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TRANSCRIPT
London, 12 December 2017
One Bank, One UniCredit Capital Markets Day
Agenda
1
Q&A session
Breakfast & Registration
Transform Operating Model and Maximize Commercial Bank Value
Transform 2019
Q&A session
Commercial Banking Italy
Improve Asset Quality
CFO Presentation
Coffee Break
Topic
J.P. Mustier
Closing remarks
Lunch
Q&A session
Speaker
G.F. Papa
A. Casini / G. Ronca
T.J. Lim
M. Bianchi
J.P. Mustier
Time
9.00
8.00
11.10
11.30
13.30
London, 12 December 2017
J. P. Mustier
One Bank, One UniCredit Transform 2019
Transform 2019: key targets confirmed with an improved risk profile (1/2)
A simple successful Pan European Commercial Bank, with a fully plugged in CIB, delivering
a unique Western, Central and Eastern European network to its extensive client franchise
Transform 2019 fully on track yielding tangible results underpinned by group-wide business momentum
2019 key targets confirmed
2
2019 key targets confirmed, RoTE target >9%
2019 fully loaded CET1 ratio confirmed >12.5%
FY19 dividend1 payout increased from 20% to 30%
Self-funded full rundown of Non Core by 2025
1. To be paid in 2020
Post 2019 dividend payout to increase from 30% up to 50%
once upcoming regulatory impacts are confirmed
3
Transform 2019: key targets confirmed with an improved risk profile (2/2)
One Bank, One UniCredit Transform 2019 fully on track
Strong commercial
dynamics thanks to network
revamp
Additional NPE
rundown
Confirm capital target whilst
increasing dividend payout
1. Of which: Non Core down by 2.0bn from 19.2bn to 17.2bn and Group Core down by 2.0bn from 25.1bn to 23.1bn 2. Refers to CET1 ratio phasing-in regulatory headwinds post 2019 (managerial estimates) 3. To be paid in 2020 Note: CET1 ratio fully loaded and data in Euro throughout the document unless otherwise stated
• FINO phase 1 closed, all objectives achieved; phase 2 binding agreements signed to sell down below 20%, closing expected by 1Q18
• Group gross NPEs down by a further 4.0bn1 by end 2019, better than initial Transform 2019 target
• Self-funded full rundown of Non Core by 2025
• 2019 revenues confirmed: higher relative contribution of fees and commissions
• 2019 costs confirmed: higher HR savings allowing for additional IT Investments
• 2019 RoTE target confirmed at >9%
• SREP Pillar 2 requirement lowered by 50bps to 200bps, CET1 MDA buffer above 250bps from 2019
• 2019 fully loaded CET1 ratio target confirmed >12.5% including partial anticipation of regulatory headwinds
• Post 2019, annual CET1 ratio2 target >12.5% thanks to organic capital generation fully absorbing expected regulatory headwinds
• FY193 dividend payout increased from 20% to 30% thanks to a solid capital position
• Post 2019 dividend payout to increase from 30% up to 50% once upcoming regulatory impacts are confirmed
4
improved
-0.21
+0.21
+6bps1
unchanged
unchanged
unchanged
unchanged
unchanged
2019 key targets confirmed RoTE target >9% and further 4.0bn reduction of NPEs
Net Income and RoTE confirmed
9M17
FY17 Guidance
LLP -1.8
Net Income 3.02
Cost <-11.7
Revenues 14.8
-2.6
2019
4.7
-10.6
20.6
1. Line adjustment due to accounting changes, for details see Annex slide 19 and 20. Increase of revenues only impacts NII and it is compensated by LLP increase which mechanically impacts cost of risk 2. Adjusted to exclude net income from Pekao and Pioneer disposals and a one-off charge booked in Non Core related to FINO; RoTE calculated considering also the capital increase and Pekao and Pioneer disposals as at 1 January 2017
Cost of risk 54bps
Cost/income 57.9%
RoTE 8%2
CET1 ratio 13.8%
Gross NPE stock 51.3
55bps
<52%
>9%
>12.5%
40.3 down by 4.0bn from 44.3bn
Line adjustment1 €bn, unless otherwise stated
5
One Bank, One UniCredit The five pillars
5 STRATEGIC PILLARS
TRANSFORM
OPERATING MODEL
ADOPT LEAN
BUT STEERING CENTRE
STRENGTHEN AND OPTIMISE CAPITAL
MAXIMISE
COMMERCIAL BANK VALUE
IMPROVE
ASSET QUALITY
ONE BANK ONE
6
• Fees expected to reach 7.1bn as a result of higher AuM
• Reduction of NII of 0.1bn:
− U-shaped vs. V-shaped Net interest income evolution between 2017 and 2019
− loan volumes revised lower by 11bn to 444bn2
− lower cost of funding thanks to decreased issuance and lower rates
• Customer rates bottoming out in the second half of 2018
1. Including line adjustment from accounting changes, for details see Annex slide 19 and 20
2. Net loans excluding repos
Comments
€bn
Revenues1 mix evolution
2019 target confirmed
2019
20.6
11.0
7.1
2.5
2015
20.4
11.5
6.5
2.4
NII Fees & Commissions Trading Income, Dividends and Other
Previously: • 7.0bn on Fees
and Commissions
• 11.1bn on NII
Transform operating model Overall revenues target confirmed: higher relative contribution of fees and commissions
7
12.2
10.6 -1.2
-0.5
2015 HR savings Non-HRsavings
2019
3,809
3,127 2,865
2015 2017 2019
Transform operating model Cost target confirmed, FTE and branch reductions ahead of schedule
Group costs, €bn Branches in Western Europe
Cost savings Branch reduction in
Western Europe1
• Decrease in costs on track with Transform 2019
• Higher HR savings allowing for additional IT Investments
Group FTE, '000
FTE reduction
• FTE reductions ahead of Transform 2019 schedule, 51% as of 9M17
• 7,232 net redundancies as of 9M17 and over 1,300 planned for 4Q17
• Additional 121 branch closures in Italy realised in 4Q172
• 266 further closures planned between 2018 and 2019
1. Retail branches 2. Already done as of November 17 Note: Numbers might not add up due to rounding
101 <93 87
2015 2017 2019
-14
2019 target confirmed
