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Wednesday 22 December, 2010

Unione di Banche

3rd Quarter Results

RNS Number : 4501Y
Unione di Banche Italiane S.c.p.a.
22 December 2010
 



 

 

PRESS RELEASE

 

 

Profit for the first nine months of 2010 increases by 5,6% year on year following a marked improvement in the results in the third quarter

 

 

The balanced and sustainable growth strategy, also designed to increase market shares and safeguard capital adequacy, confirms its validity again in the third quarter, which recorded a substantial improvement in net interest income and credit quality alongside sound capital ratios.

 

***

 

Loans to customers at 101,2 billion euro (+4,8% y/y and +1% compared to June 2010).

The increase in market share for lending, up to 6,24% in September 2010 compared to 6,12% in September 2009, was accompanied by an improvement in the cost of credit, down to 60 basis points from 82 in 2009.

 

Direct funding at 103,9 billion euro (+8,7% y/y, +0,5% compared to June 2010).

Indirect funding unchanged at 79 billion euro both y/y and compared to June 2010.

 

Estimated capital ratios as at 30th September 2010, inclusive pro-rata of an hypothesis dividend: a tier one ratio of 8,08%, approximately 94% of which consisting of the core tier one ratio at 7,56%.

Total capital ratio of 12,09%.

 

Net Profit for the period of 197,7 million euro compared to 187,3 million euro in the first nine months of 2009.

Net Profit in the third quarter of the year of 95,7 million euro (64 million euro the second quarter of  2010 and 38,1 in the first quarter of 2010)

 

 

* * *

 

Brescia, 12th November 2010- the Management Board of Unione di Banche Italiane Scpa (UBI Banca) has approved the interim financial report as at and for the period ended 30th September 2010.

 

The optimisation of the branch network concluded at the end of June 2010 allowed Group banks to focus on their respective geographical areas, the subsequent rationalisation of the distribution networks and the consequent reorganisation of minority interests in the share capital of some banks, completed in July 2010.

Despite the extent of the action undertaken and the complex economic context, the Group succeeded in continuing to  develop its commercial activities to support its local markets with good growth in lending (+4,8% September 2010-September 2009) and a consequent increase in market share (6,24% in September 2010 compared to 6,12% in September 2009) and in total numbers of customers.

Also, following the reorganisation of minority interests and the sale of a further 9,9% interest in the Lombarda Vita Spa joint venture to Cattolica, completed at the end of September 2010, the estimated Group capital ratios as at 30th September 2010 had increased to give a core tier one ratio of 7,56%, a tier one ratio of 8,08% and a total capital ratio of 12,09%.

 

 

From a results viewpoint, the first nine months of the year ended with a net profit of 197,7 million euro, an increase compared to 187,3 million euro in the same period of 2009(1).

Careful control over costs continued, with operating expenses virtually unchanged compared to the first nine months of 2009, despite the inclusion in 2010 of a non-recurring expense in relation to the trade union agreement signed last May (-1,3% year-on-year net of that expense). The cost of credit improved further to reach significantly lower levels than those recorded in 2009 (-23,1%, at 60 basis points compared to 82 basis points in September 2009), assisted by structural action undertaken in some banks in the Group.

Operating income fell on aggregate by 12,3% compared to the first nine months of 2009, due basically to a reduction in net interest income (‑13,5%); the latter, however, started to benefit in the third quarter of the year, from the first strengthening measures progressively introduced since June 2010, recording significant growth of 5% compared to the second quarter of the year and of 1,8% compared to the first quarter. Net commission income was practically unchanged compared to the first nine months of 2009 (-1,3%), although with different quarterly performance also in relation to the different timing for the recognition of up front commissions. Finally, although lower on aggregate than in the first nine months of 2009, which benefited from non-recurring items, the finance result contributed with a significant 13 million euro, including 19 million euro earned in third quarter of 2010.

 

The Group therefore commenced the fourth quarter of the year with:

-     good commercial momentum;

-     solid capitalisation;

-     the institutional funding programme completed;

-     income strengthening measures in place with net interest income progressively improving;

-     stringent control over operating expenses;

-     the cost of credit markedly better than expected.

 

* * *

 

Results for the first nine months of 2010 compared to the same period in 2009

 

The consolidated income statement for the first nine months of 2010 ended with operating income of 2.585,6 million euro, a decrease of 12,3% compared to 2.947 million euro earned in the period January-September 2009.

