Financial statements for FY 2015/16 approved
Distinctive positioning in the Italian banking system
Revenues at all-time high of €2,047m
GOP up 11% to €736m, net profit up 2% to €605m
Dividend up 8% to €0.27 per share
Excellent stress test results (among the best banks in Europe)
- The Mediobanca Group posted improved results in FY 2015/16, a year which was marked by significant market turmoil, on the back of its distinctive positioning in the banking sector. Mediobanca’s business model has proved to be profitable even in the current scenario of subdued economic growth and low interest rates, due to the following distinctive features:
- Focus on three diversified, specialist businesses (CIB, Consumer Credit and Wealth Management) unaffected by restructuring processes
- Excellent asset quality (Texas ratio 16%)
- High capital solidity levels (CET1 above 12%, leverage ratio 10%)
- Low cost/income ratio (44%)
- In a challenging macro scenario, the Mediobanca Group delivered the following results:
- Revenues at an all-time high of €2,047m, driven by RCB: ongoing growth in net interest income of 6%, to €1,207m, driven by consumer credit (up 13% to €784m), plus the higher contribution from Assicurazioni Generali (up 14% to €255m) offset the reductions in fees (down 5% to €450m) and treasury income (down 36% to €133m), impacted by the difficult market conditions. The results reflect an important reshuffling of the Group’s revenue composition, with the share accounted for by retail activities increasing significantly: RCB 55% (49%), CIB 31% (38%), PI 14% (12%).
- Loan loss provisions down 21% to €419m, due to further improvement in asset quality: non-performing loans down 10%, and in relative terms down from 3.5% of total loans to 2.9%, coverage ratio up to 54%; loan loss provisions down 21% and cost of risk down from 168 bps to 124 bps.
- Operating profit up 11% to €736m, despite 5% increase in costs to €892m, linked to expanding distribution capacity and launch of various Group infrastructural projects, such as the advanced internal ratings-based model validation project (AIRB);
- Net profit up 2% to €605m, following €62m in net contributions to the Banking Resolution Fund and Deposit Guarantee Fund, ROTE 7.4%
- Proposed dividend: €0.27 per share (up 8%), payout increase to 38%
- Capital ratios above 12% despite 75 bps negative impact of Assicurazioni Generali investment deduction (50% of the deduction scheduled for Jan. 2019 brought forward to 4Q):
- CET1 ratio: 12.1% phased-in, 12.6% fully phased
- Leverage ratio: 9.5% phased-in, 9.9% fully phased
- Excellent results from stress test exercise: impact of adverse scenario limited to 94 bps, with CET1 phase-in (Dec. 2018) at 11.46%, comfortably above SREP ratio level of 8.75%
- 4Q: net profit up 34% to €162m, with net interest income resilient (at €301m), fees recovering (up 4% to €114m), further reductions in NPLs (gross and net down 4%), and strong reduction in RWAs due to market risk optimization and partial deduction of Assicurazioni Generali stake (Group RWAs down from €60bn to €53.9bn)
- At the end of the three-year period covered by the plan, the validity of the strategic vision has been confirmed, expressing the Group’s commitment to become simpler and easier to value by the market, able to ensure sustainable profitability in the medium term by investing in three specialized, high fee-generating and low capital-absorption banking businesses. From this standpoint, over the past three years the Bank has:
- reduced equity exposure and related volatility: stakes worth €1.5bn have been sold, generating €0.5bn in gains, removing P&L volatility deriving from valuation of AFS shares, and the process of selling 3pp of the AG stake has been launched;
- invested in high fee-generating and low capital-absorption activities: Group AUM have doubled to reach €35bn, through organic growth (CheBanca! and private banking) and by acquisitions (Cairn Capital and Barclays), with investment banking activities strengthened in Italy and internationally;
- improved profitability: GOP doubled, from €370m as at end-June 2013 to €736m, generating net profits of approx. €1.7bn, dividends of some €600m distributed, and ROTE over 7%;
- preserved capital solidity and outstanding asset quality, starting RWAs optimization
- At the divisional level:
- CIB: validity of model as specialist, client-oriented operator confirmed. Domestic leadership confirmed, with improving position in southern Europe generally, and non-Italian share of revenues rising to 46%. Despite the macroeconomic scenario impacting negatively, entailing substantial reductions in net interest and treasury income, ROAC has remained positive at all times on the back of the stable fee pool and excellent asset quality (the cost of risk fell from 69 bps to 19 bps during the three years of the plan).
- Compass: anti-cyclical, growing, profitable business (ROAC 20%), growth driver for the whole Group. Compass has confirmed its leadership position on the consumer credit domestic market, acting as NII growth driver (CAGR 2013-16: +13%), displaying the capability to disburse finance stably while pricing in risk correctly and at the same time reducing the cost of risk.
- CheBanca!: from deposit gatherer to profitable wealth manager, source of recurring revenues for the Group as a whole. AUM of €4bn raised during the three years of the plan, safeguarding the level of deposits at over €10bn, ROAC from negative to 5%, and foundations laid to double in size with the Barclays acquisition.