Unione di Banche

3rd Quarter Results

RNS Number : 6216C
Unione di Banche Italiane S.c.p.a.
17 November 2009
 




PRESS RELEASE 



Normalised net profit as at 30 September 2009 of 195,2 million euro (-63% year-on-year)

Normalised net profit to 64,8 million euro in 3Q2009 vs 23,2 in 2Q2009 



Cost of credit of 82 basis points in 3Q2009 vs 97 basis points in 2Q2009


Direct funding of 95,5 billion euro (+1,3% year-on-year and -2,1% since December 2008) 

Indirect funding of 78,7 billion euro (-2% year-on-year and +6,2% since December 2008) 


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Bergamo, 12th November 2009 - The Management Board of UBI Banca, which met today, approved the consolidated results of the UBI Banca Group as at and for the period ended 30th September 2009. 


The income statement 


The UBI Banca Group closes the first nine months of 2009 with a consolidated net profit of 187,3 million euro (620 million euro in the same period of 2008) despite the difficult economic conditions which had their effect on volumes of business, the quality of credit and the generation of revenuesThe management focus was on the generation of recurring and sustainable revenues even in the presence of an unfavourable market situation, on cost control and on prudent risk management, including those credit risks typical of the banking business conducted with customers which represents the core activity of the Group. At the end of September 2009, estimates performed confirmed the Group's capital strength, with a core tier 1 ratio of 7,33%, which had increased further compared to 30th  June 2009 (7,24%), a tier 1 ratio of 7,86% and a total capital ratio of 11,76%. It should be noted that these figures do not include the additional benefits of two extraordinary operations (a non life banc assurance agreement and the transfer of depositary banking operations) announced in September 2009, which together will lead, by the end of the first half of 2010, to an improvement in the core tier 1 ratio, as estimated at present, of approximately 20 basis points. 


Note to the comment on the period 

A commitment fee was introduced from 1st July 2009, of an all encompassing nature, which, with a view to simplification, has replaced not only the maximum overdraft charge, but also a series of other commissions applied to credit lines and to authorised current account overdrafts. For the purposes of a uniform analysis, an additional version of the reclassified income statement has been prepared which excludes the maximum overdraft charge from net interest income (reclassifying it into net commissions) for all the periods prior to 30th September 2009. That version will be used, starting with the next financial report, for the purposes of quarterly and year-on-year comparisons. 


Performance in the third quarter of 2009 

Despite the continuing weakness of the economic situation, the third quarter of 2009 ended with a stated net profit of 61,4 million euro compared to 101,6 million euro in the second quarter of 2009 and 100,9 million euro in the third quarter of 2008. In normalised terms, net of non-recurring items, profit for the quarter amounted to 64,8 million euro compared to 23,2 million euro in the second quarter of 2009 and 116,7 million euro in the third quarter of 2008. 

While the third quarter of 2009 can hardly be compared to the same period in 2008, which represented just the beginning of the economic crisis induced by the financial crisis, a quarterly analysis based on a comparison with the second quarter reveals factors worth noting: 



Results for the first nine months of 2009 


Operating income amounted to 2.947 million euro in the period in question, a fall of 8,7% compared to 2008, as a result of the trends registered by interest income and net commissions, partly offset by the positive result for financial activities and the good performance for other operating income. 


Net interest income fell in the first nine months of the year by 12,6% to 1.925 million euro (-11,2% if maximum overdraft charges, amounting to 82,3 million euro compared to 129 million euro in the same period of 2008, are excluded to give a uniform comparison), attributable mainly to the reduction in the spread on business with customers, caused by the fall in market interest rates which was only partially offset by action taken to reprice risk on lending performed since 2008. Volumes of business were virtually stable with a change in composition towards longer term lending and funding, which are less remunerative and more costly respectively. The year-on-year change in net interest income also suffered from the greater proportion of funding from ordinary customers (85% of the total - institutional funding accounted for 15% of the total), more stable but more reactive, both in negative and in positive terms, to changes in reference interest rates, and by the higher costs connected with the strong historical capitalization of the Group


Dividends received on securities owned fell to 9,8 million euro from the previous 70 million euro, principally due to the absence of 55,1 million euro relating to the interest held in Intesa Sanpaolo recognised in 2008. The lower dividends accounted for more than 20% of the decrease in operating income. 


