Listen, understand, respond.

Transcription

1 Listen, understand, respond. Consolidated Interim Report as at September 30, 2014

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3 This report expresses UniCredit s approach to banking by telling everyday stories about our interactions with Customers, innovations in products and adaptability in services. These brief but meaningful stories come directly from our colleagues. They are examples of the tangible benefits and concrete solutions offered by UniCredit, demonstrating how we make a difference in people s lives. Our clear goal to improve everyday circumstances is rooted in our complete commitment to outcomes that ensure Customer satisfaction. At UniCredit, listening to our Clients and engaging with them to offer simple, direct results lies at the heart of our commercial banking operations. It is part of our determined effort to contribute to the economic and social well-being of our Customers as well as the communities where we work. We will continue with this commitment to all of you, every day. Consolidated Interim Report 2013 Consolidated Reports and Accounts as at September 30, 2014

4 UniCredit S.p.A. A joint stock company Registered Office in Rome: Via Alessandro Specchi, Rome Head Office in Milan: Piazza Gae Aulenti 3 Tower A Milan Share capital 19,905,773, fully paid in, Fiscal Code, VAT number and Registration 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

5 Contents Introduction 7 Board of Directors, Board of Statutory Auditors and External Auditors 9 Prefatory Note to the Consolidated Interim Report 10 Reclassified Financial Assets 12 Consolidated Interim Report 15 Highlights 16 Condensed Accounts 18 Quarterly Figures 20 Comparison of Q3 2014/Q Segment Reporting (Summary) 23 How the UniCredit Group has grown 24 UniCredit Share 25 Group Results 26 Results by Business Segment 44 Other information 49 Subsequent Events and Outlook 54 Further information 56 Declaration by the Manager charged with preparing the financial reports 59 Notes The following conventional symbols have been used in the tables: a dash (-) indicates that the item/figure is inexistent; two stops (..), n.s. or n.m. 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 are solely due to the effect of rounding. UniCredit Consolidated Interim Report as at September 30,

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7 Introduction Board of Directors, Board of Statutory Auditors and External Auditors 9 Prefatory Note to the Consolidated Interim Report 10 Reclassified Financial Assets 12 Introduction UniCredit Consolidated Interim Report as at September 30,

8 I 8 Consolidated Interim Report as at September 30, 2014 UniCredit

9 Board of Directors, Board of Statutory Auditors and External Auditors Board of Directors, Board of Statutory Auditors and External Auditors as at September 30, 2014 Board of Directors, Board of Statutory Auditors and External Auditors Board of Directors Giuseppe Vita Candido Fois Vincenzo Calandra Buonaura Luca Cordero di Montezemolo Fabrizio Palenzona Federico Ghizzoni Mohamed Ali Al Fahim Manfred Bischoff Henryka Bochniarz Alessandro Caltagirone Francesco Giacomin Helga Jung Marianna Li Calzi Luigi Maramotti Giovanni Quaglia Lucrezia Reichlin Lorenzo Sassoli de Bianchi Alexander Wolfgring Anthony Wyand Gianpaolo Alessandro Chairman Deputy Vice Chairman Vice Chairmen CEO Directors Company Secretary Board of Statutory Auditors Maurizio Lauri Chairman Giovanni Battista Alberti Cesare Bisoni Enrico Laghi Maria Enrica Spinardi Federica Bonato Paolo Domenico Sfameni Beatrice Lombardini Pierpaolo Singer Standing Auditors Alternate Auditors General Manager Manager charged with preparing the financial reports External Auditors Roberto Nicastro Marina Natale Deloitte & Touche S.p.A. UniCredit Consolidated Interim Report as at September 30,

10 Introduction Prefatory Note to the Consolidated Interim Report General aspects Prefatory Note to the Consolidated Interim Report This Consolidated Interim Report as at September 30, 2014 has been prepared in consolidated form as dictated by Article 154-ter of the Consolidated Finance Act introduced by Legislative Decree No. 195/07 to implement EU Directive 204/109/EC concerning periodic reporting, as described in the Further Information at the end of this document. The contents of this report are not in line with the international accounting principle on interim reporting (IAS 34). Press releases on significant events during the period, the market presentation on 2014 first quarter results and the disclosure by institutions pursuant to Regulation (EU) No. 575/2013 (Pillar III) are also available on UniCredit s website. Any discrepancies between data disclosed in the Consolidated Interim Report are solely due to the effect of rounding. Preparation criteria The structure of this report references quarterly reports from previous periods with condensed reclassified tables for the Balance Sheet and Income Statement. The items of the condensed Balance Sheet and Income Statement refer to the Bank of Italy instructions laid down in circular 262/05, including the aggregations and reclassifications disclosed in the Annex 1 of Consolidated first half financial report as at June 30, 2014 The Consolidated Interim Report as at September 30, 2014, which is presented in reclassified or condensed form, was prepared under the IAS/IFRS in force. For further information on the accounting policies see the Explanatory Notes of the Consolidated Accounts relating to the Condensed Interim Consolidated Financial Statement included in the Consolidated First Half Financial Report as at June 30, It should also be noted that, for the purposes of the Consolidated Interim Report as at September 30, 2014, the recoverable amount of tangible and intangible assets including goodwill and assets evaluated on the same estimates was not remeasured and the actuarial valuations of the defined benefit commitments related to post-employment benefits have not been updated. The Consolidated First Half Financial Report as at June 30, 2014 evidenced the effects of the remeasurement at that date of post employment benefits. The evolution occurred in interest rates during the quarter would have resulted in a higher value of liabilities through equity, because of the sensitivity of the parameters already disclosed in 2013 annual report. The update of such measurements will be analyzed for the purposes of the next annual report ( 2014 Consolidated Reports and Accounts ). In those cases in which the accounts did not fully reflect the reporting of items on an accruals basis, such as certain administrative expenses, the accounting figure was supplemented by estimates based on the budget. Since January 1, 2014 the amortization period of certain intangible assets (software) has been extended from 5 to 7 years in order to better reflect their technical useful life, determined on the basis of the historical experience of usage by the Group and the estimates of technical obsolescence. As required by IAS 38 and IAS 8, this extension has been accounted for prospectively, being a change in accounting estimates, and will result in the recognition in 2014 of lower amortization expense for about 44million. In particular, please note that as from the first quarter of 2014, only for the purposes of the Condensed Consolidated Income Statement, the results of the few industrial companies consolidated line by line will be fully abridged as net profit in the line Net Other Expenses/Income in order to focus the P&L lines on the pure banking activities For more details on how the Scope of consolidation changed following the introduction of IFRS 10 and IFRS 11, effective from January 1, 2014, see the Further Information section of this report. For consolidation purposes, the accounts as at September 30, 2014 of the Parent Company and subsidiaries were used and were properly reclassified and adjusted to take into account consolidation requirements, and modified as necessary to bring them into line with Group accounting principles. All intercompany balance sheet and operating figures of a material amount were eliminated. All unreconciled amounts were posted to other assets or liabilities or to net other income/expenses, if not related to interests or commissions. Lastly, please note that with reference to the foregoing changes, made as from the first quarter of 2014, comparative information was restated accordingly. Consolidated Interim Report is accompanied by the following details: Highlights; Condensed Accounts; Quarterly Figures; Comparison of Q3 2014/Q Segment Reporting (Summary); How the UniCredit group has grown; UniCredit Share; as well as: Group Results; Results by Business Segment; Other Information; Subsequent Events and Outlook; Further Information; Declaration by the Manager charged with preparing the financial reports. This Consolidated Interim Report is not audited by the External Auditors. 10 Consolidated Interim Report as at September 30, 2014 UniCredit

11 Scope of consolidation The changes in the scope of consolidation during the third quarter of 2014 mainly related to the acquisition of 100% of the equity interest in Immobilien Holding, a holding company of a group of 56 companies in which the Bank Austria Group already held the right to an 88% share of income. This resulted in the consolidation of 34 companies using the line-by-line consolidation method and 10 companies using the equity method. For strategic reasons, Bank Austria intends to dispose the group within the next 12 months. Accordingly, the companies consolidated using the equity method and the assets/liabilities of the companies consolidated line-by-line have been classified under disposal groups classified as held for sale. With respect to December 31, 2013, the following overall changes have been recorded, also as a result of IFRS 10 and 11: the number of fully consolidated companies has gone from 732 at the end of 2013 to 771 at September 2014 (71 first-time consolidations - of which 27 as a result of IFRS 10 - and 32 exited), representing an increase of 39; the proportionally consolidated companies, which amounted to 26 at the end of 2013, have been reduced to zero as a result of the introduction of IFRS 11: of these, 18 have been consolidated using the equity method, and 8 minor companies invested in indirectly have been consolidated synthetically from January 1, 2014 through the consolidation at equity of the direct investee; the number of companies consolidated using the equity method has gone from 59 at the end of 2013 to 72 at September 2014 (19 entered - of which 18 as a result of the change in method of consolidation due to the introduction of IFRS11 - and 6 exited), representing an increase of 13. Non-current assets and disposal groups held for sale In the balance sheet at September 30, 2014, the main assets classified according to IFRS 5 as non-current assets and disposal groups held for sale, with regard to the individual assets and liabilities held for sale, were: Business Oil related to the Italpetroli group; some properties held by UniCredit S.p.A. and by some UniCredit Bank Austria AG group companies; some of the properties held by the BARD group; the companies DAB Bank AG and Direktanlage.At AG, of the UniCredit Bank AG group, and Istraturist UMAG and Istra D.M.C. DOO, of the UniCredit Bank Austria AG group; the private equity fund held by the companies UniCredit Bank AG and HVB Capital Partners AG; the equity investment in the company CA Immobilien Anlagen Aktiengesellschaft. With regard to groups of assets held for sale, and associated liabilities, the item at September 30, 2014 refers to: the group companies in Ukraine o BDK CONSULTING; o PUBLIC JOINT STOCK COMPANY UKRSOTSBANK; o PRIVATE JOINT STOCK COMPANY FERROTRADE INTERNATIONAL; o LLC UKROTSBUD; o LTD SI&C AMC UKRSOTS REAL ESTATE; o SVIF UKRSOTSBUD the Immobilien Holding group companies, in the scope of consolidation since September 30, 2014 (for more information, see the paragraph Scope of consolidation in this section). Segment Reporting (Summary) Segment reporting is presented and commented on the basis of the organizational structure currently used in management reporting of Group results, which consists of the following business segments: Commercial Banking Italy; Commercial Banking Germany; Commercial Banking Austria; Poland; CEE Division; CIB; Asset Management; Asset Gathering; Non-core; Governance/Group Corporate Centre (including Global Banking Services, Corporate Centre Global Function, inter-segment adjustments and consolidation adjustments not attributable to individual segments). The Non-core segment was introduced in the first quarter of It includes selected assets of Commercial Banking Italy (identified on a single customer basis) and the activities of the company UniCredit Credit Management Bank and of some securitization SPVs. UniCredit Consolidated Interim Report as at September 30,

12 Introduction Reclassified Financial Assets EC Regulation 1004 dated October 15, 2008 transposed the changes made to IAS 39 and IFRS 7 Reclassification of financial assets by the IASB. These changes applied as from July 1, 2008 and allow, after initial recognition, the reclassification of certain held for trading and available for sale financial assets. The following may be reclassified: Held for trading and available for sale financial assets which would have complied with the IFRS definition of loans and receivables (if they had not been recognized as held for trading and available for sale financial assets on initial recognition), provided that the entity has the intention and ability to hold them for the foreseeable future or to maturity; Only in rare circumstances held for trading financial assets failed to satisfy the loans and receivables definition on initial recognition and 2 of the above Regulation noted that the current financial crisis is considered one of such rare circumstances that may justify the use of this option (sc. Reclassification) by the entity. A portion of financial instruments held for trading and available for sale were reclassified between H and H1 2009, as the rare circumstance of the financial crisis had been recognized in respect of assets held for trading. The following table (which is broken down by type of underlying asset and portfolio) provides the book value and fair value as at September 30, 2014 of assets which had been reclassified in H and H The income/expenses that would have been recognized if such reclassifications had not occurred, as well as those effectively recognized through profit or loss or at equity are also provided. Reclassified Financial Assets 12 Consolidated Interim Report as at September 30, 2014 UniCredit

13 Reclassified financial assets: book value, fair value and effects on comprehensive income ( 000) INCOME/EXPENSES ABSENT RECLASSIFICATION (BEFORE TAX) INCOME/EXPENSE RECOGNIZED DURING THE PERIOD (BEFORE TAX) ACCOUNTING PORTFOLIO BEFORE ACCOUNTING PORTFOLIO AFTER BOOK VALUE AS AT FAIR VALUE AS AT FROM OTHER FROM OTHER INSTRUMENTS TYPE RECLASSIFICATION RECLASSIFICATION MEASUREMENT MEASUREMENT (1) (2) (3) (4) (5) (6) (7) (8) (9) A. Debt securities 4,416,624 4,621, , ,682 3, ,629 Held for trading Available for sale 5,915 5, Held for trading Held to maturity 179, ,515 (326) 4,271-3,934 Held for trading Loans to Banks 1,295,692 1,363,871 4,904 27,645 (3,654) 35,396 Held for trading Loans to Customers 2,807,849 2,942, ,893 69,032 6,461 68,375 Available for sale Loans to Banks Available for sale Loans to Customers 127, ,446 6,206 1,382-1,528 B. Equity instruments Held for trading Available for sale C. Loans 298, ,906 3,021 12,471-12,316 Held for trading Available for sale Held for trading Held to maturity Held for trading Loans to Banks 73,270 73,408 (2,688) 2,620-2,755 Held for trading Loans to Customers 225, ,498 5,709 9,851-9,561 Available for sale Loans to Banks Available for sale Loans to Customers D. Units in investment funds Held for trading Available for sale Total 4,714,914 4,941, , ,153 3, ,945 Debt securities reclassified in the loan with customers portfolio include structured credit products for an amount of 2,315 million at September 30, UniCredit Consolidated Interim Report as at September 30,

14 14 Consolidated Interim Report as at September 30, 2014 UniCredit

15 Consolidated Interim Report Highlights 16 Condensed Accounts 18 Consolidated Balance Sheet 18 Consolidated Income Statement 19 Quarterly Figures 20 Consolidated Balance Sheet 20 Consolidated Income Statement 21 Comparison of Q3 2014/Q Consolidated Income Statement 22 Segment Reporting (Summary) 23 How the UniCredit Group has grown 24 UniCredit Share 25 Group Results 26 Macroeconomic situation, banking and financial markets 26 International situation 26 Banking and financial markets 26 Main results and performance for the period Capital and Value Management Principles of value creation and disciplined capital allocation 34 Capital Ratios 34 Note on the results of the ECB Comprehensive Assessment 35 Shareholders Equity attributable to the Group 36 Information on risks 37 Results by Business Segment 44 Commercial Banking Italy 44 Commercial Banking Germany 44 Commercial Banking Austria 45 Poland 45 CEE Division 46 CIB 46 Asset Management 47 Asset Gathering 47 Non-core 48 Other information 49 Development of Group operations and other corporate transactions 49 Certifications and other communications 52 Capital Strengthening 53 Subsequent Events and Outlook 54 Subsequent Events 54 Outlook 55 Further information 56 Unless otherwise indicated, all amounts are in millions of euros. Consolidated Interim Report UniCredit Consolidated Interim Report as at September 30,

