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Unione di Banche (40EK)

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Tuesday 23 March, 2010

Unione di Banche

Consolidated Results as at 31

RNS Number : 0395J
Unione di Banche Italiane S.c.p.a.
23 March 2010






Net profit of 270,1 million euro compared to 69 million euroachieved in 2008

-    Net operating income of 1,4 billion euro, in moderate reduction (-5,9%) as a result of:

-   a contained decrease in operating income (-4,5%), despite the collapse in market interest rates;

-   a reduction in operating costs (-5% net of the impairment of the brand of some network banks and of non recurring costs relating to the branch network optimization project, booked in the last quarter of the year);

-    Cost of credit of 88 basis points (59 in 2008), one of the best in the banking sector.  


As a result of the performance of interest rates, at a record low, and the increase in the cost of credit, profit, net of non recurring items, fell by approximately 59% to 173,4 million euro.


Capital strengthened further notwithstanding increase in lending and with account taken of the proposed dividend: core tier 1 ratio of 7,43%, tier 1 ratio of 7,96% and a total capital ratio of 11,91%.  These ratios do not include the additional potential positive effect of over 70 basis point which could derive from the possible conversion of the convertible bond issued in July 2009. 


Proposed a cash dividend of 0,30 euro per share for 2009.


Lending :+1,7% to 98 billion euro

Total funding : +2,4% to 176 billion
of which : Direct funding:
-0,4% to 97,2 billion euro

                Indirect funding+6,1% to 78,8 billion euro.



Bergamo, 19th March 2010 - The Management Board of Unione di Banche Italiane Scpa (UBI Banca) approved the draft Separate Annual Report of UBI Banca and the Consolidated Annual Report for the Group for the year ended 31st December 2009, which will be submitted for approval to the Supervisory Board on 7th April 2010.


The result for the year will allow the Management Board to submit  a proposal to the shareholders meeting to be held in first call on 23rd April and in second call on 24th April 2010, for the declaration of a dividend of 0,30 euro on the 639.145.902 ordinary shares outstanding.

If approved by shareholders in the amount proposed, the dividend will be paid on 24th May 2010 with value date of 27th May 2010. The total dividend payment will amount to maximum 191,7 million euro drawn, after legal and by-law allocations, on the profit of the Parent Bank (406 million euro).


* * *


The year 2009 ended for the UBI Banca Group with a net profit of 270,1 million euro, a significant increase compared to the total of 69 million euro achieved in 2008.


The basic completion of Group integration which had already been performed at the end of  2008 allowed the  new Group to concentrate on structural and organisational repositioning in 2009. Work went ahead with the reorganisation of the Parent Bank and the change of senior management in some network banks, while a wide ranging project, completed at the beginning of 2010, was implemented to optimize the branch network and focus individual brands in the areas in which they operate. Corporate transactions performed in the non life banc assurance sector (partnership with Fortis-BNP Paribas Assurance), the business services sector (partnership with Affinion) and the depository bank sector (partnership with RBC-Dexia, to be concluded in 2010) laid the basis for improving efficiency and assuring the best possible service from operators of the highest standing with recognised expertise. Finally, attention to customer care continued with the Ascolto consultation project which entered its second year of operation. This project, implemented in co-operation with an outside specialist firm, consists of surveys performed (over 150.000 interviews per year) to monitor customer satisfaction at the level of individual branches and market segment, with both customer retention and growth objectives.


Rigorous attention to the capital solidity of the Group continued during the year. Action was taken to requalify and optimise capital with the launch of a public exchange offer on outstanding preference shares and Lower Tier II both at domestic and international level and, from the viewpoint of potential reinforcement in the future, with the issue of a convertible bond fully subscribed by shareholders.


With the proposed dividend included and in the presence of growth in lending, Group capital ratios as at 31st December 2009 had improved further with a core tier 1 ratio of 7,43% (7,09% at end 2008), a tier 1 ratio of 7,96% (7,73%) and a total capital ratio of 11,91% (11,08%). These ratios do not include the additional potential positive effect of over 70 basis point which could derive from the possible conversion of the convertible bond issued in July 2009 (the bond is convertible on initiative of the company as from January 2011).

At the same time activity continued designed to ensure a balance between sources of funding and forms of lending. This involved the diversification of international issuances also on longer maturities and took concrete form with the first issues of long term covered bonds.


Action undertaken in 2009 allows the UBI Banca Group to commence its second three-year period on solid foundations, a necessary condition for it to be able to react to the stimuli and grasp the opportunities of the "new normal" that is gradually taking form.



2009 results


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 fee, but also a series of other commissions applied to authorised and unauthorised current account overdrafts. The reclassified income statement has been prepared excluding the maximum overdraft fee from net interest income (reclassifying it into net commissions) for all the periods prior to 31st December 2009.

