Consolidated Interim Report as at March 31, 2016

Net Profit at €406 m in 1Q16 (+165% Q/Q), above €640 m Excluding Integration Costs

Stable CET1 Ratio Fully Loaded Pro-Forma at 10.85% (-9bps Q/Q, +75bps Y/Y)

Further Improvement in Asset Quality with Lower Net Impaired Loans at €38.1 bn (-2.0% Q/Q, −7.1% Y/Y) and Solid Coverage Ratio of 51.7% (+0.5p.p. Q/Q, +1.1p.p. Y/Y).

Net Bad Loans Ratio at 4.2% in 1Q16, with Coverage Ratio of 61.2%

Significant Increase of Net Operating Profit to €1.4 bn (+44.4% Q/Q) Thanks to Resilient Revenues (+0.7% Q/Q Adjusted for One-offs), Lower Group Operating Expenses (-2.7% Q/Q) and Reduced Cost of Risk (-39bps Q/Q)

-3.8k FTE Y/Y and −519 Branches Y/Y Across All Geographies Supporting Continued Cost Reduction (-3.7% Y/Y)

Investment Services Fees in Core Bank Up by 7.1% Q/Q in a Challenging Financial Market Context

Core Bank Commercial Deposits Increased by €6.0 bn in 1Q16, Mainly in Italy and CEE

New medium-Long Term Loan Origination of €15 bn in 1Q16

Important Contributors to Group Results Commercial Bank Italy, CIB and CEE.

In CEE Net Profit increase of 93.6% Y/Y as a Result of Higher Revenues and Lower LLP

Digital Transformation: Strengthened Leadership in Mobile Banking Applications with Launch of New State-of-the-art Mobile Services. Mobile Users Up by c. 50% since Dec-14

Today, the Board of Directors of UniCredit approved 1Q16 results. Federico Ghizzoni, CEO of UniCredit, comments:

«In the first quarter of 2016, we reported a significantly higher net profit versus the previous quarter of above €640 m excluding negative one-off items, despite an extremely challenging financial environment. Our capital ratios confirm the solidity of our Group and our asset quality continues to improve: impaired loans continuously decrease, net bad loans are stable with a coverage ratio above 61%, the highest among Italian banks. The business performance is more than satisfactory, as reflected in the growth trend of loans and deposits. In particular, the increase in investment fees in Italy is extremely positive. UniCredit is highly committed to support the economy in all its geographical constituencies: new loans origination reached €15 bn in the first quarter. UniCredit’s pan-European footprint is a key strength ensuring steady business growth. The implementation of our Strategic Plan is on track: we already achieved tangible results in terms of cost reduction and we are progressing well in the digital transformation of the bank

Group net profit reaches €406 m in 1Q16 and stands above €640 m excluding non-recurring items related to restructuring charges in Austria and Italy. RoTE [1] at 3.8% in 1Q16 (6.1% excluding restructuring charges). Strong contributors to bottom line are Commercial Bank Italy, CEE and CIB.

Net operating profit registers a strong performance at €1.4 bn (+44.4% Q/Q; +5.9% Y/Y), thanks to:

i. resilient revenues at €5.5 bn (+0.7% Q/Q, excluding positive one-offs in Germany of €96 m booked in 4Q15 and days & FX impacts of €55 m) supported by fees and trading growth;

ii. lower operating costs at €3.3 bn (-2.7% Q/Q, −3.7% Y/Y) both in staff and administrative expenses;

iii. lower LLP at €755 m (-37.9% Q/Q, −22.9% Y/Y), translating into an improved cost of risk at 63bps (-39bps Q/Q, −19bps Y/Y).

CET1 ratio fully loaded pro-forma [2] is stable at 10.85% (-9bps Q/Q, +75bps Y/Y). CET1 ratio transitional pro-forma stands at 10.50% (-23bps Q/Q), Tier 1 ratio transitional pro-forma at 11.36% and Total Capital ratio transitional pro-forma at 13.98% [3]. Basel 3 Leverage ratio transitional [4] pro-forma stands at 4.49% and fully loaded [5] pro-forma at 4.42%.

Group asset quality continues to improve in 1Q16, with net impaired loans further down to €38.1 bn (-2.0% Q/Q, −7.1% Y/Y) with a solid coverage ratio at 51.7%. Net bad loans slightly increase at €20.2 bn with an improved coverage ratio at 61.2%. Net bad loan ratio is stable at 4.2% in 1Q16 [6]. Other net impaired loans further shrink by −5.4% Q/Q and −16.0% Y/Y, mainly due to higher collections and back to performing. In Italy, asset quality experiences continued positive progress with impaired loans trend of UniCredit S.p.A. consistently better than the Italian banking system (ABI sample [7]) at the end of March 2016, with the highest coverage ratio on gross impaired loans at 53.0%.

The Core Bank net profit increases to €973 m in 1Q16 (excluding c. €240 m of restructuring costs). Revenues are resilient at €5.5 bn (-2.6% Q/Q, −3.8% Y/Y), with higher trading and investment fees offsetting the impact of low interests rates. Costs register a downward trend, as provisions do. Commercial Bank Italy confirms its role as largest contributor to net profit followed by CIB and CEE, notwithstanding a challenging and adverse market environment.

New medium-long term loan origination reaches c. €15 bn in 1Q16, of which €7.5 bn in the three Commercial Banks, €3.9 bn in CIB, €2.8 bn in CEE and c. €1 bn in Poland, thanks to UniCredit’s pan-European franchise and cross-divisional synergies.

