodwill arising from the business combination with HVB and Capitalia, which were carried out with an exchange of shares and recorded in accordance with IFRS The H figure has been restated following revision of the condensed income statement. The Cost/income ratio is at the same level. 4. Economic Value Added, equal to the difference between NOPAT (net operating profit after taxes) and the cost of capital. RISK RATIOS AS AT COMPARABLE 1 Net non-performing loans to customers / Loans to customers 2.98% 2.94% 2.95% Net impaired loans to customers / Loans to customers 6.80% 6.74% 6.89% 1. See "Net Impairment Losses on Loans and Provision for Guarantees and Commitments" in these Consolidated Interim Report, for more details. CAPITAL RATIOS AS AT INCLUDING CASHES EXCLUDING CASHES Capital for regulatory purposes ( million) 60,047 60,047 57,655 Total risk weighted assets ( million) 445, , ,850 Core Tier 1 Ratio 9.12% 8.49% 8.58% Total regulatory capital/total risk-weighted assets 13.49% 13.49% 12.68% See Capital and Value Management - Capital Ratios, for more details. RATINGS SHORT-TERM MEDIUM AND OUTLOOK DEBT LONG-TERM Fitch Ratings F-1 A STABLE Moody's Investors Service P-1 Aa3 REVIEW 1 Standard & Poor's A-1 A STABLE 1. Currently in review for possible downgrade. 15

16 Condensed Accounts CONSOLIDATED BALANCE SHEET ( million) AMOUNTS AS AT CHANGE AMOUNT PERCENT Assets Cash and cash balances 6,596 6, % Financial assets held for trading 107, ,551-15, % Loans and receivables with banks 71,544 70, , % Loans and receivables with customers 561, , , % Financial investments 97,352 96, , % Hedging instruments 10,718 13,616-2, % Property, plant and equipment 12,345 12, % Goodwill 20,244 20, % Other intangible assets 5,007 5, % Tax assets 12,329 12, % Non-current assets and disposal groups classified as held for sale % Other assets 12,845 12, % Total assets 918, ,488-10, % ( million) AMOUNTS AS AT CHANGE AMOUNT PERCENT Liabilities and Shareholders' Equity Deposits from banks 115, , , % Deposits from customers 406, , , % Debt securities in issue 179, ,990-1, % Financial liabilities held for trading 98, ,099-16, % Financial liabilities designated at fair value 1,065 1, % Hedging instruments 10,040 12,479-2, % Provisions for risks and charges 8,252 8, % Tax liabilities 5,356 5, % Liabilities included in disposal groups classified as held for sale 976 1, % Other liabilities 25,302 23, , % Minorities 3,397 3, % Group Shareholders' Equity: 64,726 64, % - Capital and reserves 63,384 63, % - Available-for-sale assets fair value reserve and cash-flow hedging reserve 20 (336) n.s. - Net profit 1,321 1, % Total liabilities and Shareholders' Equity 918, ,488-10, % As regard previous periods, Deposit from customers and Debt securities in issue are now in two separate lines. CONSOLIDATED FIRST HALF FINANCIAL REPORT AS AT JUNE 30,

17 >> Interim Report on Operations CONSOLIDATED INCOME STATEMENT ( million) H1 CHANGE m PERCENT ADJUSTED 1 Net interest 7,787 7, % - 0.8% Dividends and other income from equity investments % % Net fees and commissions 4,264 4, % - 0.7% Net trading, hedging and fair value income % % Net other expenses/income % % OPERATING INCOME 13,383 13, % + 1.5% Payroll costs (4,675) (4,653) % - 0.0% Other administrative expenses (2,762) (2,742) % + 0.4% Recovery of expenses % + 4.0% Amortisation, depreciation and impairment losses on intangible and tangible assets (563) (559) % - 0.4% Operating costs (7,783) (7,745) % - 0.0% OPERATING PROFIT 5,600 5, % + 3.6% Net write-downs of loans and provisions for guarantees and commitments (2,685) (3,507) % % NET OPERATING PROFIT 2,915 1, % % Provisions for risks and charges (405) (262) % % Integration costs (6) (11) % % Net income from investments % % PROFIT BEFORE TAX 2,573 1, % % Income tax for the period (1,018) (724) % % NET PROFIT 1,555 1, % % Profit (Loss) from non-current assets held for sale, after tax PROFIT (LOSS) FOR THE PERIOD 1,555 1, % % Minorities (205) (119) % % NET PROFIT ATTRIBUTABLE TO THE GROUP BEFORE PPA 1, % % Purchase Price Allocation effect (29) (96) % % Goodwill impairment - (162) % % NET PROFIT ATTRIBUTABLE TO THE GROUP 1, % % Notes: 1. Changes at constant foreign exchange rates and perimeter. Starting from Q the PPA related to the acquisition of HVB, formerly classified within different P&L lines, is entirely allocated in the Purchase Price Allocation effect line of P&L (as already done for Capitalia s acquisition). Previous periods has been reclassified. Following the merger in novembre 2010 which entailed the absorption of certain placement entities by the issuer the result arising from the placement of securities issued by UniCredit S.p.A. recognised by the former in H has been reclassified from Net fees and commissions to Net interest". 17