16 Highlights Consolidated Interim Report Highlights Income Statement ( million) FIRST 9 MONTHS CHANGE Operating income 16,863 17, % of which: - net interest 9,378 9, % - dividends and other income from equity investments % - net fees and commissions 5,690 5, % Operating costs (10,332) (10,507) - 1.7% Operating profit 6,531 7, % Profit (loss) before tax 3,731 2, % Net profit (loss) attributable to the Group 1,837 1, % The figures in this table refer to reclassified income statement. Balance Sheet ( million) AMOUNTS AS AT CHANGE Total assets 858, , % Financial assets held for trading 93,026 80, % Loans and receivables with customers 470, , % of which: - impaired loans 40,897 39, % Financial liabilities held for trading 72,237 63, % Deposits from customers and debt securities in issue 554, , % of which: - deposits from customers 399, , % - securities in issue 155, , % Shareholders' Equity 51,357 46, % The figures in this table refer to reclassified balance sheet. See "Net write-downs on loans and provisions for guarantees and commitments" in this Consolidated Interim Report for more details. Staff and Branches AS AT CHANGE Employees 1 129, ,122-2,164 Branches 2 7,665 8,954-1,289 of which: - Italy 4,067 4, Other countries 3,598 4,783-1, "Full time equivalent" data (FTE): number of employees counted for the rate of presence. Figures as at December 31, 2013 were restated following the introduction of IFRS 10 and IFRS figure includes the branches of the Koç/Yapi Kredi group (Turkey). 16 Consolidated Interim Report as at September 30, 2014 UniCredit

17 Profitability Ratios FIRST 9 MONTHS CHANGE EPS 1 ( ) Cost/income ratio 61.3% 59.9% 139bp EVA 2 ( million) (1,675) (2,643) 968 Return on assets % 0.15% 0.10bp 1. Annualized figure. 35,466 thousand was deducted from the M net profit of 1,837,456 thousand ( 70,443 thousand at September 2013) due to disbursements charged to equity made in connection with the contract of usufruct on treasury shares agreed under the cashes transaction. 2. Economic Value Added, equal to the difference between NOPAT (net operating profit after tax) and the cost of capital. 3. Return on assets: calculated as the ratio of Net profit or loss to Total assets pursuant to art. 90 of CRD IV. Risk Ratios AS AT Net non-performing loans to customers/loans to customers 4.11% 3.74% Net impaired loans to customers/loans to customers 8.69% 8.22% Own Funds and Capital Ratios AS AT (*) Total own funds ( million) 59,224 57,651 Total risk-weighted assets ( million) 401, ,739 Common Equity Tier 1 Capital Ratio 10.58% 9.60% Total own funds/total risk-weighted assets 14.76% 13.61% (*) Transitional own funds and capital ratios (Basel 3). See Capital and Value Management Capital Ratios, for more details. Ratings SHORT-TERM MEDIUM AND STANDALONE DEBT LONG-TERM OUTLOOK RATING Fitch Ratings F2 BBB+ NEGATIVE bbb+ Moody's Investors Service P-2 Baa2 NEGATIVE D+ Standard & Poor's A-2 BBB NEGATIVE bbb Data as at May 14, UniCredit Consolidated Interim Report as at September 30,

18 Consolidated Interim Report Condensed Accounts Consolidated Balance Sheet ( million) AMOUNTS AS AT CHANGE ASSETS AMOUNT PERCENT Cash and cash balances 8,882 10,520-1, % Financial assets held for trading 93,026 80, , % Loans and receivables with banks 83,284 63, , % Loans and receivables with customers 470, ,684-13, % Financial investments 136, , , % Hedging instruments 14,435 12, , % Property, plant and equipment 10,283 10, % Goodwill 3,565 3, % Other intangible assets 1,882 1, % Tax assets 18,394 19,834-1, % Non-current assets and disposal groups classified as held for sale 8,301 3, , % Other assets 9,563 11,187-1, % Total assets 858, , , % ( million) AMOUNTS AS AT CHANGE LIABILITIES AND SHAREHOLDERS' EQUITY AMOUNT PERCENT Deposits from banks 116, , , % Deposits from customers 399, , , % Debt securities in issue 155, ,266-9, % Financial liabilities held for trading 72,237 63, , % Financial liabilities designated at fair value % Hedging instruments 16,444 12, , % Provisions for risks and charges 9,735 9, % Tax liabilities 4,107 3, % Liabilities included in disposal groups classified as held for sale 6,885 2, , % Other liabilities 21,262 19, , % Minorities 3,475 3, % Group Shareholders' Equity: 51,357 46, , % - Capital and reserves 49,139 61,002-11, % - AfS assets fair value reserve, Cash-flow hedging reserve and Defined benefits plans reserve 380 (315) n.s. - Net profit (loss) 1,837 (13,965) + 15,802 n.s. Total liabilities and Shareholders' Equity 858, , , % Notes: Comparative figures as at December 31, 2013 have been restated following the introduction of IFRS 10 and IFRS 11. For further details see the Further information section of this Consolidated Interim Report. Due to a change in sector of a counterparty, and in order to enable a uniform comparison between periods, the items loans and receivables with/deposits from banks, and loans and receivables with/deposits from customers have been restated. Condensed Accounts Consolidated Balance Sheet 18 Consolidated Interim Report as at September 30, 2014 UniCredit

19 Consolidated Income Statement ( million) FIRST 9 MONTHS CHANGE m PERCENT ADJUSTED 1 Net interest 9,378 9, % + 3.4% Dividends and other income from equity investments % % Net fees and commissions 5,690 5, % + 3.9% Net trading income 1,217 1, % % Net other expenses/income % % OPERATING INCOME 16,863 17, % - 2.8% Payroll costs (6,119) (6,330) % - 2.9% Other administrative expenses (4,176) (3,923) % + 6.9% Recovery of expenses % % Amortisation, depreciation and impairment losses on intangible and tangible assets (656) (759) % % Operating costs (10,332) (10,507) % - 1.2% OPERATING PROFIT (LOSS) 6,531 7, % - 5.2% Net write-downs on loans and provisions for guarantees and commitments (2,595) (4,186) + 1, % % NET OPERATING PROFIT (LOSS) 3,935 2, , % % Provisions for risks and charges (302) (443) % % Integration costs (49) (28) % % Net income from investments 146 (20) n.s. n.s. PROFIT (LOSS) BEFORE TAX 3,731 2, , % % Income tax for the period (1,340) (755) % % NET PROFIT (LOSS) 2,391 1, % % Profit (Loss) from non-current assets held for sale, after tax (55) (7) - 49 n.s. n.s. PROFIT (LOSS) FOR THE PERIOD 2,335 1, % % Minorities (284) (291) % - 3.4% NET PROFIT (LOSS) ATTRIBUTABLE TO THE GROUP BEFORE PPA 2,051 1, % % Purchase Price Allocation effect (214) (295) % % Goodwill impairment NET PROFIT (LOSS) ATTRIBUTABLE TO THE GROUP 1,837 1, % % Notes: 1. Changes at constant foreign exchange rates and perimeter. As from the first quarter of 2014, the results of the industrial companies consolidated line by line will be shown in Net Other Expenses/Income" in order to focus the P&L lines on the pure banking activities. The previous period has been restated accordingly. For further details see the Further information section to the Consolidated Interim Report. In addition, please note that comparative figures as at September 30, 2013 have been restated: - following the introduction of IFRS 10 and IFRS 11, - as a result of the restatement of all the items that composed the profit/loss of some Ukrainian Group companies (PUBLIC JOINT STOCK COMPANY UNICREDIT BANK; BDK CONSULTING; PUBLIC JOINT STOCK COMPANY UKRSOTSBANK; PRIVATE JOINT STOCK COMPANY FERROTRADE INTERNATIONAL; LLC UKROTSBUD; LTD SI&C AMC UKRSOTS REAL ESTATE; SVIF UKRSOTSBUD), which, in accordance with IFRS 5, have been included in item 310. Profit (loss) after tax from discontinued operations. Consolidated Income Statement UniCredit Consolidated Interim Report as at September 30,

20 Consolidated Interim Report Quarterly Figures Quarterly Figures Consolidated Balance Sheet ( million) AMOUNTS AS AT AMOUNTS AS AT ASSETS Cash and cash balances 8,882 9,975 12,499 10,520 6,692 6,708 6,743 Financial assets held for trading 93,026 84,079 79,368 80,701 87,802 93,584 98,451 Loans and receivables with banks 83,284 72,308 74,128 63,310 73,630 68,742 80,017 Loans and receivables with customers 470, , , , , , ,956 Financial investments 136, , , , , , ,586 Hedging instruments 14,435 13,845 12,586 12,390 15,184 15,946 17,947 Property, plant and equipment 10,283 10,509 10,690 10,818 11,016 11,235 11,301 Goodwill 3,565 3,536 3,528 3,533 11,308 11,313 11,406 Other intangible assets 1,882 1,854 1,797 1,793 3,717 3,762 3,811 Tax assets 18,394 18,897 19,635 19,834 17,359 17,306 17,658 Non-current assets and disposal groups classified as held for sale 8,301 3,325 3,166 3,928 3,902 4,185 7,951 Other assets 9,563 9,789 10,994 11,187 11,522 10,056 11,032 Total assets 858, , , , , , ,859 LIABILITIES AND SHAREHOLDERS' EQUITY AMOUNTS AS AT AMOUNTS AS AT Deposits from banks 116, , , , , , ,527 Deposits from customers 399, , , , , , ,590 Debt securities in issue 155, , , , , , ,777 Financial liabilities held for trading 72,237 63,637 62,622 63,799 77,499 77,832 92,994 Financial liabilities designated at fair value Hedging instruments 16,444 15,018 13,521 12,745 15,042 16,142 20,062 Provisions for risks and charges 9,735 9,602 9,115 9,459 8,773 8,692 8,773 Tax liabilities 4,107 3,790 4,156 3,900 4,913 4,898 7,542 Liabilities included in disposal groups classified as held for sale 6,885 1,401 1,447 2,129 2,102 2,228 5,964 Other liabilities 21,262 21,553 20,784 19,530 21,513 19,681 19,436 Minorities 3,475 3,234 3,391 3,334 3,963 3,831 4,186 Group Shareholders' Equity: 51,357 48,937 47,460 46,722 61,179 61,195 62,250 - Capital and reserves 49,139 47,640 46,595 61,002 60,874 61,259 62,412 - AfS assets fair value reserve, Cash-flow hedging reserve and Defined benefits plans reserve (315) (709) (874) (610) - Net profit (loss) 1,837 1, (13,965) 1, Total liabilities and Shareholders' Equity 858, , , , , , ,859 Notes: Comparative figures for each quarter of 2013 have been restated following the introduction of IFRS 10 and IFRS 11. For further details see the Further information section of this Consolidated Interim Report. Due to a change in sector of a counterparty, and in order to enable a uniform comparison between periods, the items loans and receivables with/deposits from banks, and loans and receivables with/deposits from customers have been restated. Consolidated Balance Sheet ( million) 20 Consolidated Interim Report as at September 30, 2014 UniCredit

21 Consolidated Income Statement ( million) Q3 Q2 Q1 Q4 Q3 Q2 Q1 Net interest 3,122 3,179 3,077 3,139 3,032 3,075 3,057 Dividends and other income from equity investments Net fees and commissions 1,853 1,947 1,890 1,853 1,794 1,822 1,892 Net trading income Net other expenses/income 12 (17) 36 (6) OPERATING INCOME 5,551 5,733 5,578 5,770 5,662 6,099 5,785 Payroll costs (2,030) (2,002) (2,087) (2,045) (2,080) (2,107) (2,142) Other administrative expenses (1,358) (1,419) (1,399) (1,434) (1,281) (1,316) (1,325) Recovery of expenses Amortisation, depreciation and impairment losses on intangible and tangible assets (220) (221) (216) (479) (251) (254) (255) Operating costs (3,406) (3,416) (3,510) (3,746) (3,448) (3,484) (3,576) OPERATING PROFIT (LOSS) 2,145 2,317 2,068 2,024 2,215 2,615 2,209 Net write-downs on loans and provisions for guarantees and commitments (754) (1,003) (838) (9,295) (1,482) (1,532) (1,173) NET OPERATING PROFIT (LOSS) 1,392 1,314 1,230 (7,271) 733 1,083 1,037 Provisions for risks and charges (145) (143) (14) (525) (170) (175) (99) Integration costs (5) (40) (4) (699) (16) (9) (3) Net income from investments (22) (19) 20 PROFIT (LOSS) BEFORE TAX 1,285 1,171 1,275 (7,582) Income tax for the period (350) (582) (408) 2,471 (128) (279) (348) NET PROFIT (LOSS) (5,111) Profit (Loss) from non-current assets held for sale, after tax (33) (26) 3 (632) 9 (40) 24 PROFIT (LOSS) FOR THE PERIOD (5,743) Minorities (112) (89) (83) (90) (105) (102) (84) NET PROFIT (LOSS) ATTRIBUTABLE TO THE GROUP BEFORE PPA (5,833) Purchase Price Allocation effect (69) (71) (74) (1,378) (98) (99) (98) Goodwill impairment (7,767) NET PROFIT (LOSS) ATTRIBUTABLE TO THE GROUP (14,979) Notes: As from the first quarter of 2014, the results of the industrial companies consolidated line by line will be shown in Net Other Expenses/Income" in order to focus the P&L lines on the pure banking activities. The previous periods have been restated accordingly. For further details see the Further information section to the Consolidated Interim Report. In addition, please note that 2013 figures have been restated: - following the introduction of IFRS 10 and IFRS 11, - as a result of the restatement of all the items that composed the profit/loss of some Ukrainian Group companies (PUBLIC JOINT STOCK COMPANY UNICREDIT BANK; BDK CONSULTING; PUBLIC JOINT STOCK COMPANY UKRSOTSBANK; PRIVATE JOINT STOCK COMPANY FERROTRADE INTERNATIONAL; LLC UKROTSBUD; LTD SI&C AMC UKRSOTS REAL ESTATE; SVIF UKRSOTSBUD), which, in accordance with IFRS 5, have been included in item 310. Profit (loss) after tax from discontinued operations. Consolidated Income Statement UniCredit Consolidated Interim Report as at September 30,

