Introduction
The Private Banking business unit primarily targets high-net-worth individuals by providing advisory services and wealth-management solutions using a comprehensive approach. The business unit operates through a network of around 1,200 private bankers located in more than 250 branches in the three main countries (Italy, Germany and Austria), in addition to a selective presence in some European markets (Switzerland, Luxembourg and San Marino).
Financial performance
The first quarter of 2010 was characterized by moderate growth of financial markets, with performance varying from country to country: for example, the main stock market indices in
Germany and Austria rose in the three months to March 31, 2010 (DAX 30 +3.3%; ATX +5.5%), but there was a slight fall in Italy (FTSE MIB -1.7%).
The business unit’s total financial assets under management and administration at March 31, 2010 amounted to€137.3 billion, an increase of 1.1% compared with December 31, 20091.
Total Financial Assets (billion€)
AMOUNTS AS AT 03.31.2010 12.31.2009 AMOUNT % PRIVATE BANKING Total Assets 137.3 135.8 1.5 1.1% Ordinary Assets 104.3 103.8 0.6 0.5% AuM 35.6 33.5 2.1 6.3% AuC 48.2 47.7 0.5 1.1%
Deposits (inc. Repos) 20.4 22.5 ( 2.1) -9.2%
Other assets 0.1 0.1 .. ..
CHANGE ON DEC '09
Net of extraordinary components2, financial assets at March 31, 2010 were up slightly (+0.5%) at the end of 2009 thanks to a positive performance effect of€1.2 billion. There were net outflows3of €600 million in the quarter. Strong competitive pressure on deposit conditions offered to clients prompted outflows of€1.8 billion in Q1 2010, only partly offset by net inflows into managed assets ( €1.4 billion) in line with market trends.
The breakdown of financial assets3at March 31, 2010 showed a reallocation in favor of managed assets (34.1% of the total compared with 32.3% at December 31, 2009) and, to a lesser extent, assets under administration (46.2% compared with 46% at year-end 2009). Deposits, including repos, were down from 21.6% to 19.6% at December 31, 2009.
Percentage breakdown of financial assets3at March 31, 2010 34.1% 46.2% 19.6% 0.1% Assets under management Assets in custody
Deposits (inc. Repos)
Other assets
3
See footnote on previous page
The Private Banking business unit reported operating profit of€58 million at March 31, 2010, up by 22.6% on the previous quarter and consolidating the recovery started in the last months of 2009.
Income Statement (€ million)
2010 2009 CHANGE 2009 CHANGE Q1 Q4 % Q1 % PRIVATE BANKING ON Q4 '09 ON Q1 '09 Operating income 196 194 + 1.1% 205 - 4.2% Operating costs (138) (147) - 5.9% (139) - 0.9% Operating profit 58 47 + 22.6% 65 - 11.0%
Profit before tax 55 28 + 95.4% 61 - 9.6%
Revenues of€196 million were up by 1.1% on the previous quarter:
net interest income was down again (by 18% from the previous quarter), due primarily to strong competitive pressure that caused a fall in deposit volumes and a narrowing of the relative spreads, only partly offset by a bigger contribution from loan income;
net non-interest income, on the other hand, rose by 10% thanks to an increase of 14% in net commissions compared with the previous quarter; this growth was mainly attributable to an increase in assets under management driving more up-front and management fees, and to additional revenues from fiduciary services following Italian tax amnesty.
Operating costs totaled€138 million, a decrease of 5.9% compared with Q4 2009. There were
significant reductions in payroll costs (-4%) and other administrative expenses (-9%).
Measures to contain direct, structural and discretionary costs continued, but the sharp fall compared to the previous quarter was influenced by non-recurring or cyclical costs in payroll costs and other administrative expenses booked at the end of 2009.
Provisions for risks and charges, down massively compared to Q4 2009 which was affected by
extraordinary charges, were -€0.9 million. This was the net difference between provisions made for
legal disputes or customer claims in Italy (-€1.5 million) and the recovery of €0.6 million previously set aside in Germany.
Pre-tax profit was€55 million, up considerably compared to the previous quarter (+95.4%). It was
boosted by better operating results and by a significant reduction in writedowns and provisions, which had greatly affected Q4 2009.
Key Ratios and Indicators
2010 2009 CHANGE 2009 CHANGE
Q1 Q4 % Q1 %
PRIVATE BANKING ON Q4 '09 ON Q1 '09
EVA (€ million) 26 7 + 265.4% 33 - 20.9%
Absorbed Capital (€ million) 392 385 + 1.7% 334 + 17.2%
RARORAC 26.39% 7.35% n.s. 39.11% n.s.
ROA, bp (*) 75bp 75bp 0bp 84bp -8bp
Cost/Income 70.4% 75.6% -519bp 68.1% 229bp
Operating costs/Total Financial Assets (**) 53bp 57bp -4bp 57bp -4bp
(*) Operating income on Total Financial Assets (average) net of extraordinary assets. (**) Total cost on total Financial Assets (average) net of extraordinary assets.
Staff Numbers
03.31.2010 12.31.2009 AMOUNT %
PRIVATE BANKING
Full Time Equivalent 2,977 2,977 (1) -
CHANGE AMOUNTS AS AT
Breakdown by business, geographic area and company
The business unit is organized into four business lines: PB Italy (including San Marino), PB Germany, PB Austria, and PB International, which includes the operating units in Switzerland and Luxembourg.
Below are their key figures.
Percentage contribution by country as at March 31, 20101
48.9% 48.1% 50.6% 26.3% 27.6% 23.3% 17.7% 18.0% 17.2% 7.1% 6.3% 8.9% INTERNATIONAL AUSTRIA GERMANY ITALY
Private Banking Italy reported€80 billion in total financial assets. Ordinary financial assets were
€62 billion, up by 1.2% since the beginning of the year thanks to a positive performance effect on the assets of€700 million. Ordinary net sales, which were marginally positive in the quarter, were marked by a significant portfolio shift by clients into managed assets (+€1.2 billion) and a sharp decrease in direct deposits (-€1 billion). Operating profit was €32 million, up by 62% over Q4 2009 thanks to a sharp increase in revenues (6% quarter on quarter) and a parallel reduction in operating costs (9% quarter on quarter), returning to a normal trend after non-recurring effects on payroll costs in the final three months of 2009. The fall in net interest income (15% from quarter on quarter) was offset by a rise of 14% in net commissions. The cost/income ratio went from 78.2% at December 31, 2009 to 66.9% at March 31, 2010. UniCredit Private Banking ended the quarter with a net profit of
€11 million.
Private Banking Germany reported€26 billion in total financial assets at March 31, 2010. The
ordinary component amounted to€23 billion, stable compared to Q4 2009 (-0.2%) thanks to a positive performance effect of€0.3 billion. There were ordinary net outflows in the quarter of €0.4 billion, caused by significant outflows from deposits (€0.7 billion) as a result of strong competitive pressure. Operating profit was€15 million (+9% quarter on quarter), boosted by a rise of 28% in
commissions; net interest income fell again (-19% quarter on quarter) for the reasons mentioned earlier. Operating costs rose slightly (2%) as a result of higher payroll costs (+14% quarter on quarter) arising from increased variable compensation and the presence in Q4 2009 of non-recurring positive impacts on fixed compensation; other administrative expenses fell by 8%, due largely to seasonal spending.
The transfer of clients to and from the Retail Business Area in Austria was largely completed in March 2010. Data are therefore pro-forma in all previous periods, on a like-for-like basis.
Total financial assets at March 31, 2010 were€17 billion; the ordinary component grew by 0.8% compared with the previous quarter to€15 billion, thanks to a positive performance effect of €300 million. There were slight net ordinary outflows in the quarter of€0.1 billion as a result of outflows from deposits (-€0.3 billion). Operating profit was €11 million, up by 23% over the previous quarter owing to lower operating costs (-10% quarter on quarter), especially other administrative expenses (- 25% quarter on quarter). Revenues fell by 2% compared to Q4 2009, with a rise in net commissions (5%) not enough to offset the fall in net interest income (23%), caused mainly by lower income from deposits.
Private Banking International reported€16 billion in total financial assets at March 31, 2010, including €5 billion in ordinary assets. Such ordinary assets were down by 1.1% since the beginning of the year due to slight net ordinary outflows (€0.1 billion). Operating profit was €6 million, down by 47% over the previous quarter because of a reduction of 26% in revenues. Operating costs were largely stable (-0.2% quarter on quarter). The business line’s results were negatively affected by the impact of Italy's tax amnesty as well as by significantly narrower spreads on deposits.