18 Quarterly Figures CONSOLIDATED BALANCE SHEET ( million) AMOUNTS AS AT AMOUNTS AS AT Assets Cash and cash balances 6,596 5,982 6,414 4,935 7,225 5,796 Financial assets held for trading 107, , , , , ,495 Loans and receivables with banks 71,544 67,319 70,215 77,977 80,295 91,862 Loans and receivables with customers 561, , , , , ,894 Financial investments 97,352 96,373 96,148 89,286 76,679 70,906 Hedging instruments 10,718 9,828 13,616 18,679 17,520 15,557 Property, plant and equipment 12,345 12,629 12,611 12,155 12,148 12,161 Goodwill 20,244 20,293 20,428 20,570 20,808 20,815 Other intangible assets 5,007 5,061 5,164 5,082 5,213 5,288 Tax assets 12,329 12,797 12,961 12,615 12,375 12,949 Non-current assets and disposal groups classified as held for sale Other assets 12,845 14,744 12,949 10,863 10,658 10,505 Total assets 918, , , , , ,867 ( million) AMOUNTS AS AT AMOUNTS AS AT Liabilities and Shareholders' Equity Deposits from banks 115, , , , , ,828 Deposits from customers 406, , , , , ,359 Debt securities in issue 179, , , , , ,180 Financial liabilities held for trading 98,035 97, , , , ,753 Financial liabilities designated at fair value 1,065 1,156 1,268 1,351 1,423 1,601 Hedging instruments 10,040 8,447 12,479 17,105 16,505 14,248 Provisions for risks and charges 8,252 8,156 8,088 7,858 7,957 8,010 Tax liabilities 5,356 5,821 5,837 6,533 6,229 7,174 Liabilities included in disposal groups classified as held for sale ,395 1, Other liabilities 25,302 26,153 23,645 23,004 22,178 20,712 Minorities 3,397 3,502 3,479 3,438 3,326 3,452 Group Shareholders' Equity: 64,726 64,686 64,224 64,487 64,428 65,288 - Capital and reserves 63,384 64,259 63,237 63,274 63,664 64,135 - Available-for-sale assets fair value reserve and cash-flow hedging reserve 20 (384) (336) Net profit 1, ,323 1, Total liabilities and Shareholders' Equity 918, , , , , ,867 As regard previous periods, Deposit from customers and Debt securities in issue are now in two separate lines. CONSOLIDATED FIRST HALF FINANCIAL REPORT AS AT JUNE 30,

19 >> Interim Report on Operations CONSOLIDATED INCOME STATEMENT ( million) Q2 Q1 Q4 Q3 Q2 Q1 Net interest 3,903 3,884 3,982 3,893 3,956 3,890 Dividends and other income from equity investments Net fees and commissions 2,096 2,168 2,155 1,993 2,171 2,136 Net trading, hedging and fair value income Net other expenses/income OPERATING INCOME 6,455 6,928 6,474 6,422 6,433 6,746 Payroll costs (2,342) (2,333) (2,196) (2,356) (2,331) (2,322) Other administrative expenses (1,418) (1,345) (1,407) (1,330) (1,401) (1,341) Recovery of expenses Amortisation, depreciation and impairment losses on intangible and tangible assets (279) (284) (282) (284) (278) (281) Operating costs (3,925) (3,858) (3,720) (3,859) (3,903) (3,842) OPERATING PROFIT 2,530 3,070 2,754 2,563 2,530 2,903 Net write-downs of loans and provisions for guarantees and commitments (1,181) (1,504) (1,751) (1,634) (1,716) (1,791) NET OPERATING PROFIT 1,349 1,566 1, ,113 Provisions for risks and charges (244) (161) (472) (32) (106) (156) Integration costs(3) (3) (254) (16) (6) (6) Net income from investments (15) 84 (155) PROFIT BEFORE TAX 1,087 1, ,020 Income tax for the period (463) (555) 509 (380) (331) (393) NET PROFIT Profit (Loss) from non-current assets held for sale, after tax PROFIT (LOSS) FOR THE PERIOD Minorities (99) (107) (80) (122) (56) (63) NET PROFIT ATTRIBUTABLE TO THE GROUP BEFORE PPA Purchase Price Allocation effect (14) (15) (30) (49) (52) (44) Goodwill impairment - - (199) (0) (162) - NET PROFIT ATTRIBUTABLE TO THE GROUP Notes: Starting from Q the PPA related to the acquisition of HVB, formerly classified within different P&L lines, is entirely allocated in the Purchase Price Allocation effect line of P&L (as already done for Capitalia s acquisition). Previous periods has been reclassified. Following the merger in November 2010 which entailed the absorption of certain placement entities by the issuer the result arising from the placement of securities issued by UniCredit S.p.A. recognised by the former in Q1, Q2 and Q quarterly figures have been reclassified from Net fees and commissions to Net interest". 19