-1.7 -944
>59% to be achieved
by end 2017 72% achieved as of November 17
8
Transform operating model Digital and IT transformation on track
Phased-in release of new applications to minimise operational risk
November 2017 New Core Banking system first release
Evolution of Core Banking system
Ongoing program including rationalisation and simplification
Set-up of first proprietary cloud infrastructure
Infrastructure transformation
Decommissioning - 830 applications closures (ca. 75% versus target 2019)
Global application to replace local ones
Reduction of IT complexity
IT achievement
New multi-country online and mobile banking platforms
New Corporate Portal in Italy, Germany and Austria
First bank in Italy to launch payments via Apple Pay and to introduce Alipay
3x faster procedure for current account opening, with increased number of risk controls
Increased dematerialisation process
Launched fully remote card management on Internet and mobile banking
Innovative distribution
channels
End-to-End1: simplification and improvement of key processes
Improved customer experience thanks to digital transformation
1. End-to-End process launched for Commercial Banking Italy, planned expansion to include Commercial Banking Germany and central functions
9
Operating Costs1
Maximise Commercial Bank Value Western Europe transformation progress resulting in higher productivity
1. Delta between 9M16 and 9M17 2. Stated figures, allocated capital calculated as 12.5% of RWA 3. Allocated capital calculated as 12.5% of RWA; normalised RoAC. 9M16 for capital gain on Visa disposal; 9M17 for a capital gain on disposal in 3Q17 and a release of a tax provision in 2Q17 4. Allocated capital calculated as 12.5% of RWA; normalised RoAC. 9M16 for DBO integration costs and others items; 9M17 for real estate disposals and tax effects
Commercial Banking Italy Commercial Banking Austria Commercial Banking Germany
Actions implemented
• New service model for SME client segment
• Closer CIB-Commercial banking collaboration
Actions implemented
• New Retail service model
• Focus on cross-selling
-3.1%
Fees and Commissions1 +9.7%
9
-1
9M17 9M16
9M17
8.2
9M16
6.3
Cost of Risk, bps RoAC3, %
+1.9
Actions implemented
• Multichannel approach
• New service model for Affluent and SME clients
Operating Costs1 -3.2%
Fees and Commissions1 +4.0%
70 66
9M16 9M17 9M17
11.7
9M16
10.4
Cost of Risk, bps RoAC2, %
-3 +1.3
Operating Costs1 -11.9%
Fees and Commissions1 +4.8%
Cost of Risk, bps RoAC4, %
-12 +11.3
-19-8
9M17 9M16
9M17
6.0
17.3
9M16
+10
10
Maximise Commercial Bank Value CEE and CIB confirming leadership positions
Operating costs1
CEE CIB
-4.6%
Client driven revenues1 +0.9p.p.
20 15
9M17 9M16 9M17
14.5 15.1
9M16
Cost of Risk, bps RoAC3, %
-5 +0.6
Net new clients2 +10%
Fees and Commissions1 +4.4%
13.5
9M17 9M16
14.4
Cost of Risk, bps RoAC3, %
-15 +0.9
Further strengthened leadership position
#1 in terms of total assets4
Confirmed market leadership
#2 in Loan and Bonds5
1. Delta between 9M16 and 9M17, for CEE at constant FX 2. Delta between 2015 and 9M17 3. Stated figures, Allocated Capital calculated as 12.5% of RWA, CEE at current FX
109 94
9M16 9M17
11
4. Based on total assets compared to Erste, Intesa Sanpaolo, KBC, OTP, RBI, Société Générale, ranking as of 1H17 5. Combined Loans and Bonds – EMEA All borrowers (EUR denominated) as of 9M17
Strengthen and optimise capital 2019 CET1 ratio target confirmed whilst anticipating additional regulatory headwinds
12
Fully loaded CET1 ratio, %
1. Occurred between 4Q16 and 9M17 2. IFRS9 to be implemented on 1st January 2018 3. Partial anticipation impacts include EBA guidelines related effect and other minor adjustments
Regulation, models and procyclicality
IFRS92
EBA guidelines (anticipation) etc.3
Organic Capital Generation4 +0.4 +0.5
-0.3 -0.4 -0.1
-0.4
-0.8
>13.04,5 12.2/12.7 >12.5 13.8
Fully loaded CET1 ratio evolution to 2019, %
Dividend payout 20% 20% 30%
-0.31 Confirmed expected
regulatory impacts of -1.5
9M17 4Q17 2018 2019
Total CET1 impact, % -0.8 +0.3 -0.7
%
4. Includes: retained earnings net of dividend payout (FY17: 20%; FY18: 20%, FY19: 30%) and of AT1 coupons, RWA growth and other; for 2018 includes FINO Significant Risk Transfer benefit 5. Pro-forma for IFRS9
-0.1
% of cumulative phase-in
EBA guidelines (remaining)
Calendar provisioning2
FRTB3
Basel IV4
Estimated CET1 impact, %
< -0.9
-0.4
-0.1
-0.9
Estimated CET1 impact, % 2020 2021 2022 2023
20% 100%
13% 37% 54%
20% 40%
2024 2025
60%
66%
80%
86%
100%
< -0.8 -0.3 -0.2 -0.3 -0.3 -0.2
up to 2027
100%
100%
-0.2
65% 65%
1. Refers to CET1 ratio phasing-in regulatory headwinds post 2019 (managerial estimates) 2. Conservative approach based on ECB proposal has been used 3. Expected phase-in period of 2 years; no impact expected during phase-in, full impact in 2024 4. Our expectation is that a phase-in approach will be introduced through the EU transposition in law; assumption of 5 years is consistent with foreseen phase-in period for output floor implementation 5. Assuming net annual organic capital generation equivalent to 2019 of +0.5, net of 30% dividend payout
Cumulative net CET1 impact including organic capital generation5, %
< +0.1 +0.3 +0.5 +0.7 +1.0 +0.3 > +1.7
Regulatory Headwinds post 2019 – CET1 ratio impact (managerial estimates)
Strengthen and optimise capital - Post 2019 annual CET1 ratio1 >12.5% thanks to
organic capital generation fully absorbing expected regulatory headwinds
13
Post 2019 dividend payout to increase from 30% up to 50% once upcoming regulatory impacts are confirmed with CET1 ratio1 >12.5%