 

Net interest income(2) amounted to 1.594 million euro compared to 1.842,6 million euro in the first nine months of 2009, a reduction of 13,5% as a result of an unfavourable interest rate scenario compared to last year. Despite this, the first results of the measures taken in June to strengthen Group income were seen in the third quarter of the year (repricing which progressively took effect from the middle of August 2010 and investment in Italian government bonds), with net interest income of 543,2 million euro, a marked recovery compared both the  second (+5%) and the first quarter of the year (+1,8%). As a result of those measures, net interest income is expected to improve further in the fourth quarter of 2010.

 

Net commission income fell slightly compared to the first nine months of 2009 (-1,3% to 871,5 million euro): the good performance of commissions on securities business, which grew by more than 55 million euro (to 445,2 million euro), was offset by the lower contribution (-45,5 million euro) from those commissions that were replaced by commitment fees, which included maximum overdraft charges, and by a decrease in commissions related to economic activity (payments and receipts, current accounts, etc.). The contribution from commissions on the sale of third party bond products remained modest on the whole, accounting for approximately 5,5% of the total.

A comparison of the third quarter of the year with the second quarter shows net commission income falling from 313,9 million euro to 264 million euro, affected primarily by the total absence in the third quarter of commissions on sales of third party bond products (approximately 30 million euro), the absence of commissions on depository banking operations, disposed of at the end of June (-3 million euro), and the seasonal effect of lower levels of business with customers over the summer period.

Net commission income is expected to improve significantly in the fourth quarter.

 

The net profit on financial activities (3) for the period to 30th September 2010 amounted to 13,5 million euro as a result of good performance in the third quarter of the year, which ended with a positive result of 19,4 million euro, due to the contributions from trading (6 million euro), hedging (7,1 million euro) and assets designated at fair value (7,1 million euro).

 

Following the partial disposal of UBI Assicurazioni (performed on 29th December 2009 as part of partnership agreements with BNP Paribas Assurance/Fortis), net income from insurance operations was nil (it was 31 million euro in the comparative nine months). The profits of the company are now recognised within the item "profit (loss) of equity-accounted investees" in proportion to the percentage interest held.

 

Operating expenses, amounting to 1.858,8 million euro, were only slightly higher (+0,5%) than in the first nine months of 2009 despite the inclusion of a non-recurring expense of 33,2 million euro in respect of a trade union agreement signed last May. Net of that non-recurring item, operating expenses would have fallen by 1,3% year-on-year. To summarise:

- personnel expense - 1.107,1 million euro - was down by -1,1% compared to 1.118,9 million euro in  2009 despite the inclusion of the non-recurring item just mentioned. Net of that amount it would have decreased by 45 million euro (-4%) compared to the first nine months of 2009. This reduction is attributable primarily to changes in employee remuneration due to the progressive reduction in average personnel numbers and also to lower payments made for the variable component of salaries, which resulted in the release of provisions made previously.

In the third quarter of the year, personnel expense amounted to 359,6 million euro, practically unchanged compared the average for the two preceding quarters net of the non-recurring item relating to the trade union agreement (approximately 358 million euro).

The benefits of the trade union agreement are expected in the fourth quarter, since it resulted in 500 persons having left the Group as at 30th  September 2010.   

- other administrative expenses, amounting to 568,4 million euro, recorded a year-on-year increase of 1,9% (approximately 11 million euro)  and were affected by a change in the consolidation scope after UBI Assicurazioni and Mercato Impresa were excluded from it. This led to increased expense of 13,5 million euro, attributable primarily to expenses for insurance premiums and outsourced services, previously infragroup. On a like-for-like basis, other administrative expenses fell year-on-year by approximately 2,8 million euro, continuing to confirm the cost containment actions under way;

- net impairment losses on property, equipment and investment property and intangible assets totalled 183,2  million euro (+9,6 million euro compared to the first nine months of 2009). The changes that occurred were a result of the increase in the purchase price allocation performed here (56,2 million euro compared to 49,6 million euro before), attributable to the amortisation charge on the remaining goodwill on brand names, which has an annual impact of approximately 14 million euro (11 net) after the reduction in value resulting from the impairment test performed at the end of 2009.

 

As a summary of overall performance, in the first nine months of the year net operating income amounted to 726,8 million euro, compared to 1.096,7 million euro in 2009.

Furthermore, net operating income for the third quarter of the year, amounting to 258,7 million euro, increased compared to both the second (+11,3%) and the first quarters (+9,8%).

 

Net impairment losses on loans fell to 455,7 million euro in 2010 from 592,5 in 2009, a decrease of 136,8 million euro (-23,1%), to give a cost of credit of 0,60% of total lending, compared to 0,82% in the first nine months of 2009. This was partly the result of action undertaken, started over a year ago,to bring the quality of the lending portfolios of some network banks into line with the Group average. In terms of reversals of analytical impairment losses, net of the effect of present value discounting, these amounted to 186,1 million euro in the first nine months of 2010, an increase of 73,6% compared to the same period in 2009.