20 Comparison of Q / Q CONDENSED INCOME STATEMENT ( million) Q2 CHANGE m PERCENT ADJUSTED 1 Net interest 3,903 3, % - 0.9% Dividends and other income from equity investments % - 6.9% Net fees and commissions 2,096 2, % - 2.8% Net trading, hedging and fair value income % % Net other expenses/income % % OPERATING INCOME 6,455 6, % + 0.7% Payroll costs (2,342) (2,331) % + 0.1% Other administrative expenses (1,418) (1,401) % + 0.7% Recovery of expenses % + 5.4% Amortisation, depreciation and impairment losses on intangible and tangible assets (279) (278) % - 1.6% Operating costs (3,925) (3,903) % + 0.0% OPERATING PROFIT 2,530 2, % + 1.8% Net write-downs of loans and provisions for guarantees and commitments (1,181) (1,716) % % NET OPERATING PROFIT 1, % % Provisions for risks and charges (244) (106) % % Integration costs (3) (6) % % Net income from investments (15) n.s. n.s. PROFIT BEFORE TAX 1, % % Income tax for the period (463) (331) % % NET PROFIT % % Profit (Loss) from non-current assets held for sale, after tax PROFIT (LOSS) FOR THE PERIOD % % Minorities (99) (56) % % NET PROFIT ATTRIBUTABLE TO THE GROUP BEFORE PPA % % Purchase Price Allocation effect (14) (52) % % Goodwill impairment - (162) % % NET PROFIT ATTRIBUTABLE TO THE GROUP % % Notes: 1. Changes at constant exchange rates and perimeter. Starting from Q the PPA related to the acquisition of HVB, formerly classified within different P&L lines, is entirely allocated in the Purchase Price Allocation effect line of P&L (as already done for Capitalia s acquisition). Previous periods has been reclassified. Following the merger in November 2010 which entailed the absorption of certain placement entities by the issuer the result arising from the placement of securities issued by UniCredit S.p.A. recognised by the former in second quarter 2010 has been reclassified from Net fees and commissions to Net interest. CONSOLIDATED FIRST HALF FINANCIAL REPORT AS AT JUNE 30,

21 >> Interim Report on Operations Segment Reporting (Summary) KEY FIGURES by BUSINESS SEGMENT F&SME NETWORK ITALY F&SME NETWORK GERMANY F&SME NETWORK AUSTRIA F&SME NETWORK POLAND F&SME FACTORIES CORPORATE & INVESTMENT BANKING PRIVATE BANKING ASSET MANAGEMENT CENTRAL EASTERN EUROPE GROUP CORPORATE CENTER 1 ( million) CONSOLIDATED GROUP TOTAL Income statement OPERATING INCOME H , , ,331 (699) 13,383 H , , ,243 (197) 13,179 Operating costs H (2,215) (720) (439) (356) (438) (1,370) (284) (235) (1,091) (634) (7,783) H (2,296) (694) (416) (347) (425) (1,381) (285) (242) (1,040) (620) (7,745) OPERATING PROFIT H , , ,240 (1,333) 5,600 H , , ,204 (816) 5,433 PROFIT BEFORE TAX H , (1,589) 2,573 H (26) , (967) 1,769 Balance Sheet LOANS TO CUSTOMERS as at June 30, ,735 44,971 22,053 9,395 54, ,593 6, ,444 11, ,792 as at December 31, ,708 46,885 22,122 8,764 54, ,826 6, ,308 11, ,653 DEPOSITS FROM CUSTOMERS AND DEBT SECURITIES IN ISSUE as at June 30, ,550 40,357 23,384 12,898 17, ,538 24,405-55, , ,936 as at December 31, ,349 39,252 23,516 13,166 15, ,244 24,974-56, , ,239 TOTAL RISK WEIGHTED ASSETS as at June 30, ,800 14,208 12,537 8,473 46, ,526 4,273 1,838 82,950 29, ,160 as at December 31, ,945 15,447 16,325 7,943 46, ,557 4,368 1,898 79,176 31, ,850 EVA H (173) (8) (14) 60 (33) (1,701) (756) H (280) (56) (22) 40 (30) (979) (871) Cost/income ratio H % 89.8% 75.2% 61.8% 44.7% 30.6% 59.9% 56.0% 46.8% -90.7% 58.2% H % 89.9% 70.6% 65.3% 42.9% 34.4% 61.1% 58.7% 46.4% n.s. 58.8% Employees 2 as at June 30, ,917 7,479 3,741 14,197 6,065 9,637 3,020 1,964 51,495 32, ,562 as at December 31, ,895 7,511 3,748 14,260 5,850 9,599 3,013 1,888 51,598 32, ,009 Notes 2010 figures were recasted, where necessary, on a like-to-like basis to consider changes after the March 31, 2011 in scope of business segments and EVA computation rules Global Banking Services, Corporate Centre, inter-segment adjustments and consolidation adjustments not attribuable to individual segments. 2 "Full time equivalent". These figures include all the employees of subsidiaries consolidated proportionately, such as Koç Financial Services 21