Improve asset quality Gross NPEs down by a further 4.0bn by end 2019, better than initial Transform 2019 target
Gross NPEs ratio3, %
NPEs Coverage ratio, %
Group Core – NPEs evolution1
5.8
49.6
CoR, bps 42
Gross NPEs, €bn
5.0
55.7
38
4.7
>51
434
NPE
Non Core evolution1
Gross loans, €bn
29.5
53.5
Net loans2, €bn
NPEs Coverage ratio, %
15.6
57.1
7.4
>57
Self-funded full rundown of Non Core by 2025
Performing
2.0bn better than previous target of
25.1bn
2019
23.1
10.8
11.0
1.4
9M17
22.5
11.2
10.0
1.2
9M16
25.2
13.0
10.7
1.5
Bad Loan
UTP
PD
2025 2022
7.1
2019
17.2
9M17
28.8
9M16
56.3
6.7
49.6
0
397 405 437 Net Loans2, €bn
1. For 9M16 and 9M17 stated figure 2. Excluding intercompany and repos 3. Calculated as: Gross NPEs / Gross Loans including intercompany and repos 14
4. Includes line adjustment, previously 45bps 5. Closing expected in 1Q18
2.0bn better than previous
target of 19.2bn
FINO phase 2 signed5
32.5 3.7
Corporate governance in line with best in class European companies with simplified share capital structure
Empowerment of Board of Directors to present its own list of candidates
Reduction of board members from 17 to 151 of which two appointed from the minority list
Removal of 5 per cent limit of voting rights2
Conversion of saving shares into ordinary shares
Delisting from trading of ordinary shares on Warsaw Stock Exchange3
1. On December 2016 Board of Directors approved to disclose a recommendation for Shareholders to consider the reduction of Board members for next Board renewal in 2018 2. Subject to condition ("stop loss clause"): in case the exercised withdrawal rights exceeds 0.25% of the Bank's share capital (equal to approximately Euro 98m) Bylaws will not be amended, unless Board of Directors waives such condition 3. Ongoing
Adopt lean but steering Centre Strengthened corporate governance
15
40.3
17.7
7.8
down by 0.6 from 8.4
2019 key targets confirmed
FY19 dividend3 payout increased from 20% to 30%, post 2019 dividend payout to increase from 30% up to 50% once upcoming regulatory impacts are confirmed with CET1 ratio >12.5%
2015 9M17
Revenues, €bn
Cost, €bn
RoTE, %
CET1 ratio, %
Gross NPE, €bn
Gross NPE ratio, %
2019
-12.2
4
10.4
77.8
16.0
<-11.7
82
13.8
51.3
10.6
-10.6
>9
>12.5
20.61
FY17 guidance
Cost of Risk, bps 1031 54 551
Net Income, €bn 1.5 4.7
Cost/Income, % 60.01 57.9 <521
1. Including line adjustment due to accounting changes, for details see Annex slide 19 and 20 2. Adjusted to exclude net income from Pekao and Pioneer disposals and a one-off charge booked in Non Core related to FINO; RoTE calculated considering also the capital increase and Pekao & Pioneer disposals as at 1 January 2017 3. To be paid in 2020
20.41
Net NPE, €bn 38.3 22.3
down by 4.0bn from 44.3bn
down by 2.5 from 20.2
16
Transform 2019 fully on track underpinned by group-wide business momentum
2019 key targets confirmed: RoTE >9%, fully loaded CET1 ratio confirmed >12.5% and improved risk profile
FY19 dividend1 payout increased from 20% to 30%
Post 2019, organic capital generation fully absorbs expected regulatory headwinds
1. To be paid in 2020
Self-funded full rundown of Non Core by 2025
Conclusion
17
Q&A session
London, 12 December 2017
One Bank, One UniCredit Transform 2019 Transform Operating Model and Maximise Commercial Bank Value G.F. Papa
One Bank, One UniCredit The five pillars
2
5 STRATEGIC PILLARS
ONE BANK ONE
TRANSFORM
OPERATING MODEL
ADOPT LEAN
BUT STEERING CENTRE
STRENGTHEN AND OPTIMISE CAPITAL
MAXIMISE
COMMERCIAL BANK VALUE
IMPROVE
ASSET QUALITY
One Bank, One UniCredit A simple successful Pan European Commercial Bank with a fully plugged-in CIB
3
Positioning UniCredit as a Pan European winner
Transform 2019 fully on track yielding tangible results underpinned by group-wide business momentum
"One Bank, One UniCredit" approach to maximise synergies
Strong commercial dynamics thanks to network revamp
Pragmatic approach to digital to support Transform 2019
One Bank, One UniCredit Snapshot of our successful business
4
Focused
14 o/w 12 in EU4
Pan-European but local
Corporate lender in EU12 million clients Retail branches Scale
Commercial bank1
% of total revenues – 9M17 EU – based2
% of total revenues 9M17
Market position5 Countries with banking operations
Source: Dealogic, Euromoney 2017, Global Finance, OeNB
66% 94%
Peer Av.3
61% 81%
Peer Av.3
#1 74%
Distinctive factories
GTB powerhouse Syndicated Lending in
core countries Client driven CIB
revenues11 Lending CMIB7
#2 Loans and Bonds10 ITA #1 GER #1 AUT #1 CEE#2
All Syndicated Loans9
Best Bank in Cash Management Trade Finance Provider in Western Europe and CEE8
ITA #2 GER #3 AUT #1 CEE #16
Data updated as of 9M17
UniCredit UniCredit
2nd 2513 4,97513
5. Based on Total Assets 9M17. For Austria domestic assets as of end of 2015 on local GAAP (source OeNB). For Germany considering private banks 6. Based on total assets. Compared to Erste, Intesa Sanpaolo, KBC, OTP, RBI, Société Générale, ranking as of 1H17 7. Capital Markets and Investment Banking, 9M17 8. Euromoney Cash management Survey, 2017 and Euromoney Cash Management Survey 2017 9. All Syndicated Loans, Home Countries League Tables (all curr.) 9M17 10. Combined Loans and Bonds – EMEA All borrowers (EUR denominated) 9M17 11. CIB revenues excluding Treasury 9M17 12. Peers include: BNP Paribas, Intesa Sanpaolo, Santander, Société Générale, Deutsche Bank 13. Including 100% clients and branches in Turkey; 9M17, excluding Fineco