This version will be used exclusively, starting with the next financial report, for the purposes of quarterly and year-on-year comparisons.

The schemes attached to this press release also include a version of the reclassified income statement which does not reallocate maximum overdraft fee to net commissions.


The Group operated in a context of reduced economic activity, of difficulties experienced by companies and families and of low market interest rates, which had a significant effect on both net interest income and the cost of credit. On the other hand a positive contribution was made by financial items, although continuing to maintain a low risk profile on investments. Prices on equities and bond markets, which had led to the recognition of further impairment of available-for-sale financial assets in the income statement in the first part of the year, improved during the year, with a positive effect on equity reserves and a contribution to the recovery of net management and performance fees on customers' assets, which increased in the last quarter of 2009. The Group focus remains again on recurring and sustainable core income, with little resort to "up front" commissions.

Finally, the strong action taken to contain costs produced very positive results, which had a significant effect in cushioning the impact of  the decrease in operating income driven by market conditions. This was despite the recognition in the fourth quarter of an additional non recurring cost related to the impairment of goodwill on the brand of some Group banks, also the consequence of the economic situation.


Detailed analysis of performance in 2009 shows operating income, an indicator of performance by ordinary activities, of 3.906,2 million euro compared to 4.089,7 million euro booked in 2008, recording a moderate reduction (-4,5%) despite the continuing unfavourable economic context.


Net interest incomefell by 14,6% to 2,4 billion euro (-16,7% without the reclassification of the maximum overdraft fee), affected by the drastic fall in market interest rates and the change in composition of assets and liabilities into forms with longer maturities which are less remunerative and more costly respectively. Net interest income amounted to 557,9 million euro in the fourth quarter, a reduction of 2,6% compared to the third quarter, affected by the further decrease in market interest rates to the lowest levels recorded during the year.


Dividends received on securities owned amounted to 10,6 million euro compared to 71,2 million euro in 2008, mainly due to the absence of the 55,1 million euro relating to the interest held in Intesa San Paolo.


Net commission incomefell by 10,7% to 1.214,7 million euro (-4,9% without the reclassification of the maximum  overdraft fee). However, after reaching a low of 291,3 million euro in the first quarter, this item recorded constant growth to 294,3 million euro in second quarter, 297,2 million euro in the third and 331,9 million in the fourth quarter, supported by commissions on the securities business, which grew from 120,2 million euro in the first quarter to 129,2 million euro in the second, 140,2 million euro in the third and 184,9 million euro (including approximately 23 million euro of performance fees) in the fourth.

Up front commissions earned on the "placement of securities" and the "distribution of insurance products" fell from 82,1 million euro to 67 million euro, a decrease of 18,4% resulting from a precise commercial policy with regard to customers.


Operating income benefited from a positive finance result in 2009 amounting to 126,8 million euro (3,2% of operating income), compared to a negative result of -242,3 million euro recorded in 2008 (+369,1 million euro year-on-year). The figure for 2009 includes a gross amount of 60,5 million euro from the gain resulting from the success of the public exchange offer on preferred shares and lower tier 2 securities, which ended in June 2009, and the write down on a fund amounting to 25,2 million euro. The entire portfolio of "held-to-maturity" investments, considered no longer strategic, was disposed of in the fourth quarter, and generated a gain of 37,4 million euro. Net of non-recurring items, which were also present in 2008, the finance result amounted to 54 million euro in 2009 compared to -203,4 million euro recognised in 2008 (+257,4 million euro year-on-year).

Furthermore, the impact recognised in fair value reserves in relation to the value recovery of equity and debt securities classified as "available-for-sale" in the proprietary securities portfolio, was positive by253 million euronet at the end of2009 (it was negative byapproximately 82 million euro at the end of 2008), which includes the appreciation of the Intesa San Paolo share between 30th June 2009 and 31st December 2009 amounting to 118,3 million euro net.


Net income on insurance operations,relating exclusively to UBI Assicurazioni Danni, practically tripled to approximately 31 million euro from 9,6 million euro in the previous year, which had been affected by extraordinary provisions. It will be recalled that 50%+1 share of the company in question was sold on 29th December 2009 to a strategic partner. In 2010 the company will therefore no longer be fully consolidated in the UBI Group's accounts, and the quota of the profits attributable to the Group will be recognised within "profits of equity investments valued using the equity method".


Net of non-recurring items detailed later in this press release, operating costs were reduced by 5% year-on-year.

Including these non-recurring items, total operating costs fell by 3,7% compared to 2008, amounting to 2.514,3 million euro.