22 How the UniCredit Group has grown UniCredit S.p.A. (formerly Unicredito Italiano S.p.A.) and the Group of companies with the same name which the latter heads up came about as a result of the merger, in October 1998, between the Credito Italiano S.p.A., founded in 1870 under the name of Banca di Genova, and Unicredito S.p.A., the latter the holding company which held the controlling equity investments in Banca CRT, CRV and Cassamarca. As a result of this merger, the Credito Italiano Group and the Unicredito Group pooled the strength of their respective products and the complementary nature of the geographic coverage for the purpose of more effectively competing on the banking and financial services markets both in Italy and in Europe, thereby creating the UniCredit group. Since its creation, the Group has continued to expand in Italy and in Eastern European countries, both via buy-outs and via systematic growth, also consolidating its roles in sectors of important significance outside Europe, such as the asset management sector in the USA. This expansion was characterized, particularly: by the merger with the HVB Group, achieved by means of a public exchange offer furthered by UniCredit on August 26, 2005 so as to take over control of HVB and the companies it headed up. Following this offer, finalized during 2005, UniCredit in fact acquired a holding of 93.93% in HVB s share capital (UniCredit has now 100% of the shares, after the acquisition of minority interest concluded on September 15, 2008 so-called squeeze-out in accordance with German regulations); by the merger with the Capitalia Group, achieved by means of merger through incorporation of Capitalia within UniCredit, which became effective as from October 1, GROUP FIGURES IAS/IFRS ITALIAN GAAP H Income Statement ( million) Operating income 13,383 26,347 27,572 26,866 25,893 23,464 11,024 10,203 10,375 10,465 10,099 9,989 Operating costs (7,783) (15,483) (15,324) (16,692) (14,081) (13,258) (6,045) (5,701) (5,941) (5,703) (5,483) (5,263) Operating profit 5,600 10,864 12,248 10,174 11,812 10,206 4,979 4,502 4,434 4,762 4,616 4,726 Profit before income tax 2,573 2,517 3,300 5,458 9,355 8,210 4,068 3,238 2,988 3,257 2,924 3,212 Net profit for the period 1,555 1,876 2,291 4,831 6,678 6,128 2,731 2,239 2,300 2,090 1,962 1,954 Net profit attributable to the Group 1,321 1,323 1,702 4,012 5,961 5,448 2,470 2,069 2,131 1,961 1,801 1,454 Balance sheet ( million) Total assets 918, , ,760 1,045,612 1,021, , , , , , , ,388 Loans and receivables to customers 561, , , , , , , , , , , ,622 of which: non-performing loans 16,729 16,344 12,692 10,464 9,932 6,812 6,861 2,621 2,621 2,373 2,104 1,822 Deposits from customers and debt securities in issue 585, , , , , , , , , , , ,320 Shareholders Equity 64,726 64,224 59,689 54,999 57,724 38,468 35,199 14,373 14,036 13,013 12,261 9,535 Profitability ratios (%) ROE Operating profit/total assets Cost/income ratio Annualized figures. Information in the table are "historical figures". They don't allow comparison because they are notrecasted. Total assets ( billion) 1,200 1,000 1,022 1, H ITALIAN GAAP IAS/IFRS CONSOLIDATED FIRST HALF FINANCIAL REPORT AS AT JUNE 30,

23 >> Interim Report on Operations UniCredit Share SHARE INFORMATION Share price ( ) H maximum minimum average end of period Number of outstanding shares (million) - at period end 1 19, , , , , , , , , , , shares cum dividend 18, , , , , , , , , , ,131.1 of which: savings shares average 1 19, , , , , , , , Dividend - total dividends ( million) (*) 3,431 2,486 2,276 1,282 1, dividend per ordinary share (*) dividend per savings share (*) The number of shares is net of trasury shares and included n million of shares held under a contract of usufruct. (*) 2008 dividend was paid with cash to savings sharehoders ( per share, for a total amount of 0.5 million), and with newly issued shares (so called "scrip dividend"). EARNINGS RATIOS IAS/IFRS ITALIAN GAAP H Shareholders' Equity ( million) 64,726 64,224 59,689 54,999 57,690 38,468 35,199 14,373 14,036 13,013 12,261 9,535 Group portion of net profit ( million) 1,321 1,323 1,702 4,012 5,901 5,448 2,470 2,069 2,131 1,961 1,801 1,454 Net worth per share ( ) Price/ Book value Earnings per share ( ) Payout ratio (%) (*) Dividend yield on average price per ordinary share (%) (*) (*) 2008 dividend was paid with cash to savings sharehoders ( 0,025 per share, for a total amount of 0.5 million), and with newly issued shares (so called "scrip dividend"). The 2008 EPS figure published in the consolidated report as at December 31, 2008 was 0.30 and has now been amended to 0.26 due to the increase in the number of shares following the capital increase (IAS 33 28). For the purposes of calculating 2009 EPS, net profit for the period of 1,702 million was changed to 1,571 million due to disbursements made in connection with the foreseen use of treasury shares agreed under the cashes transaction, and charged to equity. For the purposes of calculating 2010 EPS, net profit for the period of 1,323 million was changed to 1,167million due to disbursements made in connection with the foreseen use of treasury shares agreed under the cashes transaction, and charged to equity. Net profit for H1, 1,321 million, was changed to 1,238 million. 1. Annualized figures. Earnings per share ( ) H (1) ITALIAN GAAP IAS/IFRS 1. Annualized figures. (2) 23

