Quarterly financial statements as at 31 March 2009
At a Board meeting held today with Cesare GERONZI in the chair, the Directors of Mediobanca approved the Group’s financial statements for the period ended 31 March 2008, as illustrated by Chief Executive Officer Alberto NAGEL and General Manager Renato PAGLIARO.
In a scenario that continues to be challenging, the Mediobanca Group’s results for the nine months under review bear out the trends witnessed in the first half of the year. Revenues from banking activity reflect growth of 2.9%, due to increases in net interest income from corporate banking, fees and commissions, and net trading income. However, this must be set against a substantial, €367.4m reduction in the contribution from the equity-accounted companies and a €354.7m increase in provisions for financial assets reflecting the adverse market conditions. Loan loss provisions of €329.5m were also made, reflecting the general deterioration in the risk profile of both companies and households. Accordingly, total income was down from €1,607.2m to €1,276.7m, and net profit from €783.3m to €39.3m. The main income sources performed as follows:
- net interest income rose by 4.7%, from €622.6m to €651.9m, reflecting 13.9% growth in corporate and investment banking, which was boosted by higher lending (up 5.1% on the figure recorded at 31 March 2008), as well as higher income from the securities portfolio; while the retail component reflects the reduction in consumer credit loans (down 4% year-on-year, to €8.3bn) and the higher cost of bank funding; the 3% growth in net interest income from mortgage lending reflects a 20% year-on-year increase in volumes;
- net trading income rose by 2%, from €263m to €268.3m, due to dealing profits, up from €74m to €98.6m, €91.4m of which in the third quarter, which offset reduced income from the AFS portfolio, down from €189.2m to €169.6m; the healthy result for the three months was boosted by the fixed-income area (which delivered dealing profits of €89.3m) and by equity trading returning to profitability (with profits of €9.3m);
- net fee and commission income remained stable at €378.1m (€375.8m), due to a 16% increase in retail operations, with corporate and investment banking business holding up well (down just 4%) and despite private banking slowing significantly (down 25%); in CIB, there was an upturn in the third quarter in capital market activity, which generated revenues of €71m, compared with €66m in the same period last year (and which contributed over €50m in the third quarter alone), and in M&A, which produced income of €64m (roughly half of which in the third quarter);
- equity-accounted companies contributed a €21.6m loss, compared with income of €345.8m at the same stage last year, due to the €809m net loss booked by Assicurazioni Generali in the fourth quarter of 2008.
Tax of €32.2m was boosted by an amount of approx. €46m recovered due to goodwill booked upon the acquisition of Linea being exempt from taxation. On the balance-sheet side, there was further improvement in the Group’s liquidity position during the quarter, with growth of 7.2% in funding for the three months, from €48.3bn to €51.7bn, €4.3bn of which was raised by CheBanca! This financed the 15.4% rise in treasury fund applications, from €10.2bn to €11.7bn, and growth in AFS securities, up from €3bn to €5bn (largely in the fixed-income segment). Loans and advances to customers were largely stable at €36.3bn, versus €36.6bn, and equity investments were down slightly, from €2.6bn to €2.4bn.
Corporate & Investment Banking (“CIB”)
- Best quarter in the past eighteen months in terms of revenues: 14% growth in net interest income, to €276m, driven by wholesale banking (up 17%); strong recovery in net fee and commission income, at €227m, down 4% for the nine months by up 56% in the last quarter; and significant contribution from net trading income, which reached roughly €90m, on the back of five consecutive quarters without losses;
- Ordinary costs down 4% (operating costs up 6% including non-domestic growth initiatives, with 51 more staff on the books, 38 of whom at Mediobanca’s international branches;
- Slowdown in loan loss provisions in Q3 (€104m for the nine months, €37m for Q3), despite persistent economic scenario;
- Impairment charges to AFS securities totalling €145m (€71m of which for Q3);
- Net profit of €203m (€384m).
Principal Investing (“PI”)
- Net loss of €207m for the nine months, compared with €336m net profit at the same time last year, due to: writedowns of €144m and €63m to investments in Telco and RCS MediaGroup respectively, charged at 31 December 2008; earnings contributed by equity investments €356m lower than in March 2008: in particular, the contribution from Assicurazioni Generali for the nine months was negative at minus €7.3m, due to the €118.8m loss booked by the company for the third quarter, compared with a profit of €321.6m one year earlier;
- market value of investments equal to €2.6bn based on prices and holdings at 31 March 2009 (rises to €3.2bn based on current prices). Retail & Private Banking (“RPB”);
- Total income in line with last year, at €569m: retail banking positive (up 4%, to €35m), consumer credit stable (up 1%, to €446m), private banking declining (down 16%, to €87m);
- Even in a scenario as negative as the past nine months, where the increased cost of funding and higher loan loss provisions have depressed gross profitability, this division has continued to be self-financing, effectively funding the €89m costs incurred by CheBanca! and still recording a €6m pre-tax profit;
- Consumer credit: Profitability reducing, due to increased cost of bank funding and higher loan loss provisions (3.2% on an annualized basis); Major cost synergies: headcount cut by 13% in the nine months;
Consumer credit shows total income up from €439.7m to €446m, driven by higher net fee and commission income, up from €104.9m to €121m, which more than offset the fall in net interest income, from €333.2m to €325m, which was hit by the higher cost of bank funding. Net profit stood at €85.6m (€36.2m), reflecting the one-off positive tax effect referred to earlier (€45.9m), and also higher loan loss provisions (up from €164.9m to €206.9m).
- Retail banking: Outstanding commercial results by CheBanca! in its first year of business: deposits currently worth €5.5bn, i.e. 10% of MB Group total funding, and 140,000 customers
- Private banking: AUM almost flat since December at €12.6bn (31/12/08: €12.7bn), €7.9bn of which at CMB and €4.7 at Banca Esperia; Net profit down 44%, to €24m, due to reduction in fee income.
In the nine months ended 31 March 2009, Mediobanca made a net loss of €3m, compared with a net profit of €357.4m in the same period last year, thus making up virtually the entire, €58.2m loss reported at end-December. Total income held up well, at €650m, compared with €651.1m last year, boosted by €81m in net trading income for the quarter, and a 9.7% rise in net interest income. Growth in operating costs was limited, up from €180.6m to €186.3m, while provisions for AFS shares, equity investments and loan losses were higher, at €145.4m, €170.2m and €74.1m respectively. On the balance-sheet side, there was a reduction in loans and advances to customers, down from €27,315.3m to €24,549.4m, chiefly those to Group companies, which reduced from €11,668.9m to €9,201.7m, while treasury funds increased, from €9,078.4m to €11,180.9m, as did investments in AFS securities, from €2,438.5m to €2,918.8m, which include subscription to the UniCredit CASHES for €347.3m. Funding was virtually unchanged, at €38,146.1m, compared with €38,195.1m.