22 b Consolidated Interim Report Comparison of Q3 2014/Q Comparison of Q3 2014/Q Consolidated Income Statement Consolidated Income Statement ( million) Q3 CHANGE m PERCENT ADJUSTED 1 Net interest 3,122 3, % + 3.8% Dividends and other income from equity investments (185) % % Net fees and commissions 1,853 1, % + 3.8% Net trading income % + 2.8% Net other expenses/income (90) % % OPERATING INCOME 5,551 5,662 (111) - 2.0% - 1.8% Payroll costs (2,030) (2,080) % - 2.2% Other administrative expenses (1,358) (1,281) (77) + 6.0% + 6.3% Recovery of expenses % % Amortisation, depreciation and impairment losses on intangible and tangible assets (220) (251) % % Operating costs (3,406) (3,448) % - 1.0% OPERATING PROFIT (LOSS) 2,145 2,215 (69) - 3.1% - 3.0% Net write-downs on loans and provisions for guarantees and commitments (754) (1,482) % % NET OPERATING PROFIT (LOSS) 1, % % Provisions for risks and charges (145) (170) % % Integration costs (5) (16) % % Net income from investments 43 (22) 65 n.s. n.s. PROFIT (LOSS) BEFORE TAX 1, % % Income tax for the period (350) (128) (221) % % NET PROFIT (LOSS) % % Profit (Loss) from non-current assets held for sale, after tax (33) 9 (42) n.s. n.s. PROFIT (LOSS) FOR THE PERIOD % % Minorities (112) (105) (7) + 6.3% + 5.0% NET PROFIT (LOSS) ATTRIBUTABLE TO THE GROUP BEFORE PPA % % Purchase Price Allocation effect (69) (98) % % Goodwill impairment NET PROFIT (LOSS) ATTRIBUTABLE TO THE GROUP % % Notes: 1. Changes at constant exchange rates and perimeter. As from the first quarter of 2014, the results of the industrial companies consolidated line by line will be shown in Net Other Expenses/Income" in order to focus the P&L lines on the pure banking activities. The previous period has been restated accordingly. For further details see the Further information section to the Consolidated Interim Report. In addition, please note that comparative figures for the third quarter have been restated: - following the introduction of IFRS 10 and IFRS 11, - as a result of the restatement of all the items that composed the profit/loss of some Ukrainian Group companies (PUBLIC JOINT STOCK COMPANY UNICREDIT BANK; BDK CONSULTING; PUBLIC JOINT STOCK COMPANY UKRSOTSBANK; PRIVATE JOINT STOCK COMPANY FERROTRADE INTERNATIONAL; LLC UKROTSBUD; LTD SI&C AMC UKRSOTS REAL ESTATE; SVIF UKRSOTSBUD), which, in accordance with IFRS 5, have been included in item 310. Profit (loss) after tax from discontinued operations. 22 Consolidated Interim Report as at September 30, 2014 UniCredit

23 Segment Reporting (Summary) Segment Reporting (Summary) KEY FIGURES by BUSINESS SEGMENT ( million) COM M ERCIAL BANKING ITALY COM M ERCIAL BANKING GERM ANY COM M ERCIAL BANKING AUSTRIA POLAND CEE DIVISION CIB ASSET M ANAGEM ENT ASSET GATHERING GROUP CORPORATE CENTER 1 NON-CORE CONSOLIDATED GROUP TOTAL Income Statement OPERATING INCOME First 9 Months ,284 2,003 1,200 1,323 2,990 2, (743) ,863 First 9 Months ,876 2,198 1,195 1,336 3,303 3, (995) ,546 OPERATING COSTS First 9 Months 2014 (3,020) (1,579) (1,082) (623) (1,209) (1,285) (367) (158) (548) (460) (10,332) First 9 Months 2013 (3,138) (1,615) (1,074) (622) (1,260) (1,257) (360) (145) (595) (442) (10,507) OPERATING PROFIT First 9 Months , ,781 1, (1,291) (251) 6,531 First 9 Months , ,043 1, (1,590) 109 7,039 PROFIT BEFORE TAX First 9 Months , ,184 1, (1,191) (1,513) 3,731 First 9 Months , (127) ,363-1, (1,794) - (2,375) - 2,362 - Balance Sheet LOANS TO CUSTOMERS as at September 30, ,136 78,765 47,439 26,445 58,384 84, (5,466) 49, ,356 as at December 31, ,931 79,333 48,389 25,033 57,163 93, (5,065) 53, ,684 DEPOSITS FROM CUSTOMERS AND DEBT SECURITIES IN ISSUE as at September 30, , ,044 63,607 29,718 50,036 85,844-14,097 64,846 2, ,908 as at December 31, , ,651 59,134 29,538 49,473 76,448-13,246 68,583 2, ,379 TOTAL RISK WEIGHTED ASSETS as at September 30, ,414 33,598 24,068 25,177 84,530 70,166 1,520 1,624 51,145 32, ,238 as at December 31, ,629 33,823 25,130 25,089 81,668 74,528 2,046 1,915 31,531 31, ,755 EVA First 9 Months , (158) (1,991) (1,362) (1,675) First 9 Months (334) (2,036) 0 (2,175) 0 (2,643) 0 Cost/income ratio First 9 Months % 78.8% 90.2% 47.1% 40.4% 47.8% 63.8% 47.5% -73.7% 219.7% 61.3% First 9 Months % % % % % % % % % % % 0 Employees as at September 30, ,094 13,577 6,756 17,920 29,572 4,015 2, ,104 1, ,958 as at December 31, ,541 13,748 6,893 18,152 30,846 4,300 1, ,739 1, ,122 N ot e s Figures were recast ed, where necessary, on a like-t o-like basis t o consider changes in scope of business segment and met hodological rules. 1. Global Banking Services, Corporat e Cent re Global Funct ions, int er-segment adjust ment s and consolidat ion adjust ment s not at t ribut able t o individual segment s; UniCredit Consolidated Interim Report as at September 30,

24 Consolidated Interim Report 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. Group Figures Income Statement ( million) 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, ITALIAN IAS/IFRS GAAP M Operating income 16,863 23,973 25,049 25,200 26,347 27,572 26,866 25,893 23,464 11,024 10,203 10,375 Operating costs (10,332) (14,801) (14,979) (15,460) (15,483) (15,324) (16,692) (14,081) (13,258) (6,045) (5,701) (5,941) Operating profit (loss) 6,531 9,172 10,070 9,740 10,864 12,248 10,174 11,812 10,206 4,979 4,502 4,434 Profit (loss) before income tax 3,731 (4,888) 317 2,060 2,517 3,300 5,458 9,355 8,210 4,068 3,238 2,988 Net profit (loss) for the period 2,335 (3,920) 1, ,876 2,291 4,831 6,678 6,128 2,731 2,239 2,300 Net profit (loss) attributable to the Group 1,837 (13,965) 865 (9,206) 1,323 1,702 4,012 5,961 5,448 2,470 2,069 2,131 Balance Sheet ( million) Total assets 858, , , , , ,760 1,045,612 1,021, , , , ,855 Loans and receivables with customers 470, , , , , , , , , , , ,438 of which: non-performing loans 19,313 18,058 19,360 18,118 16,344 12,692 10,464 9,932 6,812 6,861 2,621 2,621 Deposits from customers and debt securities in issue 554, , , , , , , , , , , ,923 Shareholders Equity 51,357 46,841 62,784 51,479 64,224 59,689 54,999 57,724 38,468 35,199 14,373 14,036 Profitability ratios (%) Operating profit (loss)/total assets Cost/income ratio Information in the table are "historical figures". They don't allow comparison because they are not recasted or adjusted following to new accounting principles or perimeter changes. How the UniCredit Group has grown ITALIAN GAAP IAS/IFRS 24 Consolidated Interim Report as at September 30, 2014 UniCredit

25 UniCredit Share Share Information M Share price ( ) (*) - maximum minimum average end of period Number of outstanding shares (million) - at period end 1 5,866 5,792 5,789 1,930 19, , , , , , , shares cum dividend 5,769 5,695 5,693 1,833 18, , , , , , ,338.0 of which: savings shares average 1 5,826 5,791 5,473 1,930 19, , , , , , ,303.6 Dividend - total dividends ( million) (***) (**) 3,431 2,486 2,276 1,282 - dividend per ordinary share (***) (**) dividend per savings share (***) (**) The number of shares is net of Treasury shares and included million of shares held under a contract of usufruct. (*) Following extraordinary corporate operations, which involve the detachment of rights, stock splitting or grouping, demerger operations and distribution of extraordinary dividends, the price of the shares can fluctuate so much that they are no longer comparable. Thus, the time series hereby published are adjusted accordingly to restore the continuity of historical price series. (**) 2008 dividend was paid with cash to savings shareholders ( per share, for a total amount of 0.5 million), and with newly issued shares (so called "scrip dividend"). (***) As per Bank of Italy s paper dated March 2, 2012, in keeping with the decision of UniCredit S.p.A. s Board of Directors and in line with the intention announced to the Shareholders Meeting in 2012, UniCredit S.p.A. did not pay any dividends with respect to its 2011 financial results. In 2011 the following operations were carried out:. the 2.5 billion free capital increase, through the allocation to capital of an equivalent amount transferred from the Issue-premium reserve ;. the reverse stock split of ordinary and savings shares based on a ratio of 1 new ordinary or savings share for every 10 existing ordinary or savings shares;. elimination of the per-share nominal value of UniCredit shares. In the first quarter of 2012 the capital increase of 7.5 billion equal to a number of shares issued of 3, was fully subscribed for. Figures relating to the 2013 dividend are shown according to the specific Board of Directors reports on the distribution to Shareholders. The Shareholders Meeting of May 13, 2014 approved a scrip dividend scheme under which the holders of ordinary shares and the holders of savings shares will be allocated one new share for every sixty shares held and one new share for every eighty-four shares held, respectively. The new shares were allocated through a free share capital increase, without prejudice to the shareholders right to opt for a cash payout ( 0.10 for each ordinary and savings share) in lieu of the allocation of the new shares. Earnings Ratios ITALIAN IAS/IFRS GAAP M Shareholders' Equity ( million) 51,357 46,841 62,784 51,479 64,224 59,689 54,999 57,724 38,468 35,199 14,373 14,036 Group portion of net profit (loss) ( million) 1,837 (13,965) 865 (9,206) 1,323 1,702 4,012 5,961 5,448 2,470 2,069 2,131 Net worth per share ( ) Price/Book value Earnings per share 1 ( ) Payout ratio (%) (*) Dividend yield on average price per ordinary share (%) (*) Information in the table are "historical figures" and they must be read with reference to each single period. 1. Annualized figures. (*) 2008 dividend was paid with cash to savings shareholders ( 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 EPS, net profit for 2010 of 1,323 million was changed to 1,167 million; net losses for 2011 of 9,206 million was changed to 9,378 million; net profit for 2012 of 865 million was deducted of 46 million. The M EPS calculation 35 million was deducted from 2014 net profit of 1,837 million ( 70 million at September 2013) due to disbursements charged to equity made in connection with the contract of usufruct on treasury shares agreed under the cashes transaction. UniCredit Share ITALIAN GAAP 1.Annualized figures. IAS/IFRS UniCredit Consolidated Interim Report as at September 30,

26 Consolidated Interim Report Group Results Group Results Macroeconomic situation, banking and financial markets International situation USA/Eurozone In the third quarter of 2014, the global economy experienced modest and rather patchy growth of 2.8% (annual). Fundamentals in the advanced economies improved, especially in the United States, while structural bottlenecks and geopolitical tensions hindered any pick-up in growth in the emerging economies. The biggest obstacle to a sustained recovery in global economic activity comes from international trade, which is struggling to return to pre-crisis levels, mainly due to low demand in emerging countries. Looking ahead, the increase in August's Purchasing Managers Index (PMI) on new foreign orders in the manufacturing sector offers hope for a recovery in the momentum of international trade towards the end of the year. According to our forecasts, the weakness of foreign demand is likely to be reflected in fairly disappointing euro area growth of around 0.3% q/q; a result that benefits from the absence of several one-off factors that had weighed on growth in the first two quarters. Export growth is expected to remain modest, contributing together with a renewed climate of uncertainty for businesses to a slowdown in investment in machinery and equipment. In particular, tensions with Moscow are fueling a situation of considerable uncertainty, especially for countries like Germany, given Russia's strong trade links with the CEE and the dependence on Russian energy supplies. Between March and September 2014, the future expectations component of Germany's IFO manufacturing confidence index fell from 107 to 99.3, the lowest since January Against this background of generalized uncertainty and weak aggregate demand, eurozone inflation has fallen even further, reaching 0.3% in September according to preliminary estimates. Food prices are the main factor behind this deflationary spiral, although "core" inflation (which excludes the most volatile components, such as energy and food) also remains very low. In the current quarter, medium-term inflation expectations as measured by the 5-year/5-year inflation swap have fallen below the 2% threshold despite unconventional monetary policy measures announced by the European Central Bank in September. Since July, the euro has continued to depreciate against the dollar, which could induce a more sustained recovery in inflation. The weakening of the euro can be attributed, in part, to the ECB's determination to avoid deflationary drift, as shown by the latest package of unconventional measures announced in September: 1) A reduction in key interest rates, with the refinancing rate cut to 0.05%, the ECB deposit rate down to -0.20%, and interest on marginal refinancing operations now at 0.30%. 2) Purchases of only "simple and transparent" asset-backed securities; 3) A new round of covered bond acquisitions. The first TLTRO auction, held on September 18, to try to stimulate lending to businesses and households (excluding home mortgages) was a partial disappointment. Only 82 billion was taken up well short of market expectations for a take-up of 150 billion out of the 400 billion available to banks in the September and December auctions. December's auction is, however, expected to be more successful. In the third quarter, rising expectations of a mass ECB intervention and a more growth-oriented renegotiation of European budget parameters led to further reductions in German bond yields, as well as another modest compression in peripheral bond spreads. United States economic growth has been robust. According to the high-frequency macroeconomic indicators, Q3 has seen a continuation of the strong growth recorded in Q2 (annualized 4.6% q/q), underpinned by the correction of temporary factors that slowed momentum in Q1, although the rate of GDP growth is expected to slow down. Rising consumer spending and a reinvigorated construction sector should continue to drive growth in Q3, following the sharp decline seen in Q1. Inflation, as measured on the Consumer Price Index, remains in check at around 2%, with no significant spikes expected in the coming months. Thanks to the improvement in the macroeconomic scenario, the Fed has continued to taper its purchases of mortgage-backed securities and long-term Treasury bonds in line with market expectations, as it prepares to close the program at the end of October. Unless there is a drastic change in the macroeconomic outlook, rates will not be increased until the first half of next year. The Fed's benchmark rates are expected to hit 1.125% by the end of 2015 Banking and financial markets The contraction in banking aggregates slowed albeit only slightly in the third quarter of 2014, against a background of continued economic weakness, which weighs on banks' risk aversion. Private sector bank loans in the euro area fell by 1.5% year-on-year in August (compared to around -1.8% in June). Business loans continued to fall by 2.0 percent after reaching a low of -3.8% in late 2013, while household loans remained stable in the quarter. Lending to the private sector (households and businesses) in all three of the Group s key countries continued to move in line with the eurozone as a whole. In Italy, the recovery of business lending continued to speed up and was down 1.3% y/y in August after hitting a low of around -6% in late However, the improvements in loans to businesses remain limited in an environment of ongoing weakness in consumer lending. In Germany and Austria, both business and household lending showed signs of recovery during the third quarter. Regarding the bank deposit base, August saw strong growth in deposits in all three key Group countries albeit at a slower rate in Austria. In terms of bank interest rates, the ECB's reduction of benchmark rates has stimulated a slight reduction in interest rates on both loans and deposits across all three Group countries, with a slight reduction in the bank spread (difference between the average lending rate and the average deposit rate). Lastly, stock markets performed poorly in the third quarter of 2014, after the strong showing in the first half, due to signs of uncertainty over eurozone growth. The Italian and German markets both ended the quarter with a slight contraction, while the Austrian stock exchange suffered a sharper decline. 26 Consolidated Interim Report as at September 30, 2014 UniCredit