24 Group Results Macroeconomic situation, banking and financial markets International situation USA/Eurozone The continuing recovery of the global economy seems to have become rather sustainable. The latest indicators, however, are showing a slowdown in global activities for the second quarter of The slowdown stems in part from the impact of Japan s earthquake on the country s economy, and through the worldwide supply chain on the global economy; it also reflects a more moderate growth trend in the United States, which is due to the increase in the price of oil and commodities, inclement weather and supply issues related to the earthquake in Japan. The slowdown, therefore, seems to be related, above all, to temporary factors. Despite that, the short-term outlook still presents certain risks. Foremost, in certain emerging economies, the sharp rise has fuelled an increase in inflationary pressures, which has led the monetary authorities (for example, in China) to implement restrictive monetary policies. The latter will likely contribute to a moderate slowdown in growth in the coming months with potential ripple effects on the global economy. Furthermore, the necessary fiscal consolidation in developed countries could further slow down the already modest growth in those countries, in particular in the United States, Japan and those on the Eurozone periphery. A lot will depend as well on the mix of measures taken to reduce the budget deficit. As for the sovereign debt crisis, the recent agreement reached by the members of the Eurozone regarding a second aid plan for Greece seems to have calmed down the markets, even if, probably, the approved measures will not be decisive for the crisis solution. In the United States, gross domestic product rose by 1.9% in the first quarter of 2011 (annualised quarterly rate), down from the 3.1% recorded in the fourth quarter of The decline reflects primarily a more moderate increase in spending. According to the latest indicators, an even more modest rise should be expected in the second quarter. The decline seems to be primarily related to temporary factors, such as the increase in the price of oil and commodities, which has reduced disposable household income, and to supply issues related to the earthquake in Japan. After improving in the first months of the year, the labour market worsened in May. Employment figures rose by just 54,000, which is the lowest level since September The unemployment rate grew by one percentage point to 9.1%. Nevertheless, the labour market decline also seems to be due primarily to temporary factors. The federal budget deficit presents a thorny problem. Standard and Poor s cut its long-term outlook for the United States from stable to negative due to the continually high deficit (10.6% of GDP) and the lack of concrete measures aimed at bringing it down in the medium term. In addition, on-going discussions on the debt-ceiling increase help to fuel a climate of uncertainty. CONSOLIDATED FIRST FINANCIAL REPORT AS AT JUNE 30,

25 >> Interim Report on Operations The Eurozone posted a solid growth in the first quarter of 2011 (0.8% from the previous quarter), led by the core countries and in particular Germany (1.5%) and France (1.0%). The main growth driver in the first quarter was domestic demand and, in particular, investments (2.1%) where growth outperformed expectations. Government spending offered another surprise (0.8%), while consumer spending was relatively modest (0.3%). The fact that the increase in the first quarter of the year was driven primarily by domestic demand is a clear indication that economic recovery at this point has become fully sustainable. The initial data relative to economic activities available for the second quarter suggest that growth may slow down in the Eurozone, while still remaining on solid levels. This decline seems to be due primarily to a slowdown in activities in the manufacturing sector, due to the negative spill-over effect of the earthquake in Japan and the increase in energy prices. Despite initial signs of a weakening economy and continued tensions in the Eurozone periphery, the European Central Bank has signalled its intent to raise the benchmark rate in July, further to the 25 basis point increase which had brought the rate to 1.25% in April. It still remains very likely that at the July meeting, Mr Trichet