In the third quarter of the year, the annualised cost of credit stood at 0,53% compared to 0,76% and 0,54% recorded in the second and first quarters respectively (0,82%, 0,97% and 0,66% in the same periods of 2009).

 

Profits on the disposal of equity investments of 78,4 million euro were recognised in the reporting period, consisting practically entirely of non-recurring items.

The item included mainly +81,1 million euro of gross gain on the sale of a further 9,9% of Lombarda Vita Spa to Cattolica, recognised in the third quarter of the year and -4,2 million euro for the impairment loss on Gestioni Lombarda Suisse that arose following a reduction in the volumes of business of the company and consequent lower profitability.

In 2009 the item amounted to 3,6 million euro and mainly related to the gain of 2,6 million euro realised by Centrobanca on the partial sale of IW Bank to Medinvest International.

 

As a result of the performance described above, pre-tax profit on continuing operations in the first nine months of the year amounted to 319,3 million euro, compared to 442,7 million euro previously. As a result of the additional presence of non-recurring items, pre-tax profit in the third quarter of the year rose to approximately 200 million euro, a level which has not been reached during the course of the last two years.

 

As a result of the changes in taxable income in the first nine months of 2010, taxes on income from continuing operations fell to 197,3 million euro from 220,9 million euro in 2009.

 

Finally, the first nine months of the year benefited from post-tax profits from discontinued operations amounting to 83,4 million euroin relation to the contribution of depository banking operations by UBI Banca to RBC Dexia Investor Services, recognised in the second quarter of the year.

 

* * *

 

The balance sheet aggregates

 

Net loans to customers of the Group as at 30th  September 2010 amounted to 101,2 billion euro, an increase of 4,8% compared to September 2009 (96,6 billion euro) and of 3,3% compared to December 2009 (98 billion euro). The year-on-year performance recorded growth of 5,2% in medium-to-long term lending, which accounts for 68% of the total, and an increase of 4% in short term lending which accounts for 32% of the total. The analysis by market segment confirms growth, as already reported for previous quarters of the year, in the retail and "core corporate" segments, where the Group's core business is focused.

 

Total net deteriorated loans as at 30th September 2010 amounted to 5,2 billion euro and accounted for 5,1% of total net loans (4,62% at the end of December 2009 and 3,63% at the end of September 2009).

In detail, net non performing loans, amounting to 1,8 billion euro, increased by 8,8% compared to June 2010, a growth similar to that recorded between June/March 2010 and September/June 2009; net impaired loans, amounting to 1,9 billion euro at the end of September, decreased by 1,3% compared to June  (they increased by 1,7% June/March 2010 and by 12,7% September/June 2009).

The ratio of net non performing loans to net loans stood at 1,75% (1,62% in June 2010). Coverage for non performing loans was 48,6% (50,2% in June 2010), down as a result of two phenomena: higher posting to losses in the third quarter, in relation to bankruptcy procedures and a greater incidence of mortgage backed positions (41,6% in September 2010 compared to 40,7% in June 2010). If account is taken of these two phenomena, the coverage for non performing loans remained stable compared to June 2010: 79,7% compared to 79,8%.

The ratio of net impaired loans to net loans stood at 1,89% compared to 1,93% in June 2010. Total coverage for impaired loans was 13,7%, unchanged compared to June 2010: if account is taken of positions backed by collateral, coverage for impaired loans in September 2010 was 24,2%, again unchanged compared to June.

 

The year end projection of the first nine month new inflows from performing loans to non performing and impaired loans allows to estimate a significant reduction of new inflows in 2010 compared to the previous year.

 

Direct funding amounted to 103,9 billion euro, an increase of 8,7% compared to September 2009 (+6,9% compared to December 2009).

In detail, the part relating to amounts due to customers increased by 11,7% year-on-year to 57,4 billion euro: current accounts remained stable at 43,9 billion euro (+0,6% y/y), while repurchase agreements, as already reported at the end of June, increased to 11,5 billion euro (5,6 billion euro in September 2009) as a result of increased business with the Cassa di Compensazione e Garanzia (up from 3,6 to 10 billion euro), used to fund the position in Italian government bonds taken in June 2010 as part of the manoeuvre to support Group profitability.