27 CEE Countries The third quarter of 2014 saw a considerable amount of geopolitical tension, economic and policy change happening both within and outside of Central and Eastern Europe prompting meaningful shifts to our outlook. Our base case scenario is no further escalation in sanctions between Russia and the West but tail risks to the global economy stemming from tensions in Ukraine and the Middle East and lacklustre global trade is likely to reduce growth in Europe more than we initially expected. A dovish ECB increases the scope for further monetary easing in Central Europe, but a gradually more hawkish Fed poses risks for CEE asset prices. to offset deteriorating terms of trade (especially lower oil prices) increases fiscal space, but will add to inflation at a time when consumer prices soar amid bans on food imports. With weaker growth, higher inflation and lower oil prices, tail risks are tilted to a more negative scenario. Within CEE macro performance and policy is increasingly more differentiated. Russia is undergoing forced structural change and faces lower growth in the medium term while in Turkey the combination of an erosion of institutional structures, shortfall in foreign reserves and rising inflation has created downside risks to the economy. In Central Europe, low inflation leaves room for more easing (especially in Poland and Romania), while second quarter growth showed a mixed picture, with Romania re-entering technical recession and Hungary surprising on the upside. Going forward, in Poland and Hungary s domestic demand should prove relatively robust supported by real wage growth. Investment trends are encouraging through better use of EU funds while Hungary continues to benefit from new production facilities coming on line. Despite weaker eurozone growth, we still expect growth in both countries to remain above 3% this year. But industrial production and exports remain dependent on eurozone (and especially German demand) throughout Central Europe and recent weakness in German IP will probably weigh on CE for more than one quarter. The weaker growth in the Balkans is in part structural as the lack of progress of fiscal and administrative reforms has failed to improve business competitiveness. Other reasons for the region s underperformance are lower growth rates for trading partners, notably Russia, and floods that affected agriculture, mining and energy production. Serbia s reform efforts should accelerate in order to secure and IMF agreement before the end of the year. Croatia s reform agenda is driven by EDP requirements, but could be watered down ahead of general elections, expected for late Turkey s lower degree of openness has shielded it from a weaker EMU to a larger extent than in Central Europe but events in the Middle East are a source of uncertainty while exports to Iraq are contracting. Easier monetary conditions and supportive fiscal policy should help GDP growth in 2014 but the sustainability of Turkey s pro-growth policy mix is a concern as the CBRT opts for rate cuts over foreign reserve accumulation, despite very low net FX reserves compared to the reliance on volatile capital flows. In addition, disinflation remains an issue as food price shocks and TRY depreciation have kept inflation high and inflation expectations are drifting away from the inflation target. In Russia, assuming the geopolitical situation remains unchanged, further monetary tightening, larger C/A surpluses due to falling imports, a larger fiscal impulse and a diversification in Russia s funding base towards China may buy the economy some near term relief. Over the longer term, Russia is likely to erode foreign reserve buffers amid continued capital outflows while the future growth potential is dented by corporates turning to cash accumulation and debt repayments over investment. The RUB depreciation required UniCredit Consolidated Interim Report as at September 30,

28 Consolidated Interim Report Group Results Main results and performance for the period Introduction Starting from the first quarter 2014 the Group decided to introduce a clear distinction between activities defined as core segment, meaning strategic business segments and in line with risk strategies, and activities defined as noncore segment, including non-strategic segments and those with a poor fit to the Group s risk-adjusted return framework, with the aim of reducing the overall exposure of this last segment in the course of time and to improve the risk profile. Specifically, the non-core segment includes selected assets of Commercial Banking Italy (identified on a single client basis) to be managed with a risk mitigation approach, the activities of the workout company UniCredit Credit Management Bank and some special vehicles for securitization operations. Results will be commented below with specific reference to core and non-core segment. In the first nine months of 2014 the Group recorded a net profit equal to 1,837 million, with an increase of 81.3% compared to the same period in 2013, which closed at 1,014 million. Net of revised tax impact deriving from the valuation of Bank of Italy stake (accounted in second quarter 2014), Group net profit is equal to 2,053 million, up by 102.5% compared to the first nine months of Core segment (excluding the revised tax impact deriving from the valuation of the Bank of Italy stake) contributed to the first nine months profit with about 3.1 billion, up by 13% compared to the same period in 2013 restated (+14.3% at constant exchange rates), as combined effect of a higher net operating profit, lower Net write-downs on loans and provisions for guarantees and commitments and higher contribution to Group s results of profit from investments. On the other hand the Non core segment posted in the first nine months of 2014 a loss of 1,057 million mainly due to still high net write-downs on loans and provisions for guarantees and commitments. However, an improvement of 680 million, in comparison to the loss of 1,737 million registered in the first none months of last year restated, has been achieved. Operating income In the first nine months of 2014 Group operating income amounted to 16,863 million, decreasing by 3.9% over the same period in 2013 (down by 2.8% at constant exchange rates) mainly due to trading result dynamics. In particular, net interest amounted to 9,378 million, up by 2.3% over last year, dividends (which include companies accounted for using the equity method s profit) to 547 million, down by 28.9% over last year, net fees and commissions to 5,690 million, up by 3.3% over last year, net trading income to 1,217 million, down by 36.4% over last year. Finally net other expenses/income totalized 31 million in comparison to 193 million of the same period last year. Almost the whole operating income was attributable to the core segment ( 16,654 million), decreased in comparison to the previous year restated (down by 1.1% at constant exchange rates) mainly due to a lower net trading, hedging and fair value income, only partially offset by the net interest s growth (up by 5.8% at constant exchange rates compared to first nine months of 2013 restated) and net fees (up by 5.4% at constant exchange rates compared to first nine months of 2013 restated). Net of positive contribution stemming out from the repurchase public offers of bonds issued by the Group that generated a gross capital gain of 254 million in the first nine months of 2013 and 49 million in the first nine months of 2014, as well as net of the capital gain from the sale of the insurance business unit in Turkey (Yapi Sigorta), carried out in third quarter 2013, the operating income of the first nine months of 2014 would increase by 0.3% over the same period of In particular core segment s posted a net interest of 9,238 million, increasing by 4.6% over the previous year restated (up by 5.8% at constant exchange rates). Such a positive trend, as in previous quarters, is attributable to the reduction of average cost of commercial funding, which more than compensated the decrease of interests income on lending side. Such a trend was supported by the progressive reduction of credit spreads, initially on govies, later continued in the corporate sector, in a slightly increasing interest rates environment (average 3 months Euribor equal to 0.25% in the first nine months of 2014 compared with 0.21% in the same period 2013). Net interests increase was achieved regardless a still quite unfavorable loans dynamic. In particular loans to customers related to the core segment (equal to billion as of September 30, 2014) are down by 4.8% over the same period last year (down by 4.2% at constant exchange rates) although compared to the previous quarter they continue to show some stabilization signs, with the stock of commercial loans to customers falling by 0.4%, but up by 0.1% at constant exchange rates. The evolution of commercial loans to customers volumes of core segment still proved to be not uniform at geographical level: compared to September 2013 even if with a slower peace - the Western Europe decreasing trend (down by 2.9%) carried on, in particular due to Italy (down by 3.7% commercial loans, as a consequence of a weak credit demand) and Germany (down by 3.0%, mostly attributable to Corporate clients), on the other hand, the countries of CEE Region confirmed their growth (up by 5.9% at constant exchange rates) driven by Russia (up by 27.7% at constant exchange rates), Czech Republic (up by 8.5% at constant exchange rates) and Poland (up by 9.1% at constant exchange rates). Direct funding from customers (deposits and securities) of core segment (equal to billion as of September 30, 2014), instead, was growing by 2.0% (up by 2.5% at constant exchange rates) over September 2013 (quarter prove to be growing even if affected by DAB reclassification to the liabilities included in disposal groups classified as held for sale made in September 2014, net of which direct funding would have grown by 2.9% at current exchange rates). Such a trend was a result of both the commercial direct funding from customers (up by 2.5%) and the institutional component (up by 0.7%) 28 Consolidated Interim Report as at September 30, 2014 UniCredit

29 Focusing on commercial direct funding from customers, Italy, due to higher diversification towards assets under management products showed a decrease over September 2013 (down by 3.1%), whilst both Germany (up by 3.5%) and Austria (up by 9.3%) recorded an increase. CEE Region continued towards achieving an equilibrium between loans and deposits, growing by 9.4% (up by 13.1% at constant exchange rates) over the previous year, driven by Poland (up by 8.9% at constant exchange rates), Russia (up by 37.9% at constant exchange rates), Czech Republic (up by 8.8% at constant exchange rates), Bulgaria (up by 17.0% at constant exchange rates), Serbia (up by 20.7% at constant exchange rates) and Bosnia (up by 16.7% at constant exchange rates). As a consequence of the above outlined dynamics, at September 2014, a commercial funding surplus core (which excludes institutional component) of 5.7 billion was recorded, compared to September 2013 funding gap amounting at 10.9 billion. Core segment s dividends (which include the profits of the companies accounted for using the equity method) in the first nine months of 2014 amounted to 603 million, decreasing by 167 million compared to the same period of 2013 restated, mainly as a consequence of 181 million capital gain generated by the sale of the insurance business unit in Turkey (Yapi Sigorta), carried out in third quarter With regard to net fees and commissions related to the core segment, in the first nine months of 2014 they amounted to 5,525 million, up by 4.8% (up by 5.4% at constant exchange rates) over the same period of the previous year restated. Growth was mainly attributable to fees from investment services (up by 11.7% compared to the first nine months of 2013) and was driven by assets under management s products, thanks to volumes growth (up by 36 billion over September 2013). Financing services fees also recorded a positive result (up by 2.9% in comparison with the first nine months of 2013), while transactional services fees decreased by by 2.6% over the first nine months 2013 restated. Core segment s net trading, hedging and fair value income in the first nine months of 2014 was equal to 1,229 million, decreasing by 36.0% over the same period 2013 (down by 36.3% at constant exchange rate). Also net of Group s bonds buy-back, which generated a gross surplus equal to 254 million in the first nine months of 2013 and 49 million in the first nine months of 2014, a decrease of 29.2% was recorded, mainly due to Commercial Banking Germany, that in the first nine months of 2013 benefitted from a particularly positive result of the treasury activities, to CEE Division and CIB division. Finally, core segment s net other expenses/income in the first nine months of 2014 amounted to 58 million, down by 142 million over the same period in 2013 restated, mainly due to lower revenues generated by the subsidiary Ocean Breeze Energy GmbH & Co.KG, owner of the wind farm BARD Offshore 1 (for this matter refer to Consolidated First Half Financial Report as at June 30, 2014 Part E Information on risks and related risk management policies ). Non-core segment in the first nine months of 2014 registered 209 million of operating income, decreasing by 62.1% over the first nine months last year restated. Such a dynamic was consistent with the 20.3% reduction of customers loans, coupled with a higher weight of the portion of impaired loans, over which are not accounted for revenues. Moreover, the negative impact coming from a company valued at net profit method and accounted at dividend item, also contributed to the decrease. Operating income FIRST 9 MONTHS 2013 FIRST 9 MONTHS 2014 % CHANGE 2014 Q3 % CHANGE ON Q ( million) Gruppo o/ w Core Group o/ w Core Gruppo o/ w Core Group o/ w Core Group o/ w Core Net interest 9,164 8,832 9,378 9, % + 4.6% 3,122 3, % - 1.9% Dividends and other income from equity investments % % % % Net fees and commissions 5,507 5,272 5,690 5, % + 4.8% 1,853 1, % - 4.6% Net trading income 1,912 1,920 1,217 1, % % % + 6.7% Net other expenses/income % % % n.s. Operating income 17,546 16,995 16,863 16, % - 2.0% 5,551 5, % - 4.0% UniCredit Consolidated Interim Report as at September 30,

30 Consolidated Interim Report Group Results Operating costs Group s Operating costs in the first nine months of the year were equal to 10,332 million, lower by 1.7% compared to the same period in 2013 (down by 1.2% at constant exchange rates and perimeters). In detail staff expenses were equal to 6,119 million, decreasing by 3.3% over last year; other administrative expenses were equal to million, growing by 6.5% over last year; expense recovery were equal to 619 million, growing by 22.7% over last year. Finally, write-downs on tangible and intangible assets were equal to 656 million, decreasing by 13.5% over last year. Such a positive achievement on operating costs was driven by Group s core segment, which registered 9,872 million in the first nine months of 2014, lower by 1.9% over the same period in 2013 restated (down by 1.4% at constant exchange rates), thanks to staff expenses, decreasing by 3.4% compared with the first nine months of 2013 restated (down by 3.0% at constant exchange rates) and to write-downs on tangible and intangible assets, decreasing by 13.8% (down by 13.3% at constant exchange rates). Analyzing in more detail the single components, staff expenses related to the core segment in the first nine months of 2014 were 6,007 million, down by 3.4% over the same period 2013 restated (down by 3.0% at constant exchange rates). This positive achievement benefited from the workforce reduction over the first nine months of 2013, measured in terms of Full Time Equivalent (FTEs), by units (of which around 1,450 FTEs reduced in Ukraine, in addition to the outsourcing of technological infrastructure management and invoice management ), and from the release of some exceeding accruals previously made. The staff expenses trend shows some geographic differentiations, with CEE Region growing by 1.3% at constant exchange rates and the rest of the Group significantly decreasing (down by 3.6%). At divisional level, main savings were registered in commercial networks of Italy and Germany, that continue the implementation of the rationalization initiatives launched with the strategic plan. Also GBS and Corporate Centre show a decrease. Concerning core segment s other administrative expenses on the other hand, they amounted to 3,788 million in the first nine months of 2014, growing by 7.4% in comparison to the same period 2013 restated. Good part of the increase was driven by IT costs icrease due, on the one hand to higher recurrent and development activities and the other hand to outsourcing services fees. Part of these costs refers to expenses directly incurred by the Group (mainly rents and operating costs for IT assets still owned by the Group) that are later re-invoiced to the outsourcer. The income from this re-invoicing is included in the expenses recovery item, that in the first nine months of 2014 was 577 million, up by 30.5% over the same period in 2013 restated. Finally, the write-downs on tangible and intangible assets of core segment in the first nine months of 2014 were 654 million, falling by 13.8% (down by 13.3% at constant exchange rates). This reduction benefitted from the revision of the amortization period of some intangible assets categories, from the intangible assets impairments carried out in the last quarter 2013, as well as from the assets disposal related to the technological infrastructure management outsourcing. Overall, in the first nine months of 2014, total core segment s operating costs excluding staff expenses were stable (up by 0.5%) over the same period of 2013 restated. Operating costs related to the non-core segment in the first nine months of 2014 were 460 million, increasing by 4.0% over the same period in 2013 restated, mainly as a consequence of less expenses recoveries. The decline of revenues, only partially offset by the costs containment, led to 6,531 million Group gross operating profit in the first nine months of 2014, declining by 7.2% over 2013 (down by 5.2% at constant exchange rates), reduced however to 2.1% drop when referring to the core perimeter (down by 0.6% at constant exchange rates). However, it should be emphasized that net of positive contribution stemming out from the repurchase public offers of bonds issued by the Group, as well as net of the capital gain from the sale of the insurance business unit in Turkey (Yapi Sigorta), previously already mentioned, the Group gross operating profit of the first nine months of 2014 would increase by 3.7% over the same period in The cost income ratio of core segment was substantially stable, from 59.2% in the first nine months of 2013 restated to 59.3% in the first nine months of 2014, thanks to the operating costs containment. Gross operating profit related to the non-core segment in the first nine months of 2014 was instead million, against million profit in the first nine months of 2013 restated. 30 Consolidated Interim Report as at September 30, 2014 UniCredit