might indicate intent to leave the door open for further rate hikes before the end of the year. As a result, we are expecting the refi rate to stand at 1.75% at the 2011 year-end. Early in June, the Central Bank also revised slightly upwards the growth and inflation prospects for the current year (from 1.7% to 1.9% and from 2.3% to 2.6%, respectively), confirming the idea that the recovery has taken root in the Eurozone. In the US, the Federal Reserve continues to keep the Federal funds rate unchanged at a historic low of 0% to 0.25% and has ruled out any immediate intervention on interest rates. The minutes of the Federal Open Market Committee meeting in April confirm, according to the Fed, that current economic conditions call for exceptionally low rates for an extended period in order to sustain the economy and ensure price stability. At the end of June, the Fed completed its programme to purchase USD 600 billion in long-term government securities at the end of June, as planned. Banking and financial markets In the first half of 2011, the private sector bank lending trend showed improvement in the core Eurozone countries, even though the recovery trend continued to move at a moderate pace, considering the continued diverging trends among the various countries. In particular, for the Eurozone as a whole private sector lending in May showed a 2.7% increase y/y, driven by a gradual recovery of lending to nonfinancial companies and a steadying at around 3% y/y of household lending. For the latter, the changes in consumer credit have been marked by major uncertainties; as a result, the need of durable goods financing has been limited, the weak trend in disposable income has continued, and high levels of household debt have tended to limit the potential for recovery in this segment. Over the first half, the recovery in private sector lending continued in the Group s key countries, except for Germany, which still seems to be dominated by general weakness. Italy experienced the most sustained growth rate, with private sector lending showing on an annualised basis a 6.2% increase in April (latest available data), corroborating its solid recovery both from last December (3.8% y/y) and April of last year (0.8% y/y). The positive developments in bank lending were fuelled above all by a sharp upswing in corporate lending, which was up by 4.8% y/y (1.6% y/y as at December 2010), an improvement that proved to be in line with the cyclical recovery, unexpectedly slightly upward. In fact, what was expected was lesser use of external financing by Italian businesses and the launch of a deleveraging process, considering the major vulnerabilities of businesses in the latest growth stages, as well as higher debt levels compared to before (84.1% of GDP at the 2010 year-end, compared to 67% leveraging at the 2005 year-end). Household lending continued to grow at sustained rates in the first half of 2011 (8.4% y/y), by far exceeding the average in the Eurozone, with home loans performing well, which offset another slowdown in the consumer credit trend (still up by 1.8% y/y in April). 25

26 Very weak levels continued however to characterise bank lending in Germany, where private sector loans failed to show a clear improvement trend, in the range of zero growth (according to the monthly statistics of the ECB). Loans to non-financial companies in Germany remained in negative territory, while in the household loan segment, home loans continued to expand at rates close to only 1.0% y/y, while consumer credit declined to 2.5% y/y in April, from +3.7% as at December last year. In Austria, private sector lending experienced further spikes in the first half, confirming moderate growth, in the range of 2.0% y/y in April (vs. 2.9% y/y as at December 2010). In particular, household lending declined slightly, following a more contained rise in home loans and a subsequent contraction in consumer credit, while loans to non-financial companies levelled off substantially in the first half and grew in the range of 2.0% y/y. Compared with the recovery trend in bank lending however, the first half of 2011 was marked by a rather weak trend in the deposit base of the banking industry. Among the Group s key countries, Italy recorded a sharper slowdown, with customer deposits showing zero growth in April for the first time in the last ten years that resulted from a decrease in current account deposits (-2.0% y/y as at April) and a decline in deposits redeemable at notice (3.8% y/y, from 5.4% y/y as at December 2010). In