Net commissions totalled 800,5 million euro, a contraction of 11,8% (or 14,8% if maximum overdraft charges are reclassified to give a more uniform comparison), which confirmed the slowdown in the negative trend recorded in the first half of the year. 

The year-on-year contraction is due primarily to the lower commission income earned on management, trading and advisory services connected with indirect funding (-93,7 million euro net of fx trading), and the lower contribution from other segments of traditional banking business, affected by the slowdown in the economy. 

The contribution from the sale of third party financial products was contained and amounted to approximately 41 million euro in the first nine months of 2009 compared to approximately 77 million euro in the same period of 2008. 

It should be noted that in quarterly terms, net commissions started to progressively improve from the first quarter of the year onwards, putting a halt to the negative trend in progress since 2008. 


Operating income benefited from a positive finance result in the first nine months of 2009, amounting to 93 million euro compared to a negative result of 49,7 million euro recorded in 2008. The figure for the current year includes a gross capital gain of 60,5 million euro resulting from the success of the public exchange offer on preferred shares and lower tier 2 securities, which ended in June 2009, and the devaluation of a fund amounting to 25,2 million euro. Net of non-recurring items, which were also present in 2008, the finance result amounted to 57,7 million euro in the period January-September 2009, compared to -56,8 million euro recognised in the same period in 2008. 

We also report the positive impact compared to December 2008, recognised within fair value reserves, of the increase in the value of equity and debt securities classified within available for sale investments in the proprietary portfolio, amounting to 265 million euro (net of taxes and minority interests). This amount includes the appreciation of the Intesa San Paolo share in the period from 30th June 2009 until 30th September 2009 amounting to 107 million euro. 


Net income on insurance operations in respect of UBI Assicurazioni Danni (for which a recent strategic partnership announcement was made), almost doubled to approximately 31 million euro from 16,6 million euro in the first nine months of 2008 which were affected by extraordinary provision charges. 


Other net operating income/expense increased to 68,8 million euro (66,9 million in 2008), to record a progressive recovery during the year in quarterly terms. 


Operating costs fell by 4,1% over the first nine months of the year, compared to the period January-September 2008, amounting to a little more than 1,8 billion euro. The quarterly trend for the aggregate in 2009 shows average costs falling close to 617 million euro, 26 million euro lower than the average quarterly figure in the first nine months of 2008 (643 million euro). 


Personnel expenses fell by 6,1% to 1,1 billion euro, a contraction of 72,5 million euro, the combined effect of the reduction in average personnel numbers achieved as part of the integration process and the decrease in the variable component of remuneration in relation to the economic context. A year-on-year decrease was recorded at the end of September 2009 in the numbers of permanent personnel (-108) and personnel on temporary contracts (-346) with less use of workers on staff leasing contracts (-299), made possible by the conclusion of the IT migrations. 


Other administrative expenses amounted to 558,4 million euro compared to 537,5 million at the end of September 2008, an increase of approximately 21 million euro. These were affected mainly by the introduction at the beginning of 2009 of VAT on intragroup services, particularly penalising for groups of companies with a federal structure. It was not present in the first nine months of 2008 and had an effect amounting to approximately 22 million euro in the first nine months of 2009. Net of the newly introduced VAT, other administrative expenses were more or less unchanged. 

 


Net impairment losses on property, equipment and investment property and intangible assets fell by 26,8 million euro to 173,6 million euro. This result was attributable mainly to the adoption of a single IT platform. 

 

[1]The finance result: net profit on trading, hedging and disposal and repurchase activity and on assets and liabilities at fair value.


As a summary of the overall performance of the Group, net operating income amounted to 1.096,7 million euro (-15,7%). 


Net impairment losses on loans were recognised in the first nine months of the year amounting to 592,5 million euro, compared to the previous figure of 255,8 million euro, to give a cost of credit perfectly in line with that recorded in the first half of the year of 0,82% annualised (0,35% in the first nine months of 2008 and 0,59% for the full year 2008). 

