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Tuesday 31 August, 2010

Unione di Banche

Half year results- press rele

RNS Number : 8152R
Unione di Banche Italiane S.c.p.a.
30 August 2010
 



 

 

PRESS RELEASE 

 

The first semester of 2010 registers significant development in the Group's business activity 

Loans to customers: +3,4% y/y to 100,2 billion euro with an increase in market share to 6,24% (6,04% in June 2009)

Indirect funding: +4% to 78,5 billion euro 

 

Net Profit of 102,1 million euro compared to 125,9 million euro achieved in the first half of 2009 

 

Operating income to 1.723 million euro (-13,9%): 

-     net interest income to 1.050,8 million euro (-17,2%), with the lowest point recorded during the 2nd quarter of the year 

-     growth in net commissions to 607,6 million euro (+3,8%) 

 

Operating expenses down by 1,8% net of the non-recurring expenses related to the trade union agreement of 20th May. Inclusive of that expense, operating expenses were basically stable year-on-year (+0,9%) 

 

Cost of credit down to 64 basis points (82 basis points in the first half of 2009)   

 

Capital soundness confirmed: core tier one ratio at 7,34%, tier one ratio at 7,86% and total capital ratio at 11,86%, in the presence of growth in lending and including the portion attributable to the quarter of an hypothesis of dividend

 

 

2nd Quarter 2010 / 1st Quarter 2010 

Operating income: +2,1%

Net interest income: -3%

Net commission income: +6,9%

Operating expenses net of the above non-recurring expense: -2% 

Net operating result net of non recurring item: +12,4%

 

* * *

 

Bergamo, 27th August 2010 - The Management Board of Unione di Banche Italiane Scpa (UBI Banca) approved the interim financial report as at 30th June 2010. 

 

After completing the substantial internal reorganisation commenced at the beginning of the year and despite the complex economic context, the Group has given new impulse to its activity aimed at developing business and supporting its reference territories, which has led the Group to gain market shares and acquire new customers. 

 

The progressive growth in traditional banking business in the first half of the year allowed the Group to increase its lending to customers to more than 100 billion euro, up on the same period of 2009, with market share rising to 6,24% compared to 6,04% in June 2009. This growth was recorded in market segments typical of the Group's business, i.e. the retail and core corporate segments. 

 

Growth in lending, which involved growth in risk weighted assets of approximately 1,3 billion euro, and the inclusion in the calculations on an accruals basis of an hypothesis of dividend had no significant impact on Group capital ratios, which remained sound. The core tier one ratio as at 30th June 2010 stood at 7,34%, the tier one ratio at 7,86% and the total capital ratio at 11,86%. 

 

As far as economic results are concerned, careful control of operating costs continued; the item was only slightly up compared to June 2009 despite the presence in 2010 of expenses in respect of the trade union agreement signed last May, which laid the foundations for initial cost savings in the second half of 2010 (expenses cut by 10-15 million euro) and full benefits in 2011 (expenses cut by 70 million euro) in relation to personnel redundancies currently in progress which will be completed by 30th September 2010. The cost of credit improved to levels significantly lower than in 2009, also assisted by structural action undertaken, commenced more than a year ago, to bring the quality of the lending portfolios of some of the network banks into line with the average for the Group. Operating income fell compared to the same period in 2009, but recorded an increase in the second quarter of 2010 compared to the first. It continued to suffer from the impact of low market interest rates on net interest income, which was only partly offset by the favourable performance of commission income. The low exposure to trading (assets held for trading accounted for 12% of the securities portfolio) lessened the unfavourable impacts of market trends on results from financial activities which ended the second quarter with a break-even result. 

Finally, the period benefited from a net gain of 83,4 million euro in relation to the contribution of depository banking operations performed on 31st May 2010 by UBI Banca to RBC Dexia Investor Services.

 

The UBI Banca Group ended the first half of the year with a profit of 102,1 million euro compared to 125,9 million euro recorded in the same period of 2009. 

 

***

 

In detail, the income statement recorded operating income of 1.723 million euro, a decrease of 13,9% compared to 2009, but up by 2% in second quarter of the year compared to the first. 