Personnel expensesfell by 7,5% to 1.465,6 million euro, a contraction of 119,3 million euro, the combined effect of the reduction in average personnel numbers achieved as part of the integration process and the decrease in the performance related component of remuneration in relation to the economic context. In the fourth quarter of 2009 personnel expenses fell by more than 27 million euro compared to the third quarter of 2009 and by approximately 47 million euro compared to the fourth quarter of 2008.


Other administrative expenses amounted to 777,2 million euro compared to 748,6 million euro at the end of 2008, an increase of approximately 29 million euro. These were affected mainly by the introduction from the beginning of 2009 of VAT on intragroup services, particularly penalising for groups of companies with a federal structure, for approximately 28,2 million euro. Also in 2009, non recurring costs in relation to the branch network optimization project also had a penalising effect amounting to 7,5 million euro. Net of the newly introduced VAT and of the non recurring costs, other administrative expenses fell by 1%. On a quarterly basis, other administrative expenses followed the same trend as that recorded in previous years, rising in the fourth quarter compared to the third, however, not so sharply in normalised terms, if the presence in 2009 is considered of the non recurring costs just mentioned for a total of 7,5 million euro.


Net impairment losses on property, equipment and investment property and intangible assets fell by 6,4 million euro to 271,6 million euro. On the one hand these benefited from the adoption of the single target IT platform (which resulted in lower depreciation and amortisation of 26 million euro) and on the other hand they were affected by a negative component (-34,9 million euro) in relation to the impairment of the brand names of some of the network banks recognised when the allocation of the purchase price for the merger with the former Banca Lombarda Group was performed. This impairment emerged when the carrying value of the brands was tested for impairment following the completion of the operation to reorganise the branch networks; it went to rectify the amount of the purchase price allocated to the item, which therefore rose to 101 million euro from the previous 81,4 million euro.

Amortisation of the remaining goodwill on the brand names will commence from 2010 for a total of approximately 357 million euro over 19 years, with an annual impact on net profit of approximately 11 million euro.


As a summary of the overall performance of the Group, net operating income amounted to 1.391,9 million euro compared to 1.478,4 million euro in 2008.


Net impairment losses on loans were recognised in 2009, amounting to 865,2 million euro, compared to 566,2 million euro previously, to give a cost of credit of 0,88%, compared to 0,59% in 2008, the result of the deterioration in risk profiles for businesses and households.

The item includes the write-down of the Mariella Burani Group amounting to 56,5 million euro (42,7 million euro recognised in the last quarter of the year). Net of that write-down, the cost of credit would be approximately 0,83%.


After the extraordinary impairment of shares recognised in 2008 (510,4 million euro), net impairment losseson other assets and liabilities, over the last twelve months,all classified within non-recurring items, fell substantially to 49,2 million euro (9,1 million euro in relation to the Polis Fund and 32,4 million euro for the impairment of the "available for sale" investment in Intesa Sanpaolo that occurred in the first half). In the third and in the fourth quarter of the year this investment recovered in value (118,3 million euro net) on the basis of the official price - 3,1654 euro- recorded on 30th December 2009, which increased the equity reserve in relation to available-for-sale financial assets.


Disposals of equity investments recorded a profit of 100,3 million, compared to 85 million generated in 2008.


Profit on continuing operations before tax therefore rose by 19,6% to 540,9 million euro (452,1 million euro in 2008).


As a result of the changes in taxable income, taxes on income for the year for continuing operations rose to 243,4 million euro, compared to 221,6 million euro in 2008, to give a tax rate of 45,01% compared to 49,01% previously (57,52% and 47,29% respectively in normalised terms).

It should be considered  that the IRAP (local production tax) component for the year amounted to 30% of taxable income, compared to a nominal rate of 4,82%, as a result of greater IRAP taxation resulting mainly from the non deductibility of net impairment losses on loans (42 million euro approximately) and the partial non deductibility of personnel expenses as well as from the partial non deductibility of other administrative expenses (a total of approximately 50,9 million euro).


Finally the income statement contains a separate item for integration costs, which reduced as the integration process was completed from 67,2 million euro in the 2008 to the current amount of 15,5 million euro.


* * *


The balance sheet


Group loans to customersas at 31st December 2009 amounted to more than 98 billion euro, an increase of 1,7% compared to December 2008 - an identical change to that recorded by the banking sector nationally for the private sector - and  by 1,5% compared to September 2009. The growth was concentrated in the private individual retail segment and in the non banking financial companies, while demand from businesses remained weak.

The quality of the lending portfolio in the year-on-year comparison reflects the progressive deterioration of the economic situation. On a like-for-like basis (net of over 90 days past due loans) net deteriorated loans amounted to almost 4 billion euro at the end of December 2009 compared to 2,3 billion euro in December 2008. It must be considered that on the basis of Bank of Italy instructions, as from December 2009 mortgage backed loans that have been past due for more than 90 days have been included within "past due exposures". These loans amounted to approximately 569 million euro as at 31st December 2009.

The ratio of net non performing loansto net lendingwas 1,36% compared to0,88% in December2008 (1,23% in  September 2009). Total coverage for non performing loans inclusive of collateral was 78,5% in December 2009.

The ratio of net impaired loans to net lending was 1,88% compared to 1,20% in December 2008 (1,74% in September 2009). Total coverage for impaired loans, including collateral was 28,4% in December 2009.


Direct funding at the end of 2009 amounted to 97,2 billion euro, slightly less than the 97,6 billion euro recorded at the end of 2008 (95,5 billion euro in September 2009). A year-on-year comparison shows growth in Securities in issue (+0,9 billion euro), the result of new issues of covered bonds designed to provide medium term funding as part of operations to match maturities on assets and liabilities, while the item "due to customers" (-1,3 billion euro) decreased principally as a result of a contraction in "repurchase agreement" business (-5,3 billion euro). These transactions, which are no longer attractive under current market conditions, have led customers to deposit their liquidity in "current accounts and on demand deposits" (+4,5 billion euro) or to increase indirect funding, which grew as a whole year-on-year by approximately +4,5 billion euro.  


The ratio of lending to funding as at 31st December 2009 was 100,8% (99% approx. in December 2008). Net interbank exposure at the end of the year was contained at -2 billion euro (-1 billion approx. in  December 2008).


Total indirect funding from private customers increased year-on-year by 6,1% to 78,8 billion euro (78,7 billion euro in September 2009), a recovery compared to the end of 2008 for all components of the aggregate (assets under management +6,3%, of which insurance products +7,3%, and assets under custody +5,8%).  

On the basis of Assogestioni (national association of asset management companies) data relating to funds and sicav's, at the end of December 2009 the Group was in third place nationally for net assets with a market share of approximately 4,9%, unchanged compared to December 2008.


As a result of  the disposal of the entire portfolio of investments held to maturity, the Group portfolio of financial assets, calculated net of financial liabilities, amounted to 7,3 billion euro and was composed as follows: approximately 10% of financial assets held for trading, 2,3% of financial assets at fair value and 87,7% of available-for-sale financial assets.


Consolidated shareholders' equity of the UBI Banca Group, as at 31st December 2009, excluding profit for the year, amounted to 11.141 million euro (11.071,2 million euro at the end of December 2008).


* * *


As at 31st December 2009, the human resources of the UBI Banca Group totalled 20.285, a decrease of 395 compared to 20.680 in December 2008. The branch network at the end of the year consisted of 1.955 branches in Italy and eleven 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


With regard to the business outlook for operations, on the basis of the information currently available, the economic situation and the general environment for 2010 appear for the time being to be improving very slowly.

Improvement activities set in motion, including those to optimize the branch network, commercial projects in the "young people" segment and more generally initiatives to strengthen customer acquisition and growth in business volumes will allow the Group to successfully grasp opportunities arising from any increase in market interest rates.

The action undertaken to contain costs will tend to minimise the effects of increases resulting from the renegotiation of labour contracts and from the slight recovery in inflation, while it is expected that the cost of credit will start to progressively reduce from the second half onwards as a result of action taken on Group companies with lower credit quality.


Finally, with regard to an update of the Business Plan, although the relevant Bodies have already approved guidelines in previous meetings, they feel it is best not to finalise the plan until a less uncertain economic situation takes shape.


* * *


Decisions concerning the option to redeem the Obbligazioni Convertibili UBI 2009/2013 (UBI 2009/2013 convertible bonds) in cash.

In view of the possible tightening of prudential regulations on capital outlined in the Basel Committee for Banking Supervision consultation document ("Strengthening the resilience of the banking sector") published last December, the competent governing bodies of the Bank have irrevocably decided not to take advantage of the right to redeem the bond with a cash payment as provided for by articles 7, 12 and 13 of the bond regulations if the market value of the UBI Banca share on the reference date is greater than 12,80 euro (against a nominal value of the bond 12,75 euro), leaving unchanged the right to choose for lower or equal amounts. This decision will also lessen the impact on the income statement (pursuant to IAS 32) of the implicit volatility  resulting from the valuation of the option in the presence of possible future prices of the share higher than 12,80 euro.



Per ulteriori informazioni:

UBI Banca - Investor Relations - tel. 035 392217

E-mail: [email protected]

UBI Banca - Relazioni con la stampa -  tel. 030 2473591 - 035 29293511

E-mail: [email protected] 

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