this environment of general sluggishness however, the renewed increase in ownership of bank bonds, which tends to show positive albeit historically still modest growth is encouraging. The increase in customer deposits also slowed in Germany to 3.5% y/y as at April 2011, after peaking at 4.7% y/y last November. The slowdown can be attributed above all to a scaled-down increase in current accounts deposits, paralleled by a slight increase in time deposits, consistent with an interest-rate increase scenario. Finally, in Austria after a marked slowdown in the very first months of the year customer deposits in April went back to the same levels as the 2010 year-end, with household deposits, and particularly current account deposits, showing a close to 5% rise y/y, while various current account deposits continued to decrease by approximately 1.0% y/y. With respect to bank rates, both lending and deposit rates rose substantially, in all three key countries, reflecting in part the change in money-market rates. In Italy, bank lending interest rates stood at 3.76% in April, from a 3.55% low in July of the previous year. The upward trend in deposit interest rates was more measured, leading to a slight increase in bank spreads (the difference between the average lending and average deposit rates) to 2.98% in April, from 2.93% in December A similar trend was seen in Austria, where the bank spread rose, though at a more modest pace, reaching 2.07% in April, from 1.98% in December A slightly opposite trend was seen in Germany, where the stabilisation of loan interest rates, well known for being more slippery, led to a hike in deposit rates, causing a subsequent, slight drop in the bank spread to 3.49% from 3.56% at the prior year-end. The re-escalating tensions related to the difficulties experienced by Greece as well the potential contagion effect among the countries in the Eurozone, weighed on the financial markets; the equity market performance significantly deteriorated in the second quarter of the year, with a slight recovery only in the last weeks of June (in light of the positive outcome of the vote of confidence in Greece). As a result, the Austrian stock market ended the first half of 2011 almost 5% down, compared to December of 2010, while the Italian stock market, after posting losses up to -5.1% (compared to December 2010), ended the halfyear with a marginally positive increase (0.1%). In this environment, the German stock market outperformed the rest and, while exhibiting a declining trend, showed an increase in profits of approximately 7% compared to December CONSOLIDATED FIRST FINANCIAL REPORT AS AT JUNE 30,

27 >> Interim Report on Operations CEE Countries As we enter 3Q, the most pressing issue is the ability of CEE to withstand this global slowdown, even if only temporary in nature. That CEE is synchronized with global developments is not in doubt. To date the most obvious sign of a slowdown in economic activity in the region is seen in the manufacturing PMI data. Over the three months to May, the manufacturing PMI indices have fallen between a cumulative 1.2 points in Poland to a much larger 7.9 points in Turkey. There are also some signs of a dis-improvement in consumer confidence in some of the new EU countries, as well as in Russia. That said, the PMI move has been sufficient to bring the PMIs back in line with their long term averages, i.e. levels still consistent with gains in industry but more in line with long term averages than the more elevated growth rates that have been experienced in recent quarters. Current PMI readings do not imply a contraction in industrial production. Meanwhile domestic demand has the potential to act as a form of 'automatic stabiliser' over the next couple of quarters in an environment where this global slowdown does not deteriorate significantly further. To date the recovery in domestic demand has been lackluster in many countries in the region. Turkey is the most obvious exception, followed by Poland, Kazakhstan and Ukraine. Banking sector performance across the region also has a role to play in differentiating the recovery in domestic demand. We see both a structural and cyclical element to this. Turkey was the only country in the region to see a rebound in credit growth last year. Hungary, Russia, Romania, the Baltics, Ukraine and Kazakhstan saw continued negative real credit growth. To the extent that credit growth tends to be cyclical in nature and many of the economies in the region suffered a more prolonged downturn than in other