 

Net interest income1 amounted to 1.050,8 million euro compared to 1.269,7 million euro in the first half of 2009. It was affected by the impact of the fall in interest rates to a record low at the end of June, which the growth in lending that occurred in the second quarter of the year was unable to offset. Net interest incomealso fell on a quarterly basis (-3%), although monthly figures for the second quarter recorded a modest gradual recovery with respect to the low reached in April.

An investment was made, implemented in June to support net interest income in the second half of the year, consisting of approximately six billion euro in Italian government securities with maturity in September 2011. They were classified within available-for-sale financial assets in the proprietary portfolio and, with account taken of the current cost of funding, should provide an average return estimated at present at approximately 100 basis points annually. 

 

Dividends, amounting to 18,2 million euro compared to 3,5 million euro previously, relate mainly to securities held in the AFS portfolio of the Parent, UBI Banca, and included 11,6 million euro of profits distributed on the ordinary shares of Intesa Sanpaolo (not remunerated in the comparative half year). 

 

Net commission income grew by 3,8% on an annual basis to total 607,6 million euro compared to 585,6 million euro in 2009. It was driven primarily by commissions on securities business, up by more than 70 million euro (to 320,7 million euro), against a lower contribution (-36 million euroor -39%) from the set of commissions, including the maximum overdraft charge, replaced by the commitment fee, and a decrease (-17 million euro) in commissions relating to economic activity (payments and receipts, current accounts, etc.). The contribution from commissions on third party financial products remained modest accounting for approximately 8% of the total.   

 

1 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 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.

 

Action has already been commenced to adjust the pricing of some components of net interest income and net income from services, the positive effects of which will be seen progressively from the third quarter of the year onwards. This action will nevertheless still position the Bank competitively in terms of pricing in order to allow growth in market share currently in progress to continue. 

 

As at 30 June 2010, the net result for financial activities2 amounted to -5,9 million euro, practically unchanged compared to the first quarter of the year. The low exposure to trading did in fact lessen the unfavourable impacts of market performance on result for finance activities which ended the second quarter with a break-even result.The result for the first half compares with a profit of approximately 31 million euro recorded in the same period of 2009 net of extraordinary items recognised in the period (60,6 million euro relating to the public exchange offer and 25,2 million euro relating to an impairment loss on a hedge fund). 

 

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 (22 million euro in the comparative half year). The profits of the company are now recognised within the item "profit of equity investments valued using the equity method" in proportion to the percentage interest held. 

 

Operating expenses, amounting to 1.254,9 million euro, were only a slightly higher (+0,9%) than in the first half of 2009, despite the inclusion of a non-recurring expense of 33,2 million euro in respect of the trade union agreement signed last May. Net of that non-recurring item, operating expenses would have fallen by 1,8%. To summarise: 

- personnel expenses - 747,5 million euro - were slightly lower than in 2009 (745,3 million euro) despite the inclusion of the non recurring item just mentioned. Net of that amount they would have fallen by 31 million euro compared to the first half del 2009. This reduction is attributable 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. 

Again net of the non-recurring item recognised in the second quarter of the year, for the reasons just mentioned, personnel expenses decreased also compared to the first quarter of the year (-7,5%).    

As reported previously, the trade union agreement of 20th  May 2010 involves a reduction in total personnel numbers for the UBI Group of 895, consisting of 500 by means of a leaving incentive programme and the remainder by using normal management mechanisms, to be implemented also through the partial replacement of personnel leaving the Group. As concerns the leaving programme, 321 personnel left the Group with effect from 1st July 2010, while the remainder will leave the Group by 30th September 2010. The estimated savings from personnel reductions in the second half of the year amount to approximately 10-15 million euro, while these savings will amount to approximately 70 million euro, at regime, from 2011;

 

- other administrative expenses performed, on a quarterly basis, in line with the figures for 2009 (approximately 185 million euro in the first quarter and 200 million euro in the second) and amounted to 384,6 million euro at the end of period, basically unchanged compared to 2009;

- net impairment losses on property, equipment and investment property and intangible assets (inclusive of the PPA) totalled 122,8 million euro (+7,3 million euro compared to the first half of 2009). The changes that occurred were a result of the increase in the purchase price allocation performed (37,4 million euro compared to 33 million euro before), attributable to the amortisation charge on the remaining goodwill on brand names, which has an annual impact of approximately 11 million euro after the reduction in value resulting from the impairment test performed at the end of 2009; 

 

As a summary of overall performance, net operating income amounted to 468,1 million euro, compared to 758,3 million euro in 2009. 