This item has increased significantly since last year as a result of the deterioration in the risk profiles for businesses and households, a trend that has shown signs of weakening in recent months as shown by the figure for the third quarter, down to 197,3 million euro from 235,6 million euro in the previous three months. 

Confirmation of the prudence exercised in making write-downs, is shown by the amount of write-backs in the first nine months of 2009, which were still significant amounting to 22% of gross impairment (31% in the same period of 2008). 


Net impairment losses on other assets and liabilities were recognised in the period in question amounting to 35,6 million euro (as against write backs of 5,6 million euro in 2008). These included 32,4 million euro in relation to the reduction in value pursuant to IAS 39 of the interest held in Intesa Sanpaolo, which occurred in the first half of the year. The increase in the value that occurred in the third quarter (106,7 million euro gross) on the basis of the official price of the share recorded on 30th September 2009 (3,032 euro) had the effect of increasing the equity reserve relating to available-for-sale financial assets. 


The period benefited from 3,6 million euro of profits on the disposal of equity investments which included 2,6 million euro from the disposal of IW Bank shares by Centrobanca (as part of an agreement with Medinvest International). The amount of 80,3 million euro recognised until 30th September 2008 included 55,9 million euro from the disposal of UBI Pramerica SGR shares and 22,9 million euro from the partial disposal of UBI Assicurazioni Vita. 


Profit on continuing operations before tax amounted as a consequence to 442,7 million euro, compared to 1.091,6 million euro previously. 


Taxation on income for the period fell to 220,9 million euro, in relation to changes in taxable income, compared to 347,1 million euro in 2008, to give a tax rate of 49,9%, compared to the previous 31,8% in 2008. 


Finally, net integration costs, in relation to the integration process which had already been completed to a large extent at the end of 2008, amounted to 14,8 million euro in 2009 compared to 45,4 million euro in 2008. 



The balance sheet 


Loans to customers for the Group as at 30th September 2009 amounted to 96,6 billion euro, a decrease of 1,5% compared to September 2008 and more or less unchanged compared to June 2009 (96,8 billion euro) and December 2008 (96,4 billion euro): the determining factor in the trend for this item is the demand, still at low levels, as confirmed, moreover, by the applications for inclusion in the "debt moratorium" from small to medium size enterprises amounting to-date to 650 million euro. If the large corporate segment is excluded, which has been affected by action taken since the second half of 2008 to rationalise exposures with marginal profitability, the change in lending on an annual basis was 1,2%


The quality of the lending portfolio in the year-on-year comparison reflects the progressive deterioration in the economic context: net deteriorated loans at the end of September 2009 amounted to 3,5 billion euro compared to 2,1 billion euro in September 2008. Quarterly analysis, however, shows a deceleration in total deteriorated loans in the third quarter of 2009, which affected all categories of deteriorated loans

In detail, net non performing loans, which increased over twelve months from 771 million euro to 1,2 billion euro, were up by 89,6 million euro in the third quarter compared to 149,2 million euro in the second quarter of the year (-40%)

The ratio of non performing loans to net lending was 1,23% compared to 0,79% in September 2008 (1,14% in June 2009). The total coverage for non performing loans, including collateral, was 81,2% (79,7% in June 2009).

Net impaired loans rose over twelve months from 1,1 billion euro to 1,7 billion euro with an increase of 189,6 million in the third quarter compared to 232,8 million in the second quarter (-18.6%)

The ratio of net impaired loans to net lending was 1,74% compared to 1,10% in September 2008 (1,54% in June 2009). The total coverage for impaired loans, including collateral, was 24,9% (19,6% in June 2009).

The coverage for performing loans increased to 0,54% compared to 0,35% in September 2008. 


Direct funding amounted to 95,5 billion euro, an increase of 1,3% year-on-year, driven in particular by the trend for ordinary customers: current accounts and deposits (+12,7% to 43,6 billion euro) recorded the strongest growth within the aggregate as, in a turbulent financial context, they partially absorbed liquidity which is waiting to be gradually reinvested. 