31 Net write-downs on loans and provisions for guarantees and commitments Net write-downs on loans and provisions for guarantees and commitments of the Group in the first nine months of 2014 were 2,595 million, significantly reduced compared to the same period in 2013 (down by 38.0%), also as a result of measures taken in the fourth quarter of 2013 aimed to improve the coverage ratio. In the first nine months of 2014 Group gross impaired loans decreased by 128 million (down by 0.2%) over last quarter in 2013, with an incidence on total loans equal to 16.19% from 15.76% at 2013 year end. Coverage ratio (51.0%) confirmed close to the level achieved in 2013 year end. The amount of provisions for credit risk in the third quarter 2014 benefitted from a change in valuation methodology of doubtful loans operated by UniCredit S.p.A., that resulted in a release of credit allowance for about 775 million with an overall reduction on the specific portfolio affected by the change of UniCredit S.p.A. (gross nominal value 18.1 billion) and, consistently, on doubtful loans of the Group. The valuation methodology has been revised in order to reflect a change in the underlying credit management process, which is more focused now to recovering activities in the stage before revocation of the credit line, and from which higher cash flows are expected. The change in valuation methodology has been accounted as change in accounting estimate, according to IAS With regard to the core segment, in first nine months of 2014 net write-downs on loans and provisions for guarantees and commitments amounted to 1,371 million, decreasing by 20.7% (down by 19.6% at constant exchange rates) over the same period in 2013 restated. The significant reduction in loan loss provisions was also due to the methodological change above mentioned, which resulted in a release of credit allowance for about 200 million. Core segment s cost of risk was 43 basis points in nine months of 2014, improving compared to previous year (equal to 51 basis points), showing however relevant differences on geographical basis, with Italy amounting to 59 basis points, Germany -7 basis points, Austria 14 basis points, Poland 52 basis points and CEE 110 basis points. The core segment s gross impaired loans on September 30, 2014 were growing by 1.2 billion compared to December 31, 2013 restated (up by 4.8%). This resulted in a growth of gross impaired loans on total loans ratio, from 5.75% in December 2013 to 6.15% in September Gross non-performing loans stock was at 14.2 billion, growing by 418 million over 2013 year end restated. Regarding Non-core segment, instead, Net write-downs on loans and provisions for guarantees and commitments halved from 2,458 million in the first nine months of 2013 restated to 1,225 million in the first nine months of Also the non-core segment was affected by the change in valuation methodology of doubtful loans operated by UniCredit S.p.A., that resulted in a release of credit allowance for about 575 million. Non-core segment s impaired loans as of September 30, 2014 were 56.6 billion, decreasing by 2.3% in comparison to 58.0 billion as of 2013 year end restated. Non-performing loans were 36.4 billion, increasing by 3.2% over 2013 year end restated. Coverage ratio as of September 30, 2014 was at 51.9% in comparison to 53.8% as of 2013 year end restated. Loans to customers asset quality ( million) NON- DOUBTFUL RESTRUCTURED PAST-DUE IMPAIRED PERFORMING TOTAL PERFORMING LOANS LOANS LOANS LOANS LOANS LOANS CUSTOMER LOANS As at Face value 50,602 24,040 5,768 3,052 83, , ,598 as a percentage of total loans 9.81% 4.66% 1.12% 0.59% 16.19% 83.81% Writedowns 31,289 8,551 2, ,565 2,677 45,242 as a percentage of face value 61.8% 35.6% 35.7% 21.8% 51.0% 0.6% Carrying value 19,313 15,489 3,709 2,386 40, , ,356 as a percentage of total loans 4.11% 3.29% 0.79% 0.51% 8.69% 91.31% As at restated (1) Face value 49,059 24,935 6,150 3,446 83, , ,456 as a percentage of total loans 9.25% 4.70% 1.16% 0.65% 15.76% 84.24% Writedowns 30,947 9,911 2, ,844 2,928 46,772 as a percentage of face value 63.1% 39.7% 36.0% 22.3% 52.5% 0.7% Carrying value 18,112 15,024 3,934 2,676 39, , ,684 as a percentage of total loans 3.74% 3.11% 0.81% 0.55% 8.22% 91.78% As at historical Face value 47,592 25,051 6,153 3,564 82, , ,287 as a percentage of total loans 8.66% 4.56% 1.12% 0.65% 14.99% 85.01% Writedowns 29,534 9,982 2, ,545 3,600 46,145 as a percentage of face value 62.1% 39.8% 36.0% 22.8% 51.7% 0.8% Carrying value 18,058 15,069 3,936 2,752 39, , ,142 as a percentage of total loans 3.59% 2.99% 0.78% 0.55% 7.91% 92.09% (1) In order to enable a uniform comparison, the figures have been restated to take into account the introduction of IFRS10 and IFRS11 and the reclassification from loans to customers to loans to banks due to the change in sector of a counterparty. UniCredit Consolidated Interim Report as at September 30,

32 Consolidated Interim Report Group Results From net operating profit to profit before tax As a consequence of a gross operating profit decreasing by 508 million and net write-downs on loans down by million over first nine months of 2013, Group s net operating profit amounted to 3,935 million in first nine months of 2014, growing by 1,082 million (up by 37.9%) compared to the same period in The core segment contribution to net operating profit in first nine months of 2014 was equal to 5,411 million, growing by 4% compared to the same period in 2013 restated (up by 5.6% at constant exchange rates). Group s provisions for risk and charges were at million, of which million related to the core segment, that include legal and judicial cases, in addition to the estimation of other risk factors of various nature, including million booked in Hungary as an effect of the new law on exchange rates and interest rates applied to retail foreign currency loans. Integration costs were - 49 million and were mainly related to the leasing commercial network restructuring, with the agents channel closure. Finally, net income from investments was 146 million, mainly due to the rationalization of Lauro Sessantuno participation and to Neep and SIA shareholding transfers, some real estate disposals in Austria, partially balanced by the impairment of some participations of the Group. As an effect of the items above mentioned, in the first nine months of 2014 the Group registered a profit before tax of 3,731 million, compared to 2,362 million achieved in first nine months 2013 (up by 57.9%), of which 5,244 million related to the core segment (up by 10.7% in comparison to the 4,737 million of first nine months of 2013 restated) and - 1,513 million related to the noncore segment (in comparison to the - 2,375 million of the same period 2013 restated). P rofit before tax by business segment ( million) OPERATING INCOM E OPERATING COSTS Net write-downs on loans and provisions NET OPERATING PROFIT FIRST 9 M ONTHS 2013 PROFIT BEFORE TAX FIRST 9 M ONTHS 2014 Commercial Banking Italy 6,284 (3,020) (704) 2,560 2,112 2,456 Commercial Banking Germany 2,003 (1,579) (2) Commercial Banking Austria 1,200 (1,082) (69) 48 (127) 54 Poland 1,323 (623) (102) Central Eastern Europe 2,990 (1,209) (472) 1,309 1,363 1,184 Corporate & Investment Banking 2,688 (1,285) (34) 1,369 1,589 1,352 Asset Management 575 (367) Asset Gathering 333 (158) (2) Group Corporate Center (743) (548) 14 (1,277) (1,794) (1,191) Non Core 209 (460) (1,225) (1,475) (2,375) (1,513) Group Total 16,863 (10,332) (2,595) 3,935 2,362 3, Consolidated Interim Report as at September 30, 2014 UniCredit

33 Profit (loss) attributable to the Group As a consequence of 3,731 million profit before tax, in the first nine months of 2014 Group s income taxes were 1,340 million, from which derives a 35.9% tax rate. To be noticed that in Italy taxes were affected by additional taxes on Bank of Italy shareholding revaluation and deferred tax assets write-off following the reduction of IRAP tax rate. Net of these factors, Goup s income taxes would have been 1,008 million with a tax rate of 27.0%, thanks to the lower fiscal charge of CEE Region and Austria, compared to the higher taxation level of Italy and Germany. The loss from discontinued operations net of taxes was 55 million and referred to economic result for the period of the Ukrainian subsidiaries, partially offset by the economic effects of the control acquisition of Immobilien Holding group, that led to the revaluation of non-controlling interests previously owned. Profit for the period in first nine months of 2014 was 2,335 million, with contribution of core segment in amount of + 3,392 million, growing by 1.6% (up by 2.8% at constant exchange rates) in comparison to the + 3,337 million achieved in first nine months of Net of additional taxes on Bank of Italy shareholding revaluation, the Group profit for the period would amount to 2,550 million, growing by 59.4% over the first nine months of Minorities were 284 million. Purchase price allocation was million, decreasing in comparison to the million accounted in first nine months of The reduction over the last year derives from the complete impairment of the Customer relationship carried out in fourth quarter 2013, that reduced the amortization charge of the period. Consequently, in first nine months of 2014, a net profit attributable to the Group of 1,837 million was registered, growing by 81.3% compared to 1,014 million profit registered in first nine months in Net of additional taxes on Bank of Italy shareholding revaluation, net profit attributable to the Group would amount to 2,053 million, growing by 102.5% over the first nine months in The core segment in first quarter 2014 achieved 2,894 million profit attributable to the Group, growing by 5.2% (up by 6.6% at constant exchange rates), in comparison to 2,751 million profit of first nine months of 2013 restated. Net of additional taxes on Bank of Italy shareholding revaluation, net profit attributable to the Group referred to core segment would amount to 3,110 million, growing by 13.0% over the first nine months of Non-core segment registers 1,057 million net loss attributable to the Group, in comparison to 1,737 million loss registered in first nine months of 2013 restated (-39.2%). Profit (loss) attributable to the Group FIRST 9 MONTHS 2013 FIRST 9 MONTHS 2014 % CHANGE 2014 Q3 % CHANGE ON Q ( million) Gruppo o/ w Core Group o/ w Core Gruppo o/ w Core Group o/ w Core Group o/ w Core Operating income 17,546 16,995 16,863 16, % - 2.0% 5,551 5, % - 4.0% Operating costs (10,507) (10,065) (10,332) (9,872) -1.7% -1.9% (3,406) (3,264) -0.3% -0.2% Operating profit (loss) 7,039 6,929 6,531 6, % -2.1% 2,145 2, % -9.2% Net w rite-dow ns on loans and provisions for guarantees and commitments (4,186) (1,728) (2,595) (1,371) -38.0% -20.7% (754) (244) -24.9% -59.5% Net operating profit (loss) 2,853 5,202 3,935 5, % 4.0% 1,392 1, % 7.4% Provisions for risks and charges (443) (418) (302) (287) -32.0% -31.4% (145) (146) 1.5% -1.6% Integration costs (28) (26) (49) (30) 78.0% 15.4% (5) (2) -86.7% -92.4% Net income from investment (20) (20) n.s. n.s % + 8.9% Profit (loss) before tax 2,362 4,737 3,731 5, % 10.7% 1,285 1, % 9.7% Income tax for the period (755) (1,393) (1,340) (1,797) 77.5% 29.0% (350) (545) -40.0% -25.7% Net profit (loss) of discontinued operations (7) (7) (55) (55) n.s. n.s. (33) (33) 30.6% 30.6% Profit (loss) for the period 1,600 3,337 2,335 3, % 1.6% 902 1, % 36.9% Minorities (292) (292) (284) (284) -2.6% -2.6% (112) (112) 25.7% 25.7% Net profit (loss) attributable to the Group before PPA 1,309 3,046 2,051 3, % 2.0% 790 1, % 38.1% Purchase Price Allocation effects (295) (295) (214) (214) -27.5% -27.5% (69) (69) -2.7% -2.7% Goodwill impairment n.s. n.s. - - n.s. n.s. Net profit (loss) attributable to the Group 1,014 2,751 1,837 2, % 5.2% 722 1, % 41.8% UniCredit Consolidated Interim Report as at September 30,

34 Consolidated Interim Report Group Results Capital and Value Management Principles of value creation and disciplined capital allocation In order to create value for the shareholders, the Group s strategic guidelines are aimed at optimizing the composition of its business portfolio. This goal is pursued through a process of capital allocation to each business line in relation to its specific risk profile and ability to generate extra income measured as EVA, which is the main performance indicator related to TSR (Total Shareholder Return). The development of Group operations with a view to value creation requires a process for allocating and managing capital governed by different phases in the process of planning and control, articulated as: formulation of the proposed propensity for risk and capitalization targets; analysis of the risks associated with the value drivers and resulting allocation of capital to the business lines and to the Business Units; assignment of performance targets in line with risk; analysis of the impact on the Group s value and of the creation of value for shareholders; drafting and proposal of the financial plan and dividend policy. The process of capital allocation is based on a dual track logic, considering both economic capital, measured through the full evaluation of risks by risk management models, and regulatory capital, quantified applying internal capitalization targets to regulatory capital requirements. Capital Ratios The Group dynamically manages its capital base by monitoring regulatory capital ratios, anticipating the appropriate changes necessary to achieve its targets, and optimizing the composition of its assets and equity. Planning and monitoring refer, on the one hand, to the total own funds/regulatory capital (Common Equity Tier 1, Additional Tier 1 and Tier 2 Capital) and, on the other hand, to the Risk-Weighted Assets (RWAs). The Risk-Weighted Assets, for portfolios managed using the Advanced model, not only depend on the nominal value of the assets but also on the relevant credit parameters. Besides volume dynamics, it is also crucial to monitor and forecast the change in the loan quality of the portfolio in view of the macroeconomic scenario (the so-called pro-cyclical effect). Own Funds and Capital Ratios AS AT ( million) (*) (**) Common Equity Tier 1 Capital 42,456 40,683 Tier 1 Capital 46,138 42,737 Total own funds 59,224 57,651 Total RWA 401, ,739 Common Equity Tier 1 Capital Ratio 10.58% 9.60% Tier 1 Capital Ratio 11.50% 10.09% Total own funds Capital Ratio 14.76% 13.61% (*) Transitional own funds and capital ratios (Basel 3). (**) Amounts and ratios calculated in compliance with the supervisory regulations in force at the date (Basel 2.5), i.e. Regulatory Capital and Tier 1 Capital; the Core Tier 1 Capital and Core Tier 1 Ratio relating to December 31, 2013, compared with Common Equity Tier 1 and with the related capital ratio as at September 30, 2014, respectively, were calculated using an internal model. The economic and financial crisis, which began in 2007, has raised an intense debate on the need to promote a stronger and more resilient financial system. Therefore, over the last years, global regulators introduced a series of new regulatory requirements that have contributed greatly to re-shape the financial markets landscape. In particular, in December 2010, the Basel Committee for Banking Supervision (BCBS) published a series of changes relative to the requirements for banking institutions on capital and liquidity, also known as Basel 3. The regulatory changes introduced by the Basel 3 framework define more stringent rules for capital requirements and introduce for the first time liquidity and leverage limits. According to the Basel 3 framework, the new rules are introduce gradually in order to allow the banking system to comply with the new requirements and contain the impact on the real economy. The Basel 3 framework has been translated into law by means of two separate legislative instruments: a Directive (CRD 4) and a Regulation (CRR), which include the majority of the measures relating to capital requirements, the provisions of which are directly binding and applicable within each European Union Member State. The first proposal of the new regulation was published by the European Commission in July Following EU Parliament approval, the CRD 4 package (i.e. Directive and Regulation) was formally published in the Official Journal of the EU on June 27, 2013 and applied from January 1, In December 2013 the Bank of Italy published ( Circolare 285 ) new supervisory regulations on banks implementing CRD 4, CRR and setting out additional local prudential rules concerning matters not harmonized at EU level. As of January 1, 2014, Italian banks are required to comply with a minimum CET1 Capital ratio of 4.5%, Tier 1 Capital ratio of 5.5% (6% starting from 2015) and Total Capital Ratio of 8%. These minimum ratios are complemented on the following capital buffers to be meet with CET1 Capital: Capital Conservation set at 2.5% from January 1, 2014 and, from 2016, Countercyclical in the periods of excessive credit growth and Systemic for Global Systemically Important Institutions (G-SII) or Other Systemically Important Institutions (O-SII). Failure to comply with such combined buffer requirements triggers restrictions on distributions and the need to adopt a capital conservation plan. As part of the transition arrangements, regulatory capital recognition of outstanding non-cet1 capital instruments that no longer meet the minimum criteria will be gradually phased out. Their recognition is capped at 80% in 2014 of nominal outstanding as at January 1, 2013, with this cap decreasing by 10% in each subsequent year. 34 Consolidated Interim Report as at September 30, 2014 UniCredit

