BoD Mediobanca - Financial statements for three months ended 30/9/20 approved
Positive start to FY 2020-21, with all business segments reacting
fast post lock-down
Net profit four times higher at €200m, ROTE 9%
Revenues up 3% to €626m, with NII and fee income up 9%
Record quarter for CIB, solid growth in WM, Consumer Banking recovering quicker than expected
CoR halved to 61 bps on healthy asset quality/moratoria trend (almost all moratoria in Consumer Banking now expired)
CET1 16.2%, factoring in estimated dividend payout @70% of net profit
Business and profitability indicators picked up quickly in 3M FY 2020-21 despite seasonal factors due to the summer months, driven by the Group’s strong position with the most resilient client brackets (households and SMEs) and helped by strict risk management.
Results beat expectations, reflecting:
- Commercial activity almost back to normal in all segments, in a market scenario that continues to be uncertain;
- Robust performance in revenues (up 3% QoQ to €626m), in particular net interest income and fee income (up 9% QoQ and up 6% YoY to €546m), which offset the reduced contribution from PI (€46m) reflecting one-off items;
- Fee income delivered strong growth (up 32% QoQ and up 22% YoY, to €189m), driven by CIB (up 70% QoQ and up 54% YoY, to €88m), with Advisory and ECM business recovering, and a solid performance in WM (up 5% QoQ and up 9% YoY, to €76m);
- Net interest income was basically flat (down 1%, to €357m) on lower customer loans in Consumer Banking (down 1% QoQ and down 4% YoY, to €12.9bn); new loans in Consumer Banking, which reduced materially during the lockdown period, have now returned to levels where they offset the stock of loans falling due in the quarter (€1.5bn);
- Net trading income totalled €36m (down 25% QoQ, up 3% YoY).
- Asset quality confirmed both in CIB, where writebacks were recorded, and Consumer Banking, where the majority of the moratoria granted were closed with no issues, with risk indicators returning to pre-Covid levels; overall moratoria granted by the Group fell from 5.6% to 2.9% of total loans outstanding. The cost of risk halved during the three months, to 61 bps (30/6/20: 141 bps); non-performing loans were stable, at 4.2% of total gross loans (net NPLs 1.9%), with coverage ratios higher at 57%; gross loans classified as stage 2 were lower, at 6.7% of the loan book (net stage 2 loans 6.2%).
- Net profit four times higher QoQ, at €200m, including €13m in writebacks to financial assets as a result of market prices improving
- ROTE adj. 9%.
- CET1 ratio stable at end-June high levels (16.2%, up 200 bps YoY) including a dividend payout equal to 70% of reported net profit, an assumption which is subject to the ECB’s ban on dividends being lifted (currently the ban is in place until end-December 2020).
At the divisional level, there was significant improvement in CIB which offset the consolidation in Consumer Banking and PI; while the WM contribution has continued to grow.
- CIB: ROAC 19%, with net profit rising to €85m (up 3.3x QoQ and up 48% YoY). Mediobanca has further strengthened its leadership position in core segments and markets, taking part in the most important M&A transactions in Italy and France in particular. In the three months there was significant growth in revenues (up 31% QoQ and up 22% YoY, to €183m), on recoveries in Advisory, ECM and DCM business. The high quality of the loan book is borne out by loan loss provisions reflecting €18m in net writebacks (compared with net writedowns of €33m in 4Q 2019-20, which also reflect approx. €40m in non-recurring adjustments to the IFRS 9 models being aligned with the new macro scenario).
- WM: ROAC 20%, net profit rose to €22m (up 58% QoQ and up 11% YoY), on revenues of €146m (up 4% QoQ and YoY) and net fee income of €76m (up 5% QoQ and up 9% YoY). Asset-gathering capability was confirmed as high, in the Affluent and Private segments in particular (NNM €0.9bn in 1Q FY 2020-21), due to the ongoing enhancement of the product offering (TFAs rose to €64.2bn) and distribution network (30 new professionals added during the quarter: bankers, FAs and relationship managers).
- Consumer Banking: ROAC 27%, with net profit (€72m) down YoY (by 18%) due to lower revenues (€260m, down 2% QoQ and down 3% YoY), caused by the reduced new business during the lockdown period (new loans have now returned to 75% of their pre-Covid levels), but higher QoQ (up 48%) due to a particularly impressive performance in asset quality (cost of risk 248 bps, vs 361 bps in 4Q FY 2019-20): 90% of the moratoria have now been paid off, with almost 90% resuming normal repayments, and the risk indicators returning to pre-Covid levels;
- PI: ROAC 13%, net profit €52m, lower due to non-recurring items in relation to asset disposals by Assicurazioni Generali
- HF: increase in funding and liquidity in treasury management, against ongoing discipline in central costs at Group level and deleveraging in leasing. The cost of funding was stable at approx. 80 bps, helped by the mix which saw increases in the deposits and T-LTRO components. NSFR 109.1% and LCR 164.1%.