EM regions, a more gradual recovery in credit is to be expected. Against a backdrop of weakening external demand, a gradual recovery in domestic demand and favourable base effects which should lower inflation over the coming quarters, any tightening in monetary policy from here in the region should be gradual in nature. As for the possibility that the crisis of sovereign debt may affect other countries, we believe that the agreement among UE members on the second aid plan to Greece and on the EFSF s widening, even if not decisive for crisis solution, helps to reduce the Greece problem, the risk of contagion to other periphery countries and the negative implication both for banking system and European growth. As a consequence, also the probability for CEE countries of a negative scenario, given from an enlargement of the crisis, is reduced. 27

28 Main Results and Performance for the period The second quarter began on a note of improving economic prospects. As it had announced in Q1, the ECB raised the refi rate from 1% to 1.25%, signaling its intention to raise the rate again in Q It also announced the extension of the extraordinary liquidity transactions to the whole of Q2. These measures have kept liquidity at relatively high levels, which has meant that market rates have been rather low compared to refi. Yields on German stock were stable in April, but declined in May and June due to a deteriorating growth outlook, especially in the US, and renewed pressure on sovereign debt in the euro zone. From March to June, the yield on 2-year German Government securities fell from 1.80% to 1.60%, while that on ten-year securities declined from 3.35% to 3%. Concern about sovereign debt fuelled demand for German bonds, but the appetite for debt issued by the peripheral countries was decidedly weaker, which caused a sharp rise in Portuguese (from 8.4% to 11%), Irish (from 10% to over 11.5%) and Greek (from 12% to 16.3%) 10 year securities. In July, the sovereign debt crisis in the euro area accelerated sharply. In particular, the Greek debt crisis increased uncertainty in financial markets causing high volatility. An important step (even if not decisive) towards the crisis solution was the agreement signed on July 21, 2011 by Heads of State and Government of the euro area. The agreement very comprehensive - provides for the possibility of a Greek debt restructuring with the participation of private investors. Unfortunately, after a first phase of euphoria, the markets have started to sell bonds issued by peripheral countries and it is very likely that additional measures to boost the stability of the European single currency will be discussed in the coming months. The demand for Italian and Spanish Government securities was sufficient to leave yields unchanged: Italian ten-year bonds were stable around 4.85% throughout Q2, and Spanish securities traded at between 5.20% and 5.50%. However, the fall in German yields meant that the ten-year spread gradually widened to 200bp and 250bp respectively for Italy and Spain at the end of Q Shorter- term yieids performed similarly. These spreads widened further in July Against this macroeconomic and financial backdrop, the UniCredit Group s improving trend continued. In the first half of 2011 (H1) Profit attributable to the Group was 1,321 million, up by 652 million over H This was due both to higher Operating profit, which grew by 167 million over H1 2010, and to lower Loan loss provisions (i.e., Net write-downs of loans and provisions for guarantees and commitments), which fell by 822 million from H Operating profit was 5.6 billion, up by 3.1% (or 3.6% at constant exchange rates and businesses) over H Net operating profit after Net write-downs of loans and provisions for guarantees and commitments grew sharply by 989 million or 51.3% to 2.9 billion. Profit before tax was 2,573 million - an increase of 45.5% (45.9% at constant exchange rates and businesses) over H Non-operational items include: Integration costs down by 5 million; Net income from investments of 69 million, down by 46 million from H1 2010; and Provisions for risks and charges of 405 million, up by 143 million over H Higher Profit before tax generated Income tax that was up by 295 million while the tax rate fell slightly to 39.6% from 40.9% in H Excluding Minorities (up by 87 million over H1 2010) and a lower Purchase Price Allocation effect (by 67 million), Net profit attributable to the Group was 1,321 million - an increase CONSOLIDATED FIRST HALF FINANCIAL REPORT AS AT JUNE 30,