35 Note on the results of the ECB Comprehensive Assessment This note is provided on specific request of Consob, pursuant to art. 114, paragraph 5, of Legislative Decree 58/98. On October 26, the European Central Bank, the European Banking Authority and Bank of Italy provided the final outcome of the Comprehensive Assessment conducted in preparation of the adoption of the Single Supervisory Mechanism (in force starting from November 2014), which entailed the analysis of the current and future conditions of 130 banking groups in the Eurozone. The Comprehensive Assessment entailed: an Asset Quality Review (AQR) at the reporting date of December 31, 2013, which concerned loan portfolios and financial assets of high risk; the simulation of a hypothetical Stress Test aimed at assessing the ability of banks to withstand extreme and particularly unfavorable conditions. The overall results of the assessment confirmed that the UniCredit Group far exceeds the requirements set in the Comprehensive Assessment. The assessment lasted nearly a year and involved, with reference to the Asset Quality Review process (AQR), the main Group legal entities in Italy, Germany, Austria, Croatia, Romania and Bulgaria, while the Stress Test is referred to the entire Group. Regarding the existence of any accounting impacts arising from the Asset Quality Review (AQR), we note that it was primarily a prudential rather than accounting exercise. Indeed, the methodology was based on the use of highly conservative assessment criteria and statistical methods. Specifically, for the prudential exercise of AQR, the results of the Credit File Review, which involved reviewing and reclassifying credits on a sample basis, were extended across the entirety of each relevant portfolio. As such, these statistical projections cannot, by their very nature, be directly interpreted as exact assessments of the need for additional accounting provisioning. More generally, it is worth pointing out that the selection of portfolios analyzed as part of the Comprehensive Assessment was based on their degree of risk, meaning the associated results cannot in any case be understood to apply to the entire balance sheet. It is to be noted that additional collective provisioning needs, which in any case were relatively limited, were calculated solely for the purposes of the AQR following the prudential criteria of the 'Challenger Model', which had no direct impacts on profit and loss or on the balance sheet and, as such, did not involve the offsetting between underprovisioned and over-provisioned portfolios, differently from what is set out in the current supervisory regulations. To date, no recommendations have been received regarding the need to amend the approach adopted for estimating collective provisioning. With reference to the adjustments put forward by the ECB in relation to the credit exposures subject to sample analysis (the Credit File Review), at the date of approval of this Consolidated Interim Report as at September 30, 2014, the Supervisory Authorities have not yet provided the Bank with detailed information about individual adjustments resulting from the AQR. However, on the basis of the information received during the contacts had with the Authorities during the Comprehensive Assessment process, the Bank assumes that the different valuations highlighted by the AQR in the Credit File Review, also connected to the updated information at the valuation date, have already largely been reflected into carrying values as of September 30, 2014, through write-downs recorded during the period. Similarly, the Bank assumes that the valuation differences connected to the Fair Value Review (FVR) have already been accounted for. Potential additional information will be considered in the preparation of financial statements as of December 31, 2014, upon receipt of the necessary details from the Supervisory Authorities. In the same way, as soon as the aforementioned Authorities provide information on any future improvements to be made in light of the Comprehensive Assessment (including in relation to the accounting and valuation processes and policies used), it will be possible to identify any additional impacts, where necessary. To date, no requests for significant changes to current risk measurement procedures have been received. Regarding, in particular, the classification of non-performing loans, it is notable that the AQR was conducted using as reference a definition of Non-Performing Exposures derived by the criteria set out in the European Banking Authority Implementing Technical Standards (EBA ITS) on Forbearance and Non-Performing Exposures (NPE). Bank of Italy has launched a consultation on a draft of Circular no. 272 of July 30, 2008, which modifies the criteria for classifying loans for both prudential and IFRS purposes, in order to achieve greater harmonization with EBA definitions of Non-Performing Exposures and to incorporate into the existing risk classes the EBA's notion of forborne exposures. Simultaneously, the EBA recently opened a consultation (which is still in progress) on issuing guidelines for defining the materiality thresholds to be used in the notion of "default", in accordance with the European Union's Capital Requirements Regulation (CRR). As a consequence, in view of these regulatory developments, the processes of classifying loans for prudential and accounting purposes will be subject to change in the coming reporting periods. UniCredit Consolidated Interim Report as at September 30,

36 Consolidated Interim Report Group Results It is also to be noted that, while for UniCredit Group's consolidated financial statements the parent company is subject to the instructions of the Italian Supervisory Authority, classification of loans in different risk classes for prudential purposes continues to be executed by the subsidiaries in the various countries subject to the legal and regulatory provisions issued by local supervisory authorities. As such, it is worth noting that the EBA's definition of a Non-Performing Exposures is mainly aligned with the Bank of Italy's prudential and IFRS definition, which not only includes non-performing loans but also impaired loans with lower expected losses (e.g. doubtful and pastdue loans). For the purposes of the UniCredit group's consolidated financial statement, suitable arrangements have been adopted with the aim of linking and aligning the classification of the local default classes, otherwise not fully coherent. The first reporting date on forborne exposures is required by EBA regulations by December 2014 (having as reference date September 30, 2014); in view of this deadline, the necessary actions are under way. The disclosures provided at future reporting dates will therefore be adjusted to reflect these changes. Shareholders Equity attributable to the Group The Shareholders Equity of the Group, including the profit of the period ( million), amounted to 51,357 million at September 30, 2014, compared to 46,722 million at December 31, The following table shows the main changes that in the first nine months of Shareholders' Equity attributable to the Group ( million) Shareholders' Equity as at December 31, 2013 (*) 46,722 Capital increase (net of capitalized costs) - Equity instruments 1,889 Disbursements related to Cashes transaction ("canoni di usufrutto") (35) Dividend payment (176) Forex translation reserve (**) (510) Change in afs/cash-flow hedge reserve 1,200 Others (***) 431 Net profit (loss) for the period 1,837 Shareholders' Equity as at September 30, ,357 (*) Please note that on January 1, 2014 the new IFRS 10 and IFRS 11, effective from January 1, 2013, were introduced. The adoption of these standards resulted in a negative impact (restated) on the Group s Shareholders Equity of 119 million as at December 31, (**) Principally arising from the consolidation of the Russian and Ukrainian subsidiaries. (***) Other changes mainly relate to the positive effects of 626 million from the sale of 34.5% of FinecoBank S.p.A., of which UniCredit is still the controlling shareholder, to the decrease in reserves relating to actuarial gains/losses on defined benefit plans of 504 million after tax, resulting from the reduction in the discount rate, and to the increase of 205 million in the revaluation reserve for companies accounted for using the equity method 36 Consolidated Interim Report as at September 30, 2014 UniCredit

37 Information on risks UniCredit Group monitors and manages its risks through rigorous methodologies and procedures proving to be effective through all phases of the economic cycle. The control and steering of the Group s risks are exerted by the Parent Company s Risk Management function which pursues its own steering, coordination and control role in particular through the Portfolio Risk Managers which are responsible for the relevant risks, from a Group perspective. Furthermore, the model considers a specific point of reference for Italy through the CRO Italy function, to which the responsibilities related to credit, operational and reputational risks of the Italian perimeter, as well as the managerial coordination of Risk Management functions in the Italian Legal Entities, have been assigned. In particular, the Risk Management function is responsible for the following tasks: optimize the quality of the Group's assets, minimizing the risk cost in accordance with the risk/profitability goals set for the business areas; ensure the strategic steering and definition of the Group's risk management policies; define and supply the Heads of the Business Functions and Entities with the criteria for assessing, managing, measuring, monitoring and communicating risk. It also ensures that the procedures and systems designed to control risk at Group and individual Entity level are coherent; help to build a risk culture across the Group by training and developing highly qualified staff, in conjunction with the competent COO functions; help to find ways to rectify asset imbalances, where needed in conjunction with Planning, Finance and Administration; help the Business Functions achieve their goals, including by assisting in the development of products and businesses (e.g. innovation of credit products, competitive opportunities linked to Basel accords, etc.); support the CEO in defining the Group Risk Appetite proposal, to be shared in the Group Risk Committee and submitted for approval to the Board of Directors. Consistently with the Risk Management function architecture and in order to strengthen the capacity of independent steering, coordination and control of Group risks, improving the efficiency and the flexibility on the risk decision process and addressing the interaction among the relevant risk stakeholders, three distinct levels of Risk Committees are in place: the "Group Risk Committee" responsible for the Group strategic risk decisions; the "Group Portfolio Risks Committees", tasked with addressing, controlling and managing the different portfolio risks; the "Group Transactional Committees" in charge of evaluating the single counterparties/transactions impacting the overall portfolio risk profile. Measuring the risk profile is a fundamental element of the Internal Capital Adequacy Assessment Process (ICAAP) in Pillar II under Basel II. The Group s approach to ICAAP relies on the definition of the Risk Governance, as a preliminary requirement, while the process consists of the following phases: perimeter definition and risk identification; risk profile assessment; risk appetite setting and capital allocation; and monitoring and reporting. Capital adequacy is assessed considering the balance between the assumed risks, both Pillar I and Pillar II, and the available capital. With respect to Pillar II, the relevant metric is the Risk Taking Capacity, which is the ratio between available capital (Available Financial Resources AFR) and Internal Capital. A yearly consolidated report on capital adequacy in accordance with Banca d Italia guidelines and including an overview of the main Group companies, is prepared and sent to the Regulator. A milestone of the ICAAP is the Risk Appetite which defines the level of risk that UniCredit group is prepared to accept to pursuit its strategic objectives, taking into account the interest of its customers and shareholders as well as capital and other regulatory requirements. The risk appetite framework is intended to achieve the following objectives: define the risk the Group is willing to take and why, to enable specific risk taking activities; describe UniCredit s performance with respect to: - risk ownership and positioning to explicitly indicate main activities of the bank and overall risk positioning; - regulatory requirements to include key indicators requested by the regulators; - profitability and risk to ensure alignment with Group budget; - control on specific risk types to ensure control on all key risks; consistently communicate the acceptable level of risk for different risk types that can be expressed in financial or non-financial terms, but anyway enabling measurement and effective monitoring. UniCredit Consolidated Interim Report as at September 30,

38 Consolidated Interim Report Group Results The structure of the Group Risk Appetite includes targets, triggers and limits levels: the targets are set as ranges broad enough to ensure business flexibility to pursue the highest level of healthy business generation but sufficiently stringent to avoid undesired risks; the triggers are defined as the level of potential deviation from expected performance that UniCredit is prepared to sustain as a result of three main scenarios. Breaches of the trigger level will be escalated to various organizational levels in order not to reach limits; the limits are the absolute maximum level of risk that the senior management and the Board are prepared to take. Limits are set taking into account the regulatory requirements, the shareholders expectations and positioning versus peers. Breaches of the limits will result in managerial actions aimed at bringing back the Group within the approved risk appetite boundaries and it will also have an impact on the incentive system. The Risk Appetite is owned by the Group Risk Management function, which is responsible for: providing oversight, advice and challenge to the CEO with respect to the strategic plan; the management of the risk appetite setting process; recommending risk appetite to the Board and asking for approval; providing timely reporting to the Board on the Group and Legal Entity s performance; developing and maintaining a comprehensive risk management framework that ensures the Group and the businesses perform in line with the approved risk appetite. The Risk Appetite is approved by the Board of Directors and is regularly monitored and reported, at least quarterly, to the relevant committees. Risk Appetite is formally reviewed on an annual basis in conjunction with the Budget. Credit Risk Group Credit Risk Strategies are an effective instrument for governing credit risk, contributing to the setting of the Group ambitions within the Budget process in coherence with the Group Risk Appetite, of which they are an integral part. Being the concrete deployment of the Group Risk Appetite metrics, Credit Risk Strategies constitute also an operational tool. Starting from the Macroeconomic and credit scenario, the outlook at industry level and the business strategy initiatives, Credit Risk Strategies define a set of guidelines and operative targets for all the Group countries and business lines. The aim is to identify their risk profile and to steer the Group growth coherent with that. Portfolio risk management pays special attention to credit risk concentration. Such concentration risk, according to the Basel II definition, consists of a single exposure or of a group of correlated exposures with the potential to generate losses of such magnitude as to prejudice the Group's ability to carry on its normal business. In compliance with the rules set within Basel Pillar II, UniCredit has to adopt internal policies and control systems to identify, measure, monitor and manage credit concentration risk towards: an individual counterparty or a group of related counterparties (Single Name/ Economic Group); counterparties in the same economic sector (Industry). Stress test simulations are a comprehensive part of credit risk strategies definition. With the stress test procedure it is possible to estimate some risk parameters like Probability of Default, Expected Loss, Economic Capital and Risk Weighted Asset under the assumption of an adverse macroeconomic and financial stressed scenario. Stressed parameters are used not only for regulatory purposes, but also as managerial indicators about the portfolio vulnerability of a single Legal Entity, business line, industry/regional area, customer group and other relevant cluster, conditioned by the downturn of the economic cycle. In compliance with regulatory requirements, stress tests are performed on an on-going basis on updated stressed scenarios and are communicated to the senior management as well as to the Supervisory Authority. In addition to the regular stress test, ad hoc stress test simulations are performed on specific request by the Supervisory Authority. The Group credit portfolio model (GCPM) produces measures of economic capital reallocated to individual borrowers within each portfolio and is the basis for estimating risk-adjusted performance measures. The measures of economic capital (Credit VaR based) are also a fundamental input for the design and application of credit strategies, the analysis of credit limits and risk concentration. Credit economic capital estimation is available on a unique technological platform ( CPM ) and a common methodology for holding functions and several legal entities of UniCredit Group. The roll out of CPM across CEE legal entities allows covering most of the relevant geographies; this project has the aim to unify Group methodologies in the area of credit portfolio risk, providing to the different legal entities the same tool, methods and parameterization which were available only in holding, Austria and Germany. The next step is the extension of the platform to the CEE countries not yet covered. The resulting homogeneity in portfolio credit analysis will allow comparing the risk profiles of portfolios located in different banks and countries in such a way that CPM could be used to drive business strategies across the Group. 38 Consolidated Interim Report as at September 30, 2014 UniCredit

