With profit for Q2 of 511 euro million UniCredit outperforms the market expectations. The consensus was for an expected profit of 471 million euro. The profit is 616 million euro without the agreed 105 million euro impairment on Greek bonds net of taxes.
The bank, led by CEO Federico Ghizzoni, joined other big European banks in writing down Greek debt after signing the Institute of International Finance’s rescue plan for Greece last month.
The Board of Directors of UniCredit approved today the consolidated results of the group for the first half of 2011.
The results show that 1H profit doubled compared to first half of 2010. It reached 1.321 billion euro, which is 97.5% up in comparison with the same period last year. In addition the 1H profit also roughly is equal to the full year profit of 2010.
The overall good performance benefited from:
- Good trading (especially very good 1Q) and significant drop in write-downs on loans.
- Operating income overall stable y/y; reached 13.38 billion euro.
- Operating costs overall stable y/y; reach 7.78 billion euro.
Cost/income ratio is also slightly improving to 58.2% as of 1H 2011 compared with 58.8% 1H 2010.
Asset quality is improving
Total assets reached 918.8 billion as of June 2011, a slight increase of 0.9% with respect to March 2011.
Net write-downs of loans and provisions for guarantees and commitments in first half of 2011 amount to €2,685 million (down with respect to the €3,507 million posted in the same period 2010). In the second quarter 2011 the item falls again with respect to the prior quarter (from €1,504 million in first quarter 2011 to €1,181 million).
This point is important: in 2Q our figure of 1,181 million is also better than the consensus figure of 1,449 million.
Less provisioning doesn’t mean however that UniCredit sways from prudence and strict risk control. In fact, coverage ratio of impaired loans has gone up in 2Q.
The coverage ratio of total gross impaired loans at June 2011 is 45.3%, which consists of a 58.6% coverage of the NPLs and a 27.2% coverage of the other problem loans. The total coverage of impaired loans rises for the second quarter in a row.
Capital ratios remain strong
Core Tier 1 ratio up to 9.12% from 9.06% in 1Q (+ 6 basis points q/q mainly thanks to retained earnings).
Loans and deposit are up
UniCredit continues to actively lend to the real economy (households and companies). Customer loans are up in 2Q to 561.8 billion euro from 558.8 billion euro in 1Q, especially thanks to CEE and Poland growth.
Customer deposits grow in the same period to 406.7 billion euro from 401.9 billion euro. The growth is driven from Western Europe, while CEE and Poland are slightly up.
This means that at Group level the growth in customer deposits is greater than the growth in customer loans.
Good performance of the geographies
- Italy: shows a strong commercial activity and further improving quality of the performing portfolio.
- Germany: The second quarter in Germany is characterized by historically low cost of risk and a positive result from all divisions.
- Аustria: asset quality is further improving
- Poland: again excellent cost and risk management.
- CEE: the net operating profit increased visibly (+6% q/q, +26% y/y) driven by improved revenues and lower loan loss provisions spread across most countries.
Conclusion
DIVERSIFICATION proves once again to be key driver for UniCredit performance. The group is diversified in geographies and businesses, in customer base, as well as in source of funding.
Further information at: www.unicreditgroup.eu