The part relating to securities issued increased by 5,2% year-on-year to 46,5 billion euro: the item benefited from an increase in institutional funding which included both the medium-to-long term (covered bonds amounting to 3,4 billion euro as at 30th September 2010 compared to one billion in September 2009) and the short term (euro commercial paper and French certificates of deposit amounting to 3,3 billion euro as at 30th  September 2010 compared to 2,2 billion euro in September 2009) components.

As already reported, medium-to-long term institutional issuances were performed in the first nine months  of the year amounting to two billion euro (including 1,25 billion euro of covered bonds and 700 million of EMTNs) and after 30th September further institutional issuances were performed amounting to 1,5 billion euro, consisting of one billion of EMTNs and 500 million of covered bonds. The programme of funding on institutional markets for 2010 is now to be considered as complete.

 

Indirect funding from ordinary customers totalled 79 billion euro, basically unchanged compared to September (78,7 billion euro) and to December 2009 (78,8 billion euro): the insurance policy component grew constantly to approximately 12,6 billion euro (+4,8% year-on-year and +4,1% compared to December 2009), with the total for assets under management up to 43,3 billion euro (+3,2% year-on-year and +3,4% compared to December 2009), while assets under custody, amounting to 35,7 billion euro, fell by 2,6% year-on-year and by 3,2% compared to December 2009.

 

The Group financial assets portfolio, calculated net of financial liabilities, amounted to 13 billion euro and was composed as follows: 84,5% of available-for-sale financial assets, 14,3% of financial assets held for trading and the remainder of financial assets designated at fair value.

 

Consolidated equity of the UBI Banca Group as at 30th September 2010, excluding profit for the period, amounted to 10.887 million euro (11.105 in September 2009 and 11.141 million euro at the end of December 2009).

 

* * *

 

As at 30th September 2010 the human resources of the UBI Banca Group, on a like for like basis, totalled 19.867, a decrease of 822 compared to 20.689 in September 2010. Furthermore, with regard to the trade union agreement of 20th May 2010, the redundancy programme for the 500 personnel affected by the implementation of a leaving incentive programme (which involved all employees acquiring the right to a pension by 31st December 2011) has been completed. As already reported the agreement involved a total reduction of 895 personnel, including 500  by means of the leaving incentive programme just mentioned and the remainder by using  management mechanisms.

The Group's branch network consisted of 1.888 branches in Italy at the end of September 2010 compared to 1.955 at the end of 2009. The decrease was the result of the programme to optimise the branch networks of the network banks which was implemented and resulted in the rationalisation of situations of branch overlap and allowed small branches to be transformed into mini-branches. In addition to its domestic branches, the Group also possesses 11 branches abroad.

 

* * *

 

Declaration of the Senior Officer Responsible for preparing corporate accounting documents

 

Elisabetta Stegher, as the Senior 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", that the financial information contained in this press release is reliably based on the records contained in corporate documents and accounting records.

 

* * *

 

Business outlook

 

The increase in short term interest rates and the repricing action put in place starting from the third quarter should allow a higher level of net interest income than that recorded in the first quarters of the year to be achieved in the last quarter of the current year.

With respect to operating expenses:

·      personnel expense is expected to improve compared to the average for previous quarters;

·      as concerns other administrative expenses, initiatives are underway to contain the trend, which generally records a seasonal increase in the last quarter of the year with respect to the preceding quarters.

The trend for the cost of credit in the fourth quarter should allow to maintain the total cost of credit for the year at around 70 basis points.

 

 

* * *

 

 

[1]If non-recurring items are excluded, which were positive by 84,2 million euro net in 2010 (the result mainly of the contribution of the depositary banking operations, although reduced by the impairment losses on available-for-sale equity investments and payments connected with personnel leaving incentives) and negative by 7,9 million net in 2009 (due to the impact of the impairment loss on the investment in Intesa Sanpaolo, the full impairment of a hedge fund and to integration costs, partially offset by the gain on the public exchange offer and the tax realignment), the normalised profit amounted to 113,6 million euro, compared to 195,2 million euro in the comparative period.
[2]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 (MOC), but also a series of other commissions applied to authorised and unauthorised current account overdrafts. The maximum overdraft charge has been excluded from net interest income (reclassifying it into net commissions) in the reclassified income statement for all the periods prior to 1st July 2009.
[3]The net result for financial activities: net income/expense on trading, hedging and disposal and repurchase activity of financial assets/ liabilities and on assets and liabilities at fair value.

 

 

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

 

 

 

 

 

For further information:

UBI Banca - Investor Relations - tel. 035 392217

E-mail: [email protected]

UBI Banca - Media Relations -  tel. 030 2473591 - 035 29293511

E-mail: [email protected] 

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

 

 

 

 


This information is provided by RNS
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