1. CBK Italy, CBK Germany, CBK Austria, CEE as percentage of Group Revenues; 9M17 2. UniCredit excludes Turkey and Russia with a pro-quota approach; BNP Paribas data at FY16 and Société Générale data calculated as of proxy of loans at geographical level; 9M17 3. Peers include: BNP Paribas, Intesa Sanpaolo, Santander and BBVA (only for geographical breakdown), Société Générale 4. Italy, Germany, Austria, Czech Republic, Slovakia, Hungary, Slovenia, Croatia, Bosnia and Herz., Serbia, Russia, Romania, Bulgaria, Turkey
Business momentum and dynamic commercial performance
5
2019
444
436
8
9M17
412
394
18
9M16
416
385
31
2015
409
372
37
-6.0%
2019
11.0
9M17
8.0
9M16
8.5
2015
11.5
Net Interest Income1 Loans2
€bn
+5.5%
2019
7.1
9M17
5.0
9M16
4.8
2015
6.5
Loans volume, Group, €bn
Fees and Commissions
€bn
• NII commercial dynamics supported by lower cost of funding
• Compression of customer spread mainly due to persistently low interest rates
• Loan volumes of Business Divisions increased by 8.5bn in last twelve months
• Continuous improvement of the portfolio quality
• Investment fees up 12.4% 9M16/9M17 thanks to higher AuM and TFAs
• Increased transactional fees (+7.4% 9M16/9M17) supported by strong GTB performance
Business Divisions
GCC & Non Core
1. Including line adjustments due to accounting changes (see Annex, slides 32-35 for additional details). Stated NII: 10.9bn in 2015, 7.9bn in 9M16, 7.7bn in 9M17 2. Excluding Repos; including line adjustments due to accounting changes (see Annex, slides 32-35 for additional details). Stated Loans: 418bn in 2015, 426bn in 9M16, 421bn in 9M17
Commercial Banking Italy Transformation of operating model fully on track
6
Business achievements Efficiency improvement
52.6 60.5 59.7 60.0
2019
12.9
9M17
11.7
9M16
10.4
2015
6.9
• Strong focus on AuM sales
• Increasing Consumer Finance
• Strict risk discipline
• New segmentation of Corporate clients
• New service models for Affluent and Small Business
• New branch formats being rolled-out
• End-to-End product processes redesign
• Focus on multichannel client approach
Improved customer
focus with a lower
cost structure
Increasing risk adjusted profitability
Cost/Income1 (%)
Branches
FTE ('000)
RoAC1 (%)
1. Figures were recasted on a like-to-like basis to consider changes in scope of business segment and line adjustment; Allocated Capital based on RWA equivalent figures calculated as 12.5% of divisional RWA – See Annex, slides 32-35 for additional details
29.0 33.5 35.6 36.6
2,400 2,784 3,140 3,283
Commercial Banking Germany Good results supported by strong growth in all segments
7
Business achievements Efficiency improvement
341341342352
67.0 76.7 66.1 74.0
11.0 10.3 9.2 11.5
9M17
9.1
2019
7.6 6.3
2015 9M16
8.2
• Growing Trade Finance business
• Successful conversion of Deposits towards AuM
• Continuous growth in Retail lending
• Low CoR given high quality of portfolio
• New SME service model
• Enhanced Retail focus
• Increased CIB- Commercial Banking cooperation and cross-selling revenues
• New Bankassurance partnership with Allianz
Improved customer
focus with a lower
cost structure
Increasing risk adjusted profitability
Cost/Income1 (%)
Branches
FTE ('000)
RoAC1 (%)
1. Figures were recasted on a like-to-like basis to consider changes in scope of business segment and line adjustment – See Annex, slides 32-35 for additional details; allocated Capital based on RWA equivalent figures calculated as 12.5% of divisional RWA
3 2
2. Normalised RoAC for Visa sale (10m) 3. Normalised RoAC for a net capital gain on disposal in 3Q17 and in 2Q17 related to the release of a tax provision (for a total of 207m)
Commercial Banking Austria Organisation streamlined, renewed focus on premium advisory
8
Business achievements Efficiency improvement
63.3 70.6 74.4 78.1
4.7 5.2 5.5 5.9
124127147174
9M17 2019
19.0
9M16
17.3 13.3
2015
6.0
• Increasing new loans production maintaining portfolio asset quality
• Stronger focus on cross-selling
• Retail AuM growth driving fees increase
• Growing volumes in household lending
• Improved client satisfaction from new Retail service model
• Progress in digital transformation
Improved customer
focus with a lower
cost structure
Increasing risk adjusted profitability
Cost/Income1 (%)
Branches
FTE ('000)
RoAC1 (%)
1. Figures were recasted on a like-to-like basis to consider changes in scope of business segment and line adjustment – See Annex, slides 32-35 for additional details; allocated Capital based on RWA equivalent figures calculated as 12.5% of divisional RWA
3 2
2. Normalised RoAC for Visa sale (+34m) and Integration costs (-208m) 3. Normalised for non recurring items in 3Q17: real estate disposals (+65m) and tax effects (+17m) for a total of +82m
Tangible results in CEE thanks to transformation actions
9
Key achievements
Organic growth
Risk discipline
KPIs1
• NPEs reduction ahead of target, with NPE ratio down 9M16/9M17 by 140 bps
• Stable revenue generation in 9M172, in line with Transform 2019 targets: - NII stable 9M16/9M17, sustained by lower cost of funding - Fees +7%3 9M16/9M17, mainly thanks to transaction banking
• Continued client acquisition (i.e. +10% new clients 9M17 vs 2015)
Sustainable profitability
• RoAC up by 90 bps 9M16/9M175
Cost savings
• Focus on cost discipline, confirming a low C/I ratio
Gross NPEs ratio4 (%)
RoAC (%)
Cost/Income (%)
7.2 8.9 10.3 11.7
36.9 35.8 35.2 37.0
4.4
3.2 3.2
4.1
Revenues (€bn)
1. Figures were recasted on a like-to-like basis to consider changes in scope of business segment and line adjustment – See Annex, slides 32-35 for additional details; allocated Capital based on RWA equivalent figures calculated as 12.5% of divisional RWA 2. Current FX rates at +0.1% y/y and +3.8% y/y normalized for Visa sale; constant FX rate at -1.3% and +2.4% normalized for Visa sale