Commercial deposits increase by €6.0 bn to €393.5 bn (+1.5% Q/Q, +9.7% Y/Y), mainly due to growth registered in Commercial Bank Italy to €126.1 bn (+3.4% Q/Q, +14.4% Y/Y) and in CEE to €58.4 bn (+4.6% Q/Q, +17.9% Y/Y at constant FX).

Strategic Plan achievements in 1Q16

  • The Group continued its effort on cost reduction. The number of FTEs declined by 1,050 Q/Q and 3,804 Y/Y as a result of agreements with Workers’ Council and Trade Unions. In addition, the Group agreed with Unions to reduce c. 500 executives in Italy. In terms of administrative cost efficiencies, 92 branches Q/Q (519 Y/Y) were successfully closed contributing to €25 m real estate savings Q/Q.
  • In terms of Group simplification, a reallocation exercise was carried out on several line items from Corporate Centres to Business Divisions in first quarter. The transfer of CEE, via elimination of the Austrian sub-holding and the subsequent direct ownership of CEE subsidiaries by UniCredit S.p.A., is in progress and is to be completed by year-end.
  • Digital transformation: the delivery model upgrade is accelerating both in mobile banking and in the branch automation areas. Online banking users reached 10.5 m across the Group and mobile banking users reached 4.3 m (c. +50% versus Dec. 2014). In mobile banking, new state-of-the art mobile applications were launched in Italy (Personal Financial Management and account opening), Germany (new banking application) and Poland (enriched payment services). As to branch automation, after a successful pilot phase, a first wave of new evolved self-service machines will be installed in Italy in 2Q16. In parallel, UniCredit is progressing on two main projects to shape the Group’s future digital business model: buddybank and UniCredit EVO.

1Q16 Key Financial Data

Group

  • Net profit: €406 m (+165% Q/Q, −20.8% Y/Y) and 3.8% RoTE (6.1% excluding restructuring charges)
  • Revenues: €5.5 bn (-2.0% Q/Q, −4.7% Y/Y)
  • Total costs: €3.3 bn (-2.7% Q/Q, −3.7% Y/Y), cost/income ratio of 60.1% (-0.4p.p. Q/Q, +0.6p.p. Y/Y)
  • Asset Quality: LLP at €755 m (-37.9% Q/Q, −22.9% Y/Y), cost of risk at 63bps (-39bps Q/Q, −19bps Y/Y); net impaired loan ratio at 7.9% (-0.3p.p. Q/Q, −0.6p.p. Y/Y) and coverage ratio at 51.7%; net bad loan ratio at 4.2% and coverage ratio at 61.2%
  • Capital adequacy: CET1 ratio fully loaded pro-forma at 10.85% and CET1 ratio transitional pro-forma at 10.50%; Tier 1 ratio transitional pro-forma at 11.36% and Total Capital ratio transitional pro-forma at 13.98%

Core Bank

  • Net profit: €735 m (+14.5% Q/Q, −16.3% Y/Y) and 8.0 %RoAC [8] (10.6% excluding restructuring charges)
  • Revenues: €5.5 bn (-2.6% Q/Q, −3.8% Y/Y)
  • Total costs: €3.2 bn (-3.1% Q/Q, −2.2% Y/Y), cost/income ratio of 58.1% (-0.3p.p. Q/Q, +0.9p.p. Y/Y)
  • Asset Quality: LLP at €413 m (-42.9% Q/Q, −28.1% Y/Y), cost of risk at 37bps (-29bps Q/Q, −16bps Y/Y)

Notes

[1] RoTE = Net Profit / Average tangible equity (excluding Additional Tier 1).

[2] Assuming (i) unaudited 1Q16 earnings net of dividend accrual, (ii) 2015 scrip dividend paid on May 3, 2016, with 78% shares acceptance rate, (iii) the full absorption of DTA on goodwill tax redemption and tax losses carried forward and (iv) Pekao minority excess capital calculated with 12% threshold.

[3] All transitional ratios assuming (i) unaudited 1Q16 earnings net of dividend accrual and (ii) 2015 scrip dividend paid on May 3, 2016, with 78% shares acceptance rate. For regulatory purposes, CET1 ratio transitional stands at 10.31%, Tier 1 ratio transitional at 11.17% and Total Capital ratio transitional at 13.79%

[4] Assuming (i) unaudited 1Q16 earnings net of dividend accrual and (ii) 2015 scrip dividend paid on May 3, 2016, with 78% shares acceptance rate. For regulatory purposes, leverage ratio transitional at 4.42%.

[5] Assuming (i) unaudited 1Q16 earnings net of dividend accrual, (ii) 2015 scrip dividend paid on May 3, 2016, with 78% shares acceptance rate, (iii) the full absorption of DTA on goodwill tax redemption and tax losses carried forward and (iv) Pekao minority excess capital calculated with 12% threshold.

[6] Calculated as €20.2 bn net bad loans divided by €483 bn total net customer loans.

[7] Italian Banking Association — sample composed by c. 80% of Italian banking system (excluding UniCredit S.p.A.), including exposures towards households and non-financial corporations.

[8] RoAC = Net profit/ Allocated capital. Allocated capital is calculated as 10% of RWA, including deductions for shortfall and securitizations.

Consolidated Interim Report as at March 31, 2016

11.05.2016 - 16:15
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