Funding from institutional customers (excluding intercompany transactions) in the year-on-year comparison was down slightly to 14,7 billion euro compared to 15,4 billion euro in September 2008. In detail funding from EMTN securities (-1,5 billion euro) was affected by a period of inactivity in relation to the unfavourable financial situation. 

In 2009 and in the second half of the year in particular, the Group made 12 issuances for 3,1 billion euro under the EMTN programme, as the first signs of markets opening up again appeared, (against maturities amounting to 3,9 billion euro) and it made a first issue of one billion euro under the covered bonds programme with a maximum ceiling of 10 billion euro, while activities on the euro commercial paper and French certificates of deposit markets continued with outstanding issues of two billion euro. 


The ratio of lending to funding as at 30th September 2009 was 101,1% (104% in September 2008). The net interbank position at the end of the third quarter stood at -2,2 billion euro (approximately -4,3 billion euro in September 2008): assets eligible for refinancing at central banks presently amount to approximately 9,8 billion euro. 


Total indirect funding from ordinary customers was down year-on-year by 2% to 78,7 billion euro (80,2 billion euro in September 2008), but up compared to the end of December 2008 (74,1 billion euro) for all items within the aggregate (assets under management +7,2%, insurance products +6,6% and assets under custody +5,2%).  

On the basis of Assogestioni (association of asset management companies) data, while Group net inflows into mutual investment funds were negative in the first quarter of 2009 by approximately 239 million euro, the positive trend already recorded in the second quarter (83 million euro) continued in the second quarter with positive net inflows amounting to 461 million euro. The figures for October 2009 also recorded positive net inflows of approximately 95 million euro. 

At the end of September, again on the basis of Assogestioni data and for mutual funds and Sicav's, the Group had the third largest market share of 4,96% in terms of net assets (4,66% in September 2008 and 4,87% in December 2008). 


At the end of September 2009 the consolidated shareholders' equity of the UBI Banca Group, excluding profit for the period, amounted to 11.105 million euro (10.850 million euro in September 2008). 


* * *


As at 30th September 2009, the human resources of the UBI Banca Group totalled 20.812, a decrease of 728 compared to 21.540 in September 2008. The branch network at the end of the period consisted of 1.945 branches in Italy and ten abroad. 


* * *

Declaration of the senior officer responsible for preparing corporate accounting documents 

Elisabetta Stegher, as the executive officer responsible for preparing the corporate accounting documents of Unione di Banche Italiane Scpa, hereby declares, in compliance with the second paragraph of article 154 bis of the "Testo unico delle disposizioni in materia di intermediazione finanziaria" (consolidated law on financial intermediation), that the information contained in this press release is reliably based on the records contained in corporate documents and accounting records. 


* * *


Business outlook for consolidated operations in the fourth quarter of 2009 


In consideration of the economic context which is still uncertain, no change is expected in the business outlook for the last part of 2009 with respect to the third quarter. 


The structure of revenues from ordinary operations should remain at the same level as in the third quarter: net interest income will still be affected by interest rates at low levels, while the modest recovery for net commissions already seen on a quarterly basis will presumably be repeated (if new and unexpected negative performance is not recorded on financial markets). The forecast for the finance area, consistent with a low risk profile, should also be one of continued positive results. 


Operating costs are expected to increase on a quarterly basis, but still fall on an annual basis. It is expected that the downward trend for personnel expenses recorded in the first nine months will be confirmed, while other administrative expenses could rise in the last part of the year as a result some commercial initiatives and seasonal factors. The trend for depreciation and amortisation already recorded should continue, stabilising at levels lower than in 2008 as a result of the close down of the former IT system. 


The cost of credit is estimated to remain in line with the first nine months of the year. 



* * *


The Quarterly Financial Report of UBI Banca to 30th September 2009 will be published on the website of the Bank (www.ubibanca.it) on 14th November 2009


Click on, or paste the following link into your web browser, to view the associated PDF document.


http://www.rns-pdf.londonstockexchange.com/rns/6216C_-2009-11-17.pdf













For further information: 

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Tel. 035 392217                                                        Tel.030 2433591 - cell 335 8268310

e-mail: [email protected] ubibanca.it                 e-mail: [email protected]

Copy of this press release is available on the website www.ubibanca.it 


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