39 Credit monitoring activities performed by dedicated departments of the Group Risk Management function have been further reinforced and made more efficient. These activities focus on the analysis of the main drivers and parameters of credit risk such as migration, cost of risk, shortfall, etc., in order to promptly initiate any countermeasures on portfolios, sub-portfolios or individual counterparties. The timely identification and consistent management of exposures with a deteriorating risk profile allow to intervene at a phase preceding potential default, when there is still the capability for repayment and, subsequently, to put in place appropriate corrective initiatives. Operational Risk As regards the management of the operational risk, UniCredit has developed an internal model for measuring the capital requirement (AMA). The measurement of operational risk relies on internal loss data, external loss data (consortium and public data), hypothetical loss data stemming from scenario analyses and risk indicators. An allocation mechanism identifies individual Group entities capital requirements reflecting their operational risk exposure. The AMA approach was formally approved by the Supervisory Authority in 2008 and it has already been rolled out to all the main Group Entities. Such approach has been upgraded and deeply revised (starting from H reporting) leading to a second generation model newly approved by competent authorities in The entities not yet authorized to use the advanced methods contribute to the consolidated capital requirement on the basis of the standard (TSA) or basic (BIA) model. With respect to reputational risk, over the last years UniCredit has defined an approach for the identification, analysis and management of the reputational risk stemming from banking activities. The Group Reputational Risk Governance Guidelines, implemented in the Group Entities, delineate a set of principles and rules for the measurement and control of reputational risk. Banking, through the definition and monitoring of Limits and Warning Levels. In particular, the following concepts have been activated: VaR Limits and VaR Warning Levels at all levels of the portfolio tree, SVaR limits and IRC limits for most relevant levels of portfolio tree, and Granular Risks Limits concerning various risk factors (interest rates, exchange rates, index and stock prices, credit spreads etc.) at subportfolio/desk level. Loss Warning Levels and Stress Test Warning Levels have also been defined. As far as the Banking Book is concerned, the following are some specific risk factors linked, in particular, with interest rate fluctuations, exchange rates, and the performance of financial markets that are affected by the current global financial conditions and which the Group results depend upon in varying measure. Constant monitoring and management of these risk factors makes it possible to continue to follow the going-concern principle in preparing the Interim Report on Operations. Limits and thresholds are defined in terms of VaR (utilizing the methodology described for trading book), Sensitivity or Repricing Gap for each Group Bank or Company. The set of metrics is defined depending on the level of sophistication of Company operations. Interest-Rate Risk Group s results are affected by interest rate trends and fluctuations in Europe as well as in the other markets where the Group operates. In particular, the results of banking and lending transactions depend also on proper management of interest rate exposure s sensitivity. Interest Rate Risk originates mainly from two sources: Repricing (refixing) risk: arises from timing differences in the maturity (for fixed rate) and repricing (for floating rate) of assets, liabilities and of off-balance-sheet positions. Such repricing mismatches can expose the bank's income and underlying economic value to unanticipated fluctuations as interest rates vary; Option risk: arises from implicit and explicit options embedded in assets, liabilities and offbalance-sheet instruments. Interest rate risk measurement includes both net Interest Income analysis and Economic Value analysis. In order to control UniCredit group exposure to reputational risk in addition to the Group Reputational Risk Governance Guidelines the following policies in specific sectors are in place: Defense/Weapons, Nuclear Energy, Noncooperative Jurisdictions, Mining and Water Infrastructures (dams). Market Risk With respect to Market Risk, as far as the trading book is concerned, daily reporting of VaR and weekly reporting of Basel 2.5 measures (based on the new harmonized internal model) is now a consolidated process along with VaR backtesting. At the same time, Parent Company and local Market Risk functions have carried on accurate portfolios risk monitoring activities, with particular reference to Investment UniCredit Consolidated Interim Report as at September 30,

40 Consolidated Interim Report Group Results Currency Risk A significant portion of Group business is carried out in currencies other than Euro, predominantly those of CEE countries and the US dollar. The Group is therefore exposed to risks linked with fluctuations in exchange rates and in local money markets. Since the financial statement and interim report are denominated in Euro, the necessary currency conversions are accomplished in accordance with applicable accounting standards. Any change in exchange rates may therefore affect the Group's overall performance. The Group adopts hedge strategies for profits and dividends arising from its subsidiaries not belonging to the eurozone. The hedging strategies take into account market circumstances. Financial Risk Group results depend significantly on financial markets. Specifically, volatility and the performance of financial markets affect: inflows of assets under management and administration, and thus earned selling commissions; management commissions, due to lower asset volume (direct effect) and redemptions caused by unsatisfactory performance (indirect effect); the overall results of the banking and trading books. Liquidity Risk Liquidity risk, for its particular nature, is addressed by means of gap analyses, liquidity stress testing and additional measures (mainly through a set of indicators: e.g. Loan to Deposit gap and Funding Concentration). In particular, gap analyses are performed within two distinct time horizons: liquidity imbalance mismatch approach on a daily basis, which controls for the short term liquidity risk arising from the overnight up to a 3 months maturity; structural gap ratios on a monthly basis, which control the medium to long term risk (structural liquidity) from the 1Y maturity onwards. Liquidity risk is a low probability, high impact event. Therefore stress testing is an excellent tool to reveal potential vulnerabilities in the Balance Sheet. The Bank uses several scenarios ranging from general market crisis to idiosyncratic crisis, and combinations hereof. Moreover, the liquidity framework is also integrated by complementary measures, included in the Group s Risk Appetite framework. One of these is the core banking book funding gap (an adjusted Loan to-deposit gap), which is calculated on a quarterly basis and which measures to what extent the commercial loan portfolio is financed through commercial liabilities. Accounting figures are duly adjusted in order to exclude repo and reverse repo deals from the calculation. In this context, the Parent Company takes into account all of the assets, liabilities, off-balance sheet positions and present and future events which generate certain or potential cash flows for the Group, thereby protecting the Group Banks/Companies from risks related to the transformation of maturity. Other Risks Financial Section Matter Recently, violations of U.S. sanctions have resulted in certain financial institutions entering into settlements and paying substantial fines and penalties to various U.S. authorities, including the U.S. Treasury Department's Office of Foreign Assets Control ("OFAC"), the U.S. Department of Justice ("DOJ"), the District Attorney for New York County ("NYDA"), the U.S. Federal Reserve ("Fed") and the New York Department of Financial Services ("DFS"), depending on the individual circumstances of each case. Certain companies in the UniCredit Group are cooperating with various U.S. authorities and are updating other relevant non U.S. authorities as appropriate. More specifically, in March 2011 UCB AG received a subpoena from the NYDA relating to historic transactions involving certain Iranian entities, designated by OFAC, and their affiliates. In June 2012, the DOJ opened an investigation of OFAC-related compliance by UCB AG and its subsidiaries more generally. In this context, UCB AG is conducting a voluntary investigation of its historic compliance with applicable US financial sanctions. UniCredit Bank Austria AG has independently initiated a voluntary investigation of its historic compliance with applicable U.S. financial sanctions. It is possible that investigations into historic compliance practices may be extended to UniCredit S.p.A. and/or to one or more of the other companies within the UniCredit Group. The scope, duration and outcome of any such review or investigation will depend on facts specific to the individual case. Although we cannot at this time determine the form, extent or the timing of any resolution with any relevant authorities, the investigation costs, remediation required and/or payment or other legal liability incurred could lead to cash outflows and could potentially have a material adverse effect on the net assets and net results of UniCredit S.p.A. (on a stand-alone and consolidated basis) and one or more individual Group entities in any particular period. Istituto per il Credito Sportivo (ICS) With reference to the extrajudicial procedure relating to Istituto per il Credito Sportivo (ICS), about which disclosure was provided in the financial statements as at December 31, 2012 and as at December 31, 2013, please note that the Regional Administrative Court of Lazio, with a judgment dated May 16, 2014, rejected the private shareholders request for the annulment of the interministerial order of March 6, 2013 concerning the annulment of the ICS Statute of 2005; the private shareholders appealed to the Council of State to suspend and then nullify this ruling. It should also be noted that in March 2014, following the approval of the new ICS Statute, issued by interministerial order of January 24, 2014 (published in the Official Gazette of April 19, 2014), in which UniCredit s shareholding in the company has been significantly diluted (from 10.81% to 1.264%), it was considered appropriate to adjust the shareholding held and its book value to the new statutory provisions. 40 Consolidated Interim Report as at September 30, 2014 UniCredit

41 Carlo Tassara S.p.A. restructuring process On December 23, 2013 Carlo Tassara ( Tassara ) and the creditor banks signed the third amendment agreement on the moratorium on debt payments. The purpose of this transaction is to allow the company to better enhance certain assets under disposal, whose proceeds will be used to pay its financial debts. The main terms and conditions of the Amendment Agreement include: 1. the postponement of the final expiry of the agreements to December 31, 2016; 2. the appointment of the 9 members composing the Board of Directors, with 6 independent members in accordance with the new corporate governance; 3. the conversion of the creditor banks exposures into Strumenti Finanziari Partecipativi ( SFP ) for a total amount of 650 million. The SFP, which can be traded once the restructuring agreement expires, have no maturity date and have a priority over any classes of shares with respect to distribution of net income and reserves, as well as in case of liquidation of Carlo Tassara. The criteria to split the SFP among the banks was calculated taking into account the amount and the distribution of the unsecured debt and, for the difference, the uncovered portion of the secured debt. The value of the listed securities was determined on the basis of the 6-month average share price before the closing of the restructuring agreement; 4. the commitment of the creditor banks to subscribing additional SFP on a pro-rata basis if in the course of the plan material losses occur pursuant to article 2447 of the Italian Civil Code; 5. the commitment of the creditor banks to converting into SFP the residual credits that should remain in place after the disposal of all the available-for-sale assets of Carlo Tassara; 6. the business continuity of Carlo Tassara will be ensured by enterprises with historical links with the Valcamonica area. In the first half of 2014 Tassara sold listed securities (pledged and not pledged as collateral) and collected dividends worth approximately 772 million, which includes the proceeds from the sale of the Intesa Sanpaolo shares (totaling 589 million, of which 580 million arising from securities put up as collateral) pledged as collateral for the loans granted by the creditor banks. In the third quarter 2014, Tassara sold further shares (pledged and not) for a total amount of about 38 million, including the proceeds from the sale of Cattolica Assicurazioni shares, for a total of about 13 million, of which 6.3 million has been used by the company to partially repay the debt exposures to UniCredit S.p.A.. Overall, therefore, the proceeds received during the first nine months of 2014 by Carlo Tassara S.p.A. as a result of collections made (for securities and dividends), amounted to about 810 million. As a result, and pursuant to the agreement of December 23, 2013, the number of SFPs held by UniCredit S.p.A., at September 30, 2014 amounted to 32,299,150, each with a face value of UniCredit S.p.A.'s credit exposure The credit exposure of UniCredit S.p.A. at 30 September 2014 amounted to 119 million ( 463 million at the end of 2013 and 132 million at June 30, 2014), against which impairment losses of 28 million have been recognized (unchanged compared to June 30, 2014, while at December 31, 2013 they amounted to 91 million). For more details on other risks see Consolidated First Half Financial Report as at June 30, The existing collateral (pledge on Intesa Sanpaolo, Eramet and Cattolica Assicurazioni shares) remained in place after the signing of the above-mentioned agreements. On December 27, 2013, following the fulfillment of the conditions precedent to the effectiveness of the third amendment agreement, the banks subscribed the SFP worth 650 million. UniCredit subscribed for 63,131,974 SFP with a nominal value of 1.00 each and totaling 63 million, issued by Tassara pursuant to the resolution of the Extraordinary Meeting of December 23, 2013, and agreed to contemporaneously pay up these SFP by voluntarily offsetting a portion of its loans (nominal value) to Tassara totaling 63 million, reducing the Bank s overall exposure to Tassara. As a result of the above-mentioned offsetting, part of the Bank's loans to Tassara ( 63 million) was paid off and the Company s outstanding debts to the Bank decreased, with effect from December 27, 2013, by 63 million. On December 23, 2013, in compliance with the governance provisions, the members of Carlo Tassara S.p.A. s new Board of Directors were appointed. UniCredit Consolidated Interim Report as at September 30,

42 Consolidated Interim Report Group Results Information on Sovereign Exposures With reference to the Group s sovereign exposures 1 as at September 30, 2014, the book value of sovereign debt securities amounted to 116,307 million, of which over 90% concentrated in eight countries; Italy, with 57,213 million, represents over 49% of the total. For each one of the eight countries, the table below shows the book value of the exposures broken down by portfolio as at September 30, Breakdow n of Sovereign Debt Securities by Country and Portfolio Country / portfolio ( '000) Amounts as at Book value - Italy 57,213,365 financial assets/liabilities held for trading (net exposures 1 ) 3,796,147 financial assets at fair value through profit or loss 22,430 available for sale financial assets 50,252,168 loans and receivables 241,999 held to maturity investments 2,900,621 - Germany 24,908,224 financial assets/liabilities held for trading (net exposures 1 ) 1,621,867 financial assets at fair value through profit or loss 22,273,788 available for sale financial assets 6,542 loans and receivables 1,006,027 held to maturity investments - - Austria 9,694,999 financial assets/liabilities held for trading (net exposures 1 ) 255,311 financial assets at fair value through profit or loss 93,548 available for sale financial assets 9,223,017 loans and receivables - held to maturity investments 123,123 - Poland 6,352,294 financial assets/liabilities held for trading (net exposures 1 ) 107,724 financial assets at fair value through profit or loss - available for sale financial assets 4,883,823 loans and receivables 1,181,378 held to maturity investments 179,369 - Czech Republic 2,557,818 financial assets/liabilities held for trading (net exposures 1 ) 122,346 financial assets at fair value through profit or loss 8,118 available for sale financial assets 2,427,354 loans and receivables - held to maturity investments - - France 1,730,946 financial assets/liabilities held for trading (net exposures 1 ) 262,584 financial assets at fair value through profit or loss 835,815 available for sale financial assets 501,046 loans and receivables 131,501 held to maturity investments - - Spain 1,308,231 financial assets/liabilities held for trading (net exposures 1 ) -1,733 financial assets at fair value through profit or loss 384,772 available for sale financial assets 918,762 loans and receivables - held to maturity investments 6,430 - Romania 1,153,231 financial assets/liabilities held for trading (net exposures 1 ) 90,626 financial assets at fair value through profit or loss - available for sale financial assets 1,062,605 loans and receivables - held to maturity investments - Total on-balance sheet exposures 104,919,108 ( 1 ) including exposures in Credit Derivatives. The remaining about 10% of the total of sovereign debt securities, amounting to 11,388 million with reference to the book values, is divided into 52 countries, among which the US ( 313 million), Slovenia ( 268 million), Portugal ( 34 million), Argentina ( 4 million) and Ireland ( 1 million). The sovereign debt securities exposures towards Cyprus, Greece and Ukraine are immaterial. These exposures were not subject to impairment at September 30, In addition to the exposures to sovereign debt securities, loans 2 given to central and local governments and governmental bodies must be taken into account. The table below shows the total amount as at September 30, 2014 of loans given to countries towards which the overall exposure exceeds 140 million, representing more than 95% of the total. Breakdow n of Sovereign Loans by Country Country Lastly, it should be noted that derivatives are traded within the ISDA master agreement and accompanied by Credit Support Annexes, which provide for the use of cash collaterals or low-risk eligible securities. ( '000) Amounts as at Book value - Germany ( 1 ) 7,585,180 - Austria ( 2 ) 5,463,919 - Italy 4,823,707 - Croatia 2,318,303 - Poland 1,536,356 - Indonesia 421,449 - Slovenia 221,967 - Bosnia-Herzegovina 220,588 - Turkey 199,140 - Bulgaria 170,015 - Brazil 160,259 - Gabon 155,967 - Serbia 147,420 Total on-balance sheet exposures 23,424,270 ( 1 ) of w hich 870,266 in financial assets held for trading and those at fair value through profit or loss. ( 2 ) of w hich 233,895 in financial assets at fair value through profit or loss. 1 Sovereign exposures are bonds issued by and loans given to central and local governments and governmental bodies. ABSs are not included. 2 Tax items are not included. 42 Consolidated Interim Report as at September 30, 2014 UniCredit