3. At current FX rates; constant FX rate: +4.4% 9M16/9M17 4. Excluding Turkey, Ukraine 5. +201bps normalized for Visa sale
2019
13.4
9M17
14.4
9M16
13.5
2015
9.7
Further strengthened leadership position in CEE
10
Innovation and digitalisation
• Solid growth in digital, in particular mobile +15p.p. vs. 2015
• Agile methodology in key projects
• Further progress in data management and analytics: new online tools successfully implemented
Synergies with the
Group
• Enhanced international client coverage
• Effective best practice sharing throughout CEE and Group
Footprint evolution
• Ongoing network optimisation delivering good results
Key achievements KPIs
Digital users1 (%)
o/w Mobile users1 (%)
Branch closures/relocations2 (%)
International clients ('000)
28 26
5144
4728
1412
2019 9M17 1. Including Turkey at 100%. Ratio defined as number of Retail digital/mobile users on active retail customers 2. Calculated as number of closures/relocations of branches on total number of branches vs. 2015
Confirmed CIB market leadership
11
Confirmed market
leadership
• Leading EMEA European Debt Finance House
• Consistently "Top 3" book-runner in Loans and Bonds in core markets
Key achievements KPIs
Solid commercial performance
• Client driven revenues boosted by strong commercial activity
• CIB-Commercial Banking cross-selling driven by effective initiatives in cross-division and cross-border business
Continuous cost discipline
and simplification
• Ongoing streamlining of businesses and operating platform resulting in reduced costs
• Continuous cost discipline to reach 2019 C/I target
League Tables Combined Loans and Bonds – EMEA1
Cost Income Ratio2 (%)
9M17 2016 2015 2014 2013 2012
73
2015
67 74 83
9M16 2019 9M17
Client Driven Revenues (%)
2019
39.6 44.7
9M16
40.2
9M17
40.2
2015
#2 #2 #3 #2 #3 #2
1. All borrowers (EUR denominated) 2. Figures were recasted on a like-to-like basis to consider changes in scope of business segment and line adjustment – See Annex, slides 32-35 for additional details
• Strategic Pan-European presence in 14 European core markets
• International network spanning a further 16 countries worldwide
• Access to a network of 4,000 correspondent banks, covering ~175 countries
• Digital innovations covering the whole value chain: - Client access - Product Offering - Back-end processes - Data analytics
• Proven set of core competencies in a wide range of products: - Cash Management & E-Banking - Trade Services - Working Capital Management - Cash & Clearing Products for FIs - Global Security Services1
Client offer GTB Powerhouse Technology innovator
2017 Awards
Best Bank in Cash Management in 11 countries
Five-Star Cash Manager in Western Europe and CEE
Best Trade Finance Provider in Western Europe and CEE
GTB, a strong backbone of the Group as well as a technology innovator
12
• €1.7bn GTB revenues2 in 9M17, representing about 11% of Group total Revenues
GTB strong contributor to Group results
1. In Austria and CEE 2. In Western Europe Commercial banking, CEE Division and CIB Division
Maximise synergies across the Group
13
Group-wide best practice sharing process in place
CIB – Commercial
Banking cooperation
Corporate – HNWI/ Private/ Retail synergies
International client support
Key achievements
• Stronger managerial commitment
• Dedicated cross-selling committees to drive business and identify opportunities
• Dedicated initiatives in Italy, Germany, Austria and CEE to maximise synergies
• Optimised Product and Investment Platform
• Improved focus on CIB and International Corporate clients cross-border business
Video: interview with Delivery Hero
14
Key indicators proving tangible progress of transformation
15
Western Europe Commercial
Banking2
CIB
2019 RoAC1 (%) 9M17 9M16
€11.6bn Revenues
37 bps CoR
57.2% Cost/Income
€8.8bn
34 bps
63.1%
€8.9bn
37 bps
65.3%
2015
8.6 9.2 11.7
9M16
12.1
9M17 2019
9M17
15.1
9M16
11.7
2019
14.8 14.5
2015
KPIs1
2019 Group RoTE target is confirmed >9%
€3.9bn Revenues
21 bps CoR
40.2% Cost/Income
€3.1bn
18 bps
40.2%
€3.3bn
24 bps
39.6%
1. Figures were recasted on a like-to-like basis to consider changes in scope of business segment and line adjustment – See Annex, slides 32-35 for additional details; allocated Capital based on RWA equivalent figures calculated as 12.5% of divisional RWA 2. Italy, Germany and Austria, RoAC normalised for Germany and Austria as per slides 7 and 8
CEE
€4.4bn Revenues
102 bps CoR
36.9% Cost/Income
€3.2bn
97 bps
35.8%
€3.2bn
115 bps
35.2% 9.7
2019 9M17
13.5 13.4
9M16
14.4
2015
2019
10.6
9M17
8.6
9M16
8.9
2015
12.2
-1.7
Productivity increase, while significantly reducing costs, branches and FTE
16
Cost savings Branch reduction in
Western Europe1
• Decrease in costs on track with Transform 2019
• Sound 9M16/9M17 cost reduction of both HR (i.e. -4.7%) and Non-HR costs (i.e. -2.5%)
-14
2019
87
9M17
94
9M16
99
2015
101
FTE reduction
• FTE reductions ahead of Transform 2019 schedule
• 2017 target already achieved, as of 9M17 reached about 51% of 2019 target2
• Execution of branch-closures in line with plan targets
• 557 branch closures by 9M172, representing 59% of 2019 target of closures
-944
2019
2,865
9M17
3,252
9M16
3,629
2015
3,809
1. Retail branches, Italy, Germany and Austria 2. vs 2015 baseline Note: Numbers might not add due to rounding reason
Group costs, €bn Group FTE, '000 Branches in Western Europe1
IT simplification, end-to-end process redesign and new digital solutions as key enablers of productivity increase
>59% to be achieved by end 2017
72% achieved as of November
Transform 2019 progress monitoring mechanism
17
• Structured monitoring of initiatives
• Dedicated Transformation Office
• Group-wide managerial KPIs
• Periodical performance review with CEO and GM
Transform 2019 progress monitoring mechanism Actions
Transformation Jour Fixe
Pillar Steering
Committees
Objectives Frequency
• Consolidated view
• Overall coordination
• Decision making
• Steer transformation
• Problem solving
• Monthly
• Weekly/ Monthly1
Participants
• CEO and GM
• Pillar Sponsors
• Program Owners
• Pillar Sponsors
• Program Owners
• CEO and GM permanently invited
Meetings
1. Depending on Pillar and Programs
Improved risk profile thanks to a strong risk discipline
18
Underwriting
Monitoring
• Disciplined and sustainable new origination, supported by centralization and automation of credit processes
• Expected Loss on New Business KPI to ensure sound origination
• Business as first line of defense for tight portfolio monitoring
• Advanced automated early warning signals
• Expected Loss on Performing Stock KPI to observe risk dynamics
0.35% 0.38%2
9M16 9M17
Expected Loss on Performing Stock1
Gross NPEs ratio1
9M17
4.7%
2019
5.8% 5.0%
9M16
0.34%
9M2017
Expected Loss on New Business1
1. Perimeter: Group Core 2. Pro-forma including models recalibration occurred end of 2016
Digital initiatives to support Transform 2019 implementation
19
• New multi-country online and mobile banking platforms
• Retail payments innovation
• Digital sales enablement and transaction migration
• Pre-scored credit lines
• Focus on cyber-security
Ongoing initiatives
• New advanced digital and analytical tools in support of Advisors
• Increasing use of advanced data analytics
• End-to-End processes redesign and digitalisation
Digital & multichannel experience
Risk Management
Advisory services
Processes optimisation
Areas of Digital development
• Simplification of IT infrastructure and evolution towards next generation IT architecture
• Process automation and digitalisation, reducing labour-intense Back-Office activities
• Optimisation of Real Estate
• Different cost mix, with increasing reliance on IT
2015
28% 26%
2019
-14%
26%
49%
29%
43%
ICT Real Estate Operations
Cost base evolution
COO Services1 - Cost mix (%)
1. COO Services P&L included in Group Corporate Center perimeter. TCO: Total cost of ownership by Service lines: IT, RE and OPs (Back office, Procurement, Workout, Governance, Security) including related HR and NHR costs
Delta 2015-2019 (%)
-2%
-24%
-22%
Structural change of cost base driven by evolving customers behaviour and increasing digitalisation
20
IT simplification, back-office streamlining and real estate optimisation key enablers of productivity increase
21
Evolution of IT architecture
Operations efficiency
Real estate optimisation
Ongoing initiatives KPIs
• Reduction of IT complexity by decommissioning applications
• Modernization of Core Banking system
• Simplification and improvement of IT infrastructure
• Back-Office capacity enhancement
• Processes digitalisation and streamlining with E2E approach
• New organisational design and simplification of geographical presence
• Reduction of Western Europe branches1
• Optimisation of head-quarter spaces
830
2019
>1,100
9M17
Decommissioning of applications (vs 2016)
-29%
2019 2015
Back-Office FTE
Western Europe branches1
2019
2,865
9M17
3,252
9M16
3,629
2015
3,809
1.Retail branches, Italy, Germany and Austria
Full engagement and commitment
to Transform 2019
Nurture our talents
Evolve the way of working
Create opportunities
Our Human Capital as fundamental enabler of Transform 2019
22
One Bank, One UniCredit A simple successful Pan European Commercial Bank with a fully plugged-in CIB
23
Positioning UniCredit as a Pan European winner
Transform 2019 fully on track yielding tangible results underpinned by group-wide business momentum
"One Bank, One UniCredit" approach to maximise synergies
Strong commercial dynamics thanks to network revamp
Pragmatic approach to digital to support Transform 2019
One Bank, One UniCredit Transform 2019 Commercial Banking Italy A. Casini – G. Ronca
London, 12 December 2017
Transformation of operating model fully on track
2
Strong commercial dynamics thanks to network revamp
Transform 2019 fully on track, yielding tangible results
Focus on multichannel client approach, leveraging on all interaction points
Strict risk discipline on new loan origination and tight risk monitoring
Improved customer focus with a lower cost structure
% increase of online transaction6
Domestic credit to private sector3 (% of GDP)
Household saving rate5
Internet users penetration7 Enterprises in Italy4
Export of goods and services (% of GDP)3
Manufacturing economy in Europe2
2017 Real GDP expected growth1
Economic landscape Italy open for business
3
+1.6%
~5.7m
#2
1. UCG Assumptions 2. World Bank - Manufacturing GDP per capita 3. World Bank 4. Ce.Bi
~30%
62%
~86%
~10%
+17%
5. ISTAT 6. MIP/Osservatori.Net 7. Audiweb powered by Nielsen
Key business priorities and achievements Retail commercial performance mainly driven by productivity increase
4
1. Including new products 2. Includes Retail, Corporate, Private, Wealth Management, CC local, Leasing and Factoring 3. Recasted data 4. Leveraging on pre-approved loans, new acquisition initiatives (jointly launched by Risk and Business divisions) and dedicated IT tools (e.g. CRM tool for Small Business) 5. Consumer Finance and Small Business. CAGR relates to stock.
Strengthen asset
gathering
Reaffirm leading
position in Retail
lending
• Expanded product offer also thanks to the partnership
Pioneer-Amundi1
• Growth in AUM and its share of TFA
• Robust new production of Consumer Finance, improving
the quality of origination
• Increased share of wallet in Small Business4
• Improving market share in residential mortgages new
business6 from 8.7% in Dec16 to 11.7% in Sep17
Evolution 2017 key highlights
72.3
CAGR: +2.5%
2019
80.0
9M2017
74.4
9M2016
74.8
20153
CF&SB5
• Strong increase in FTE productivity, accelerating in 2017
• Productivity gains driven both by optimised salesforce and
increase in total banking sales
Productivity
33% 34% 36% 41%
AuM2, €bn
AuM/ TFA
Retail loan stock, €bn
CAGR 15-19: +5.8%
Sales per FTE7, Index
Net Sales 9M2017: 8.1€bn
123.2
2019 9M2016
148.1
9M2017
114.4
20153
110.7
119
2016 20178
100
2015
108
6. Source: ABI 7. Ratio between number of Banking sales and FTE dedicated to sales activities. Banking sales are: current accounts, "Genius" cards, pre-paid cards, credit cards (Flexia), credit cards (Flexia) instalments and switch, overdrafts, personal loans, mortgages, "fast credit", enterprises loans, salary loans, saving & term deposit, AUM, insurance, P&C insurance, CPI, car insurance (new emissions and renewals), debit cards, POS, App Mobile and Online Banking 8. Figures relates to annualised data for 9M2017
Key business priorities and achievements The new Corporate model delivering tangible results
5
1. Corporate loans excluding leasing 2. As of November 2017 3. Includes revenues from structured financing, Markets, DCM, ECM, M&A
Become go-to bank for
customers
• Sustained new origination with consolidated risk discipline
• CIB "fully plugged-in" (e.g., F&A, Joint Venture) and
synergies between Retail, Private and Wealth Management
• Focus on cross-border business - new international
accounts increased by 11% Y/Y2
• Coordinated commercial activities - increased pitch
intensity, joint targeting, joint business meetings
Transform operating
model
• Network specialisation (Corporate and Retail) coupled with
organisation delayering (minus 1 layer)
• New clients segmentation in place
417
228208245
9M2017 2015 9M2016 2019
Boost Cross-selling
Evolution 2017 key highlights
2015
7.2
9M2016
4.7
9M2017
5.9
2019
8.5 MLT new loans1, €bn
Revenues from F&A and JV3, €m
Sales channels
Key business priorities and achievements Transformation of operating model fully on track
6
Evolution 2017 key highlights
• Rationalisation 2017 completed: - 391 branch closures in 2017 (o/w 121 in 4Q173) - Ca. 620 branch closures since 2015 (70% of 2019
target) 2015
3,283
9M2016
3,140
2019
2,400
9M2017
2,784
• Migration program 2017 on track: - Revised branch formats to increase automated
transactions4 on basic services - Reduction of in-branch transactions on track (-15%
9M/9M)
95.0%
2019 9M2017
88.0% 89.7%
2015
91.4%
9M2016
Day-to-day Banking
Retail Branch network, #
Automated transactions4, % of total
FTEs
• Reduction of FTEs ongoing: - Ca. 2,700 net exits in 20171 (o/w ca. 1,000 in 4Q17) - Ca. 4,000 net exits since 20152 (more than 50% of 2019
target) - FTE re-training program, moving staff from back office to
front office roles and new junior hirings 9M2016
33.5
9M2017 2019
29.0 36.6 35.6
2015
Evolution of FTEs , #, '000
1. Exits are fully provisioned 2. Including approximately 1,000 exits in 4Q17 3. Already completed by the end of November 2017 4. Includes cash withdrawals, cash deposits and transfers
Business Centre
Multichannel strategy Innovative redesign of branches
7
CASH-LESS Branch
FULL SERVICE Branch
SMART Branch
Fully automated branches:
• Basic products and remote advisory services
• Transactions provided by ATMs, no teller available
Partially automated branches:
• All products and simplified advisory services
• Transactions provided by advanced ATMs (Casse
Veloci), no teller available
Branches with 360° service:
• All products and specialised advisory services
• Transactions provided both by teller and advanced
ATMs (Casse Veloci) New centres fully dedicated
to Small Business customers
Branch formats Description 2019 target #
branches
1,600
400
400
All products and
services available
Dedicated coverage
for specific sector/
customer segments
Multichannel strategy Foster digital adoption
8
Solid increase of
internet &
mobile users
New digital
processes
Move to digital
transactions
• New Internet Banking, GIMB
• New Wallet solution for mobile payments
• Digital signature
• SMS/token signature
• Supported by branch automation
• Growing number of digitally enabled transactions
Continuous improvement of seamless multichannel customer approach
20171 online banking user
20171 mobile banking user
+6%2
+18%2
1. Data as of September 30th 2017 2. Increase 9M2016 – 9M2017 3. Equal to 130 million of pages 4. Data as of November 15th 2017
digitalised contracts (7,5 million contracts3) since launch in 2015
3M
1.6M
38%
# of currently installed "Casse Veloci"4 900
faster migration speed for branches with "Cassa Veloce"
2x
More products available on digital platform
Strong growth of remote sales
Multichannel strategy Reinforcing leadership in remote sales
9
Weight on total sales
206
148
100
9M2016 9M2017 2015
Index, 2015 = 100
9% 17% 19%
Number of remote sales Remote sales increase 9M/9M +40%
Pre-approved lending solutions 9M/9M +34%
Property & Casualty bancassurance products 9M/9M
+78%
Pre-approved lending solutions on "credit revolution1" platform (5 product categories) for Retail customers
NEW
Robo for Advisory process (leveraging on internal best practices)
NEW
SME loans offering, leveraging on credit revolution1 approach (pre-approved credit)
NEW
1. Credit Revolution is a Program within Risk division mainly aiming at: a) simplifying credit process and products and b) rationalizing IT architecture and platforms.
Video on Multichannel strategy
10
Open mindset
Fast delivery
No-frills approach
Agile methodology
End-to-End Delivery Unit to optimise internal processes and enhance customer satisfaction
11
Teams organised in "rooms", each focusing on a different
product/ process
Cross-functional teams including Business, IT and
other relevant Departments1
Idea generation workshops to merge business priorities
and customer feedback
1. E.g. Risk, Legal, Compliance, Processes, HR
E2E Delivery unit Guiding principles Expected benefits/goals
Increased efficiency – More than 450 FTE efficiencies in 2017
Speed to open a current account – 3 times faster (thus improving satisfaction of customers)
Self Service for Credit Card – Full remote card management on Internet and Mobile Banking 24/7
Sustainability of solutions with specific focus on risk – Increased number of automated risk controls for current account opening from 0 to 7
>450 FTEs
3x
100%
SMEs as the backbone of the Italian ecosystem
12
46%
100%
22%
12%
19%
GDP2
Medium
Large
Small
Micro
Size3
1. Includes individual enterprises and VAT numbers 2. Based on value added distribution
5.7 million enterprises1
Strong cross-selling potential within improving Italian economic scenario
97%
2%
Companies
0.1%
0.5%
Italian non-financial enterprises Key client drivers
Internationalisation and access to foreign markets
Digital innovation and technology investments
Generational handover, "managerialisation", industry knowledge and networking
Access to Capital Markets: Equity/ Debt for growth acceleration
3. Based on the European Commission categorization, accounting for a combination of employee number, turnover and total assets –respectively: <10 and ≤2m or ≤2m for Micro, <50 and ≤10m or ≤10m for Small, <250 and ≤50m or ≤43m for Medium, ≥250 or >50m and >43m for Large Source: Ce.Bi. 2017, 2015 data, UniCredit analysis
Video: Rainbow – an Italian growth story
13
New segments in place
New segments in place to enhance commercial targeting…
14
• CIB platform fully plugged-in with competitive service model Cost/ Income
• Simplified solutions to match basic client needs
• Digital platforms and best practice sharing with Small Business
• Commercial targeting based on key client needs
• Modular approach by industry, size and specific demands
Large
Top
Mid
1. Or local subsidiary of international clients 2. Or clients with complex needs based on actual and potential revenues, number of products, cross-border propensity and risk/return profile 3. Or clients with basic needs; 4. Small Business consolidated in Retail segment
• Dedicated Business Centers
• Remote advisory for basic banking needs Small
Business4
Real Estate
Public Sector
Dedicated service models Industry verticals
~ 1k Groups
>€350m turnover1
~ 8k Groups
>€25m turnover2
~ 16k Groups
>€5m turnover3
~ 660k Clients
<€5m turnover
~ 400 groups
~ 3k groups
… enabled by a new digital infrastructure
15
• Digital workbench with advanced data analytics
• Commercial targeting for lead generation
• Integrated access to product platforms
• Mobile sales productivity and enhanced advisory
• Cross-border capabilities
• Online portal for Large corporates with specialised tools for complex products
• Simple online "environment" for SMEs with value-added/ non-banking services
• Industrialised operations through automation, digital tools and analytics
• Multichannel experience
− Digital document exchange
− Multiple signature collection with mobile digital signature
Online banking platforms by segment
Digitalised operations The data ecosystem
Real time access to massive amount of internally available
data, across all segments
Innovate through CIB & Retail Banking digital platforms
evolution
Integrate advanced analytics into every function and process,
across all segments
Disciplined risk approach to underwriting and monitoring
16
• Network focused on investment grade classes
• Increased number of preapproved customers eligible for
lending
• Improved screening of watch list portfolio and evolution of
risk alerting systems for Network
Actions Evolution
Default rate1, %
1. CBK Italy, including Leasing and Factoring
2. Recalculated on the bases of forecasted volumes
• Due to seasonal effects, we expect Gross NPEs to slightly
increase in CBK Italy in 4Q 2017
• We confirm 2019 NPE targets
Gross NPE ratio, %
2019
5.42
9M2017
6.7
9M2016
6.4
2015
2.0
3.0
2019 9M2017
2.0
9M2016
2.5
Transformation of operating model fully on track
17
Strong commercial dynamics thanks to network revamp
Transform 2019 fully on track, yielding tangible results
Focus on multichannel client approach, leveraging on all interaction points
Strict risk discipline on new loan origination and tight risk monitoring
Improved customer focus with a lower cost structure
Q&A session
One Bank, One UniCredit Transform 2019 Improve Group Asset Quality T.J. Lim
London, 12 December 2017
One Bank, One UniCredit The five pillars
5 STRATEGIC PILLARS
ONE BANK ONE
TRANSFORM
OPERATING MODEL
ADOPT LEAN
BUT STEERING CENTRE
STRENