Normalized revenues up 7%, to €2,039m
Normalized PBT up 28%, to €792m
Net profit €369m, after €238m non-recurring charges
Proposed dividend: €0.17 per share
Group net profit €369m (30/6/10: €401m), after €238m non-recurring charges, as follows:
- €155m: writedowns to equity investments, €120m of which in respect of Telco
- €120m: charges for bonds, including €109m on Greek government securities
- €38m: Telco/Greece writedowns by Assicurazioni Generali taken in its interim accounts brought forward
€75m: writeback in respect of one exposure
Net of these items the Group reported significant growth:
- Revenues up 7% to €2,039m, driven by a recovery in the RPB segment; net interest income rose 17%, offsetting the absence of non-recurring gains on AFS disposals
- Cost of risk down 18% to 120 bps, due to improved asset quality
- Gross profit up 28% to €792m
ROTE up to 9%
Liquidity, capital solidity and funding source diversification all confirmed:
- Deposits/loans ratio: 0.7x
- Core tier 1 ratio: 11.2% (30/6/10: 11.1%)
Funding stable at €52bn, approx. 60% of which attributable to retail clients (CheBanca! deposits + Mediobanca bonds sold to retail)
- Proposed dividend: €0.17 per share, the same as last year
With Renato PAGLIARO in the chair, the Directors of Mediobanca approved the Group’s financial statements for the twelve months ended 30 June 2011, as illustrated by Chief Executive Officer Alberto NAGEL.
The financial year under review saw a healthy performance in banking activities, impacted, however, by the sovereign debt crisis affecting the peripheral EU member states, which led to reductions in the prices of certain asset classes and an increase in the cost of refinancing for governments and banks.
The Mediobanca Group’s results for the twelve months, which show a net profit of €368.6m (30/6/10: €400.8m), reflect a series of non-recurring items resulting in a net charge of €238m being taken, most of which linked to the market crisis, as follows:
- €275.5m in provisions for financial assets, virtually double the €150m taken the previous year: €119.7m of which in respect of bonds, including €108.9m on Greek government securities (in line with market prices as at the reporting date), and €155.8m of equities, including €119.6m on Telco – which wrote down the book value of its Telecom Italia shares from €2.2 to €1.8 per share – plus €32.9m other investments (chiefly Delmi);
- €37.8m in reduced earnings from the equity-accounted companies due to the writedowns charged pro rata by Assicurazioni Generali at 30 June 2011 in respect of Greek government securities and Telco; this item has effectively been brought forward, given that under the equity method, the investee companies’ earnings results are booked one quarter after they are recorded;
- €75m writeback in respect of a single performing corporate loan.
Net of the above item, the Group’s performance reflected:
- Revenues up 7%, to €2,039m, due to growth in net interest income of 16.7 %, from €917m to €1,070.3m, as a result of a positive performance in the Retail and private banking segment (up 25.6%, from €525.7m to €660.5m), with Corporate and Investment Banking resilient (at €429.3m compared to €428.9m); income from securities was stable, down from €459m to €449m, this item including the equity-accounted companies’ contribution (which, net of the €37.8m Generali charge brought forward, was up 13%), dealing profits earned by the Corporate and investment banking were up 26%, from €119m to €151m, against a reduction in income from the valuation of the CheBanca! securities portfolio; while net fee and commission income was basically stable, at around the same levels witnessed last year (€520.3m, compared with €533.5m), despite the difficult market conditions;
- Administrative costs were up 6.6%, from €772.9m to €823.9m, with labour costs up 8%, reflecting the simultaneous strengthening of the platforms both in Italy and abroad (with 210 more staff on the books, 82 in CIB, 46 in consumer credit and 78 in retail banking); the cost/income ratio was stable at 40%;
- Loan loss provisions (net of the €75m writeback referred to above) were down 18%, from €516.8m to €423.8m, and the cost of risk from 150 bps to 120 bps. Provisioning was down in Corporate and Investment Banking (from €156m to €100.3m) and on the retail side (from €360.8m to €323.5m), bearing out the improvement in asset quality in both the corporate and consumer credit segments;
- Profit before tax was up 28%, to €792m, around 60% of which earned by the CIB division, over 25% from PI and nearly 15% by the RPB division;
- ROTE was up three percentage points, to 9%.
- On the balance-sheet side, the Group remains solid and liquid, with diversified funding sources. The various items performed as follows:
- Group loans and advances to customers rose 7%, from €33.7bn to €36.2bn, due to the recovery in CIB business (up 6%) and buoyant performances in both the retail and consumer credit segments (up 16% and 8% respectively);
- Impaired assets (i.e. non-performing, sub-standard, restructured and overdue items) fell from €803.2m to €709.9m, and account for just 1.9% of total loans (30/6/10: 2.3%), with the coverage ratio at 48% (47%);
- Liquid financial assets (treasury funds, AFS and HTM assets) remain at high levels (above €18.6bn), albeit lower than last year (€20.7bn), with the reduction in favour of loans and advances;
- Funding declined from €53.9bn to €51.7bn, due to reduced use of the banking system (down from €6.0bn to €4.7bn); while CheBanca! deposits rose, from €9.6bn to €10.0bn, and debt securities totalled €34.5bn (€35.2bn); some 60% of the funding is attributable retail customers (CheBanca! deposits and Mediobanca bonds placed with retail investors);
- The loans/deposits ratio (0.7x) and net tangible equity/assets ratio (10%) bear out the Group’s high liquidity and solidity;
- Net equity grew from €6.3bn one year previously to €6.5bn, and core tier 1 ratio capital rose from €5.9bn at the same stage to €6.1bn; the capital ratios also showed improvements, with the core tier 1 ratio up from 11.1% to 11.2%, and the total capital ratio up from 13% to 14.4%.