Mediobanca BoD - Financial statements as at 31/3/20 approved

Mediobanca is strongly committed to executing the strategic guidelines of its 2019-23 plan, leveraging on the diversity of its business model and proven track record in growth across cycles and turning critical scenarios into opportunities to consolidate its position

The Group is facing the COVID-19 crisis with high capitalization, broad revenue diversification and excellent asset quality
In the emergency situation generated by COVID-19, Mediobanca has stepped up its activity in support of its stakeholders: staff, clients, community and shareholders

The Mediobanca Group earned a net profit of €85m in 3Q, the solid operating performance comfortably offsetting the COVID-19 impact

Over 9M the Group delivered improving results and high profitability – the result of our continued strategy to strengthen market positioning and intensify commercial efforts in our three core businesses (WM, CB and CIB)
ROTE: 10%, with net profit of €552m (down 12%)

TFAs €60bn (down 2% ), customer loans up 10% to €47bn, funding up 4% to €54bn
Revenues up 1% to €1.9bn

CET1 14%, including share of dividend accrued at end-2019
MDA buffer 600 bps

Capital generation will remain robust:  CET1 FY21@15% (pre-distribution) even if cost of risk doubles from pre-COVID-19 levels (from FY19 @52 bps to @100 bps)

The comfortable funding and liquidity situation will continue
In conjunction with the FY 2019-20 year-end, the Group will adjust the IFRS 9 indicators to the new macroeconomic scenario and issue new guidance on the distribution for the present financial year in line with the ECB recommendations

9M performance reflects:

  • Record commercial activity in all areas until February. Net new money (NNM) capacity in WM remains high, with no outflows in the Affluent/Private segment which contributed NNM of €1.1bn in 3Q, with additional deposits totalling €0.5bn. Despite the lockdown conditions from the last weeks in March severely reducing new business levels in consumer credit (down 80%) and mortgage lending (down 60%), over 9M new loans were up 3% in Consumer Banking (to €5.6bn) and up 45% in residential mortgages (to €1.8bn).
  • Asset quality indicators kept excellent and further improving: gross NPLs/total loans down from 3.9% at end-December 2019 to 3.8%, with a coverage ratio of 55%, Stage 2 loans up slightly, from 5.3% to 5.9% with a coverage ratio of 11%. The cost of risk (“CoR”) has been increased prudentially in 3Q, to 85 bps, from the record lows as at year-end 2019.
  • Solid capital position: CET1 ratio 13.9%, net of approx. 60 bps for the dividend already accrued for the current financial year in 1H, approx. 600 bps above the regulatory minimum. In line with the ECB guidance and decisions taken by other banks in the Single Supervisory Mechanism (SSM), the dividend policy for the current financial year (€0.52, 10% higher than last year) has not been confirmed; however, in view of the solid capital position, the share of the dividend accrued to end-December 2019 has continued to be prudentially deducted from CET1. When the full-year results are approved at end-July, the Board will issue new guidance which may result in a proposal being submitted for approval by shareholders at the AGM in October 2020 if in line with SSM guidance;
  • Comfortable funding and liquidity position: funding grew in the deposit component; increased availability in terms of TLTRO and counterbalance capacity with the new ECB guidelines. Cost of funding under control. Asset allocation in the banking book conservative;
  • Growth in revenues (up 1% YoY, to €1,907m), down 9% in 3Q (to €582m) due to the impact of market volatility (with trading income virtually wiped out in 3Q). Solid performance in core revenues, reflecting:
  • Net interest income of €1,082m, up 3% YoY and down 1% QoQ (to €360m), on higher average volumes with low cost of funding;
  • Fee income totalling €487m, up 6% YoY and down 9% QoQ (to €159m), driven by WM (to €235m, up 12% YoY), with CIB and Consumer Banking stable; 3Q saw good resilience in WM fees, due in part to the low contribution from performance fees, and a reduction in investment banking commissions;
  • Increase in CoR to 61 bps, which with 3Q has risen further to 85 bps. The increase is concentrated in Consumer Banking (up from 190 bps to 202 bps, with 3Q to 223 bps), due to higher coverage, and in CIB (from minus 33 bps to minus 9 bps, which with 3Q becomes 37bps), due to lower writebacks and one position being reclassified as UTP;
  • Net profit €552m (down 12% YoY), €85m of which in 3Q, reflecting €40m in value adjustments for seed capital and higher contributions to the SRF system fund (€37m), both taken in 3Q;
  • ROTE 10%, with all business segments contributing positively:
    • WM: ROAC  21%, leading contributor to Group fee income (48% of total in 3Q); revenues up 8% YoY (to €444m), net fees up 12% YoY (to €235m), net profit up 19% YoY (to €67m);
    • Consumer Banking: ROAC 29%, leading contributor to Group NII; revenues up 5% YoY (to €805m), NII up 5% YoY (to €711m), net profit down 3% YoY (to €248m);
    • CIB: substantial and profitable contribution; net profit €155m, ROAC 11%
    • PI: substantial and profitable contribution; net profit €225m, ROAC 14%.