43 Information about the shareholding in the Bank of Italy UniCredit S.p.A. holds % of the Share Capital of the Bank of Italy, classified in Balance Sheet item 40 Available-for-sale financial assets. In accordance to the Law of January, , the Bank of Italy increased its capital by 7.5 billion (using pre-existing reserves), replacing the existing shares (that were cancelled) with new shares with a nominal value of 25,000 each. In the preparation of UniCredit S.p.A. s Separate and Consolidated Financial Statements as at December 31, 2013, the Directors decided that the most appropriate accounting treatment was to recognize the revaluation of Bank of Italy shares in the Income Statement. With reference to the Regulatory Capital and Capital ratios treatment in 2014: a weighting factor of 100% has been applied at the carrying amount of the investments, measured as at September 30, 2014 to derive RWA (in accordance with Article 133 "Exhibitions equity" of CRR); the revaluation recognized in the 2013 Income Statement is not covered by any filter. The difference between the fair value of the initial recognition of the new shares ( 1,659 million) and the book value of the cancelled shares ( 285 million) was recognized in the Income statement (item Gains and losses on disposal of available-for-sale financial assets). This resulted in a positive effect on the net result of the year of 1,190 million (net of 184 million taxes). Taxes were determined using the 12% tax rate as required by the Stability law of December 27, 2013; the transaction had no impact on the Regulatory Capital as at December 31, This accounting treatment was therefore analyzed by the competent national and international bodies, in particular by the IFRS Interpretation Committee, which on July 16, 2014 provisionally decided that the issue raised is not of general interest because of its unique nature and the fact that it did not result in differences in the accounting treatments applied in the financial statements of the companies involved (prepared on the basis of the same interpretation process), and will therefore not be the subject of a technical resolution. The decision of the IFRS Interpretation Committee is currently subject to public consultation. A different interpretation from the approach adopted would have resulted in the recognition, in 2013, of the abovementioned gain in Shareholders Equity and not in the Income Statement. Legislative Decree no. 66 of April 24, 2014, then converted into Law no. 89/2014, introduced an increase in the tax rate to be applied to the higher value of the new Bank of Italy shares (from 12% to 26%), resulting in an additional cost of 215 million recorded in the Income Statement - Tax Expenses in the first half of The new shares are designated at fair value, determined using a fundamental Level 3 valuation process that confirmed a book value in line with the values of December 31, 2013, without resulting in valuation impacts in the first nine months of The valuation took into consideration the amount by which the capital was increased, which in turns takes account of the result of the valuation carried out in November 2013 by the group of high-level experts on behalf of the Bank of Italy, and the results of an internal assessment based on the model. UniCredit Consolidated Interim Report as at September 30,

44 Consolidated Interim Report Results by Business Segment Results by Business Segment Commercial Banking Italy Commercial Banking Italy is composed by UniCredit S.p.A. commercial network (excluding Large Corporate and Multinational clients, supported by Corporate and Investment Banking division) and the Leasing and Factoring product factories. In relation to individual clients (Households and clients of specialized network Private Banking), Commercial Banking s goal is to offer a full range of investments and credit needs, relying on almost 4,000 branches and multichannel services provided by new technologies. In relation to corporate customers, Commercial Banking, with about Managers divided in 196 Corporate branches, operates trying to guarantee both the support to the economic and entrepreneurial system and the profitability and quality of its portfolio. Income Statement, Key Ratios and Indicators ( millio n) Commercial Banking Italy FIRST 9 MONTHS 2013 FIRST 9 MONTHS 2014 % CHANGE % CHANGE ON Q Operating income 5,876 6, % 2, % Operating costs (3,138) (3,020) -3.7% (978) -1.6% Net w rite-dow ns on loans (570) (704) +23.5% (129) -56.1% Net operating profit 2,169 2, % % Profit before tax 2,112 2, % % % % Loans to customers (eop) 132, , % 130, % Customer deposits (incl. Securities in issue - eop) 148, , % 142, % Total RWA Eop 76,706 76, % 76, % % % EVA ( million) 704 1, % % Absorbed Capital ( million) 7,203 7, % 7, % RARORAC % % n.s % 81bp Cost/Income +53.4% +48.1% -533bp +48.4% 215bp Cost of Risk 0.56% 0.72% 15bp 0.40% -50bp Full Time Equivalent (eop) 37,560 37, % 37, % 2014 Q3 Commercial Banking Germany Commercial Banking Germany provides all German customers except CIB clients with a complete range of banking products and services. With its strong funding base it is an important liquidity provider. Commercial Banking Germany holds large market shares and a strategic market position in retail banking, in Private Banking and especially in business with local corporate customers (including factoring and leasing). The Division also includes the local Corporate Center, which performs tasks as Sub-holding towards other Sub-group. Income Statement, Key Ratios and Indicators ( millio n) Commercial Banking Germany FIRST 9 MONTHS 2013 FIRST 9 MONTHS 2014 % CHANGE % CHANGE ON Q Operating income 2,198 2, % % Operating costs (1,615) (1,579) -2.2% (537) +3.9% Net w rite-dow ns on loans 72 (2) n.s. 18 n.s. Net operating profit % % Profit before tax % % Loans to customers (eop) 81,137 78, % 78, % Customer deposits (incl. Securities in issue - eop) 106, , % 102, % Total RWA Eop 34,849 33, % 33, % EVA ( million) % (6) % Absorbed Capital ( million) 3,151 2, % 2, % RARORAC +7.62% +2.09% -553bp +2.09% -143bp Cost/Income +73.5% +78.8% 537bp +84.3% n.s. Cost of Risk 0.12% 0.00% 12bp 0.09% -11bp Full Time Equivalent (eop) 14,061 13, % 13, % 2014 Q3 44 Consolidated Interim Report as at September 30, 2014 UniCredit

45 Commercial Banking Austria Commercial Banking Austria provides all Austrian customers except CIB clients with a complete range of banking products and services. With its strong funding base it is an important liquidity provider. Commercial Banking Austria holds large market shares and a strategic market position in retail banking, in Private Banking and especially in business with local corporate customers (including factoring and leasing). The Division also includes the local Corporate Center, which performs tasks in connection with Bank Austria s Sub-holding company function.. Income Statement, Key Ratios and Indicators ( millio n) Commercial Banking Austria FIRST 9 MONTHS 2013 FIRST 9 MONTHS 2014 % CHANGE % CHANGE ON Q Operating income 1,195 1, % % Operating costs (1,074) (1,082) +0.8% (351) -3.9% Net w rite-dow ns on loans (147) (69) -52.7% (17) n.s. Net operating profit (26) 48 n.s % Profit before tax (127) 54 n.s. (6) n.s % % Loans to customers (eop) 48,693 47, % 47, % Customer deposits (incl. Securities in issue - eop) 57,456 63, % 63, % Total RWA Eop 25,446 24, % 24, % % % EVA ( million) (334) (158) -52.6% (79) n.s. Absorbed Capital ( million) 2,284 2, % 2, % RARORAC % -8.95% n.s % -214bp Cost/Income +89.8% +90.2% 36bp +93.9% n.s. Cost of Risk 0.40% 0.19% -20bp 0.14% 11bp Full Time Equivalent (eop) 6,960 6, % 6, % 2014 Q3 Poland Bank Pekao S.A. is one of the biggest banks in Poland providing a full range of banking services to individual and institutional clients. Bank Pekao has a nationwide network of 1,001 branches, a strong presence in all the major cities and Poland s biggest ATM network (together with Euronet) consisting of almost 6,100 ATM s (of which 1,847 ATMs owned by the Bank), enabling the Bank s customers to have fully flexible and easy access to banking services all over the country. Income Statement, Key Ratios and Indicators ( millio n) POLA N D FIRST 9 MONTHS 2013 FIRST 9 MONTHS 2014 % CHANGE Operating income 1,336 1, % % Operating costs (622) (623) +0.1% (208) -0.4% Net w rite-dow ns on loans (116) (102) -12.5% (32) -5.4% Net operating profit % % Profit before tax % % % % Loans to customers (eop) 23,956 26, % 26, % Customer deposits (incl. Securities in issue - eop) 26,705 29, % 29, % Total RWA Eop 24,162 25, % 25, % % % EVA ( million) % % Absorbed Capital ( million) 1,082 1, % 1, % RARORAC % % -113bp % 54bp Cost/Income +46.6% +47.1% 51bp +46.5% -29bp Cost of Risk 0.66% 0.52% -14bp 0.49% -4bp Full Time Equivalent (eop) 18,191 17, % 17, % 2014 Q3 % CHANGE ON Q UniCredit Consolidated Interim Report as at September 30,

46 Consolidated Interim Report Results by Business Segment CEE Division UniCredit is a market leader in Central and Eastern Europe, where it has a broad network of about 2,600 branches. Its regional footprint is diverse and includes a direct presence in 16 countries. The Group s market position in CEE provides local banks with substantial competitive advantages. This includes the sharing of best practices, significant economies of scale, access to international markets and strong brand recognition. Moreover, the diversified portfolio in this region enables modular growth and increased market penetration for UniCredit s global product lines. Income Statement, Key Ratios and Indicators ( millio n) CEE Division FIRST 9 MONTHS 2013 FIRST 9 MONTHS 2014 % CHANGE % CHANGE ON Q Operating income 3,303 2, % 1, % Operating costs (1,260) (1,209) -4.1% (401) +2.2% Net w rite-dow ns on loans (619) (472) -23.7% (156) -7.6% Net operating profit 1,424 1, % % Profit before tax 1,363 1, % % % % Loans to customers (eop) 58,889 58, % 58, % Customer deposits (incl. Securities in issue - eop) 45,912 50, % 50, % Total RWA Eop 83,347 84, % 84, % % % EVA ( million) % % Absorbed Capital ( million) 7,844 7, % 7, % RARORAC +6.69% +3.70% -299bp +3.70% 114bp Cost/Income +38.2% +40.4% 227bp +36.9% -225bp Cost of Risk 1.41% 1.10% -30bp 1.07% -11bp Full Time Equivalent (eop) 31,398 29, % 29, % 2014 Q3 CIB Corporate & Investment Banking (CIB) is dedicated to multinational and large corporate clients with highly sophisticated financial profile and needs for investment banking services, as well as institutional clients of UniCredit group. The business model adopted is focused on a clear distinction between coverage and local distribution (Network) areas, and those areas dedicated to centralized specialization of dedicated products or services, namely Financing & Advisory (F&A), Markets and Global Transaction Banking. Income Statement, Key Ratios and Indicators ( millio n) C OR POR A TE & IN V ESTM EN T B A N KIN G FIRST 9 MONTHS 2013 FIRST 9 MONTHS 2014 % CHANGE Operating income 3,229 2, % % Operating costs (1,257) (1,285) +2.3% (422) +1.5% Net w rite-dow ns on loans (334) (34) -90.0% % Net operating profit 1,638 1, % % Profit before tax 1,589 1, % % Loans to customers (eop) 102,353 84, % 84, % Customer deposits (incl. Securities in issue - eop) 77,687 85, % 85, % Total RWA Eop 81,682 70, % 70, % EVA ( million) % 70 n.s. ROAC 18.0% +17.4% -62bp 17.7% 564bp (Rev-LLP)/RWA +4.91% +4.92% 1bp +4.66% -24bp Cost/Income +38.9% +47.8% n.s % n.s. Cost of Risk 0.43% 0.05% -38bp 0.31% -76bp Full Time Equivalent (eop) 3,609 4, % 4, % 2014 Q3 % CHANGE ON Q Consolidated Interim Report as at September 30, 2014 UniCredit

47 Asset Management Asset Management operates under the Pioneer Investments brand, the asset management company within the UniCredit group specializing in the management of customer investments worldwide. The Business Line, a partner of many leading international financial institutions, offers investors a broad range of financial solutions, including mutual funds, assets under administration and portfolios for institutional investors. Pioneer Investments started an organic growth strategic plan which will further enhance the quality of Pioneer Investments product offering while maintaining focus on delivering an outstanding level of client service. In 2012, its relationship with UniCredit was also reviewed through a distribution agreement that sets specific requirements in terms of performance and quality of service provided by Pioneer. Reciprocally, UniCredit has committed to effectively support Pioneer leveraging on its distribution network, maintaining agreed level of market share. Income Statement, Key Ratios and Indicators ( millio n) A SSET M A N A GEM EN T FIRST 9 MONTHS 2013 FIRST 9 MONTHS 2014 % CHANGE Operating income % % Operating costs (360) (367) +2.0% (125) +1.6% Net w rite-dow ns on loans - - n.s. - n.s. Net operating profit % % Profit before tax % % TFAs (eop) 176, , % 203, % RoA (Operating Income/ avg TFAs) +0.41% +0.39% -1.30bp +0.40% -0.16bp EVA ( million) % % Absorbed Capital ( million) % % RARORAC +50.2% +60.7% n.s % 29bp Cost/Income +67.7% +63.8% -381bp +62.8% -144bp Full Time Equivalent (eop) 1,996 2, % 2, % 2014 Q3 % CHANGE ON Q Asset Gathering Asset gathering is a division specialized in wealth management through the direct channel and the financial advisors network, mainly focused on the retail customer segment. It operates in Italy through Fineco Bank, which, with its direct channel and a network of more than 2,400 financial advisors, offers all the banking and the investment services of traditional banks, with a specific focus on innovation, that emerges mainly from the development of the online trading, with respect to which FinecoBank is leader at a national and European level. Income Statement, Key Ratios and Indicators ( millio n) A SSET GA T HER IN G FIRST 9 MONTHS 2013 FIRST 9 MONTHS 2014 % CHANGE % CHANGE ON Q Operating income % % Operating costs (145) (158) +9.5% (51) -6.7% Net w rite-dow ns on loans (2) (2) +1.0% (1) -17.1% Net operating profit % % Profit before tax % % Loans to customers Eop % % Customer deposits (incl. Securities in issue) Eop 13,253 14, % 14, % Total RWA Eop 1,702 1, % 1, % TFAs Outstading Stock (eop) 42,144 48, % 48, % TFAs Net Sales 1,868 2, % % EVA ( million) % % Absorbed Capital ( million) % % RARORAC 72.7% 115.2% n.s % n.s. Cost/Income +45.3% +47.5% 220bp +47.9% n.s. Full Time Equivalent (eop) % % 2014 Q3 UniCredit Consolidated Interim Report as at September 30,

48 Consolidated Interim Report Results by Business Segment Non-core Non-core segment reports separately assets that the Group considers not strategic and with a poor fit to our riskadjusted returns framework. These businesses are managed with the final goal of reducing the overall exposure in the course of time. Specifically, the segment includes selected assets of Commercial Banking Italy (identified on a single deal/client basis) to be managed with a risk mitigation approach, the Workout company Unicredit Credit Management Bank and some special vehicles for securitization transactions. 48 Consolidated Interim Report as at September 30, 2014 UniCredit