 

2 The net result for financial activities: net income/expense on trading activities, hedging activities, on disposal and repurchase of financial assets/liabilities and on assets and liabilities at fair value.

 

Net impairment losses on loans recognised in the period fell to 321,7 million euro compared to 395,2 million euro previously, to give a cost of credit of 0,64%, compared to 0,82% recorded in the first half of 2009. This was the positive result of action started over a year ago taken to bring the quality of the lending portfolios of some network banks into line with the Group average, and also of a slowdown in the worsening in the quality of credit, which, however, depends on how the economic situation develops. 

 

Impairment losses on other assets/liabilitiesamounting to 18 million euro were recognised in the period (17,2 million euro for Intesa Sanpaolo and 1,7 million euro for A2A, which are now carried on the books at 2,17 euro and at 1,12 euro respectively) compared to 35 million euro in 2009.

 

The performance described above resulted in a profit from continuing operations, before taxation, of 119,6 million euro compared to 305 million euro before. 

 

Taxes on income for the period from continuing operations amounted to 94,1 million euro, down compared to 153 million euro in the first half of 2009. 

 

Finally, after tax profit from discontinued operations was recognised in the second quarter of the year amounting to 83,4 million euro in relation to the  contribution of depository banking operations performed on 31st May 2010 by UBI Banca to RBC Dexia Investor Services. 

 

* * *

Balance sheet aggregates 

 

Net loans to customersof the Group as at 30th June 2010 amounted to 100,2 billion euro, an increase of 3,4% compared to June 2009 (96,8 billion euro) and of 2,2% compared to December 2009 (98 billion euro). As already evidenced in March 2010, the analysis at market segment level confirms growth in the "private individual retail" segment and in the "core corporate" segment, while the figures for the "small business" segment are in line with those as at June 2009.

 

As at 30th June 2010, total net deteriorated loans amounted to 4,8 billion euro and accounted for 4,8% of total net loans (the percentage was virtually unchanged compared to March 2010, while it was 4,62% at the end of December 2009 and 3,27% at the end of June 2009).   

The rate of growth of net deteriorated loans reduced to +2,8% at the end of June 2010 compared to March 2010 whilst it was +3,2% at the end of March 2010 compared to December 2009. The reduction was recorded in all classes of deteriorated loans except for restructured positions, which increased due to the definition of restructuring plans for positions already classified as impaired. 

The positive gap with respect to the banking sector nationally for the ratio of net non performing loans to net loans widened. More specifically the ratio of net non performing loans to net loans increased from 2% in March 2010 to 2,20% in June 2010 for the sector nationally, while it rose from 1,53% to 1,62% for the UBI Banca Group.The total coverage for non performing loans was 50,2% (50,7% in March 2010) as a result of a greater presence of positions backed by collateral.If those positions are considered, the coverage for non performing loans was 79,8% in June (78,8% in March 2010).

The ratio of net impaired loans to net loans was 1,93% compared to 1,95% in March 2010.The total coverage for impaired loans was 13,8% (14% in March 2010) also as a result of an increase in positions backed by collateral. If those positions are taken into consideration, the coverage for non performing loans was 24,2% in June 2010 (21,7% in March 2010). 

 

Direct funding amounted to 103,4 billion euro, recording a growth of 7,5% compared to June 2009 (+6,3% compared to December 2009). 

In detail, the part relating to amounts due to customers increased by 9,2% year on year to 58,5 billion euro: current accounts remained virtually unchanged at 44,3 billion euro, while repurchase agreements increased from 7 billion euro in June 2009 to 12,1 billion euro in June 2010 and included a higher exposure to the "Cassa di Compensazione e Garanzia" (from 4 billion euro to 11 billion euro), used to fund the six billion euro position held in short term Italian government securities as part of action taken to support Group profitability. 

The part relating to securities issued increased by 5,4% year-on-year to 44,8 billion euro: the item benefited from issues of covered bonds amounting to 2,4 billion euro and from growth in issues performed as part of funding programmes in euro commercial paper and French certificates of deposit (+1,2 billion euro), while funding through the EMTN programme reduced (-1,2 billion euro). 

 

Indirect funding from ordinary customers totalled 78,5 billion euro, an increase of 4% year-on-year and a slight decrease compared to December 2009 (-0,4%): insurance policies performed very positively, rising to approximately 12,6 billion euro, (+7,3% year-on-year and +3,9% compared to December 2009); assets under management stood at approximately 42,5 billion euro, (+5,7% year-on-year and +1,5% compared to December 2009), while assets under custody, amounting to 35,9 billion euro, recorded an increase year-on-year, but a fall compared to December 2009 (+2% and -2,5% respectively). 

 

The Group financial assets portfolio, calculated net of financial liabilities, amounted to 14,4 billion euro and was composed as follows: 87% of available-for-sale financial assets (up in the first half due to the six billion euro investment in Italian government securities already mentioned), 12% of financial assets held for trading and the remainder of financial assets designated at fair value.

 

Consolidated equityof the UBI Banca Group as at 30th  June 2010, excluding profit for the period, amounted to 10.868 million euro (10.943 in June 2009 and 11.141 million euro at the end of December 2009). 

 

 

* * *

 

The human resources of the UBI Group as at 30th June 2010 totalled 20.260 headcounts, a decrease of 445 compared to 20.705 in June 2009 at comparable perimeter.Furthermore, as part of the trade union agreement already mentioned, signed on 20th May 2010, 321 personnel left the Group with effect from 1st July, while the remaining 179 personnel involved in the agreement will leave by the Group by 30th September 2010. If those personnel reductions are included, total human resources of the Group fell below 20.000 (they were 21.709 as at 1st April 2007). 

The branch network consisted of 1.884 branches in Italy at the end of period compared to 1.955 at the end of 2009. The decrease was the result of the completion of the project to optimise the geographical distribution of the network banks which allowed the rationalisation of situations of branch overlap and the transformation of small branches into mini-branches. In addition to its domestic branches, the Group also possesses 12 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" (consolidated law on financial intermediation), that the financial information contained in this press release is reliably based on the records contained in corporate documents and accounting records.

 

* * *

 

Business outlook

 

In the second half of 2010, the economic context started showing some positive signals, the result of  an increase in demand from major emerging countries towards some countries in the euro area, including Italy, which recorded a significant increase of in industrial output driven by the recovery in exports.

 

Also the recent, slight, growth in interest rates recorded the first reversal of the trend seen since 2008 with a rise in the shorter term part of the curve (maturities of 1-3 months).Debates in progress at present within the major central banks over the timing and modalities of exit strategies do not yet allow any forecasts to be made for trends in interest rates. Nevertheless the careful repricing action currently being taken by the Group on both net interest income and net income from services should, all else remaining equal, allow a progressive improvement in operating income to be made. This action will nevertheless still position the Group competitively in terms of pricing in order to allow growth in market share currently in progress to continue.

The policy to contain personnel costs will continue. In the second half, this cost item will start to benefit from savings linked to the recent trade union agreement, savings which will be fully displayed in 2011. 

 

As concerns the cost of credit, presently there are no signs of worsening compared to the trend in the first half.

 

* * *

 

 

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

http://www.rns-pdf.londonstockexchange.com/rns/8152R_-2010-8-30.pdf

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For further information:

UBI Banca - Investor relations - Tel. 035 392217 

Email: [email protected] 

UBI Banca - Press relations -Tel. 030 2473591 - 035 29293511 

Email: [email protected] 

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


This information is provided by RNS
The company news service from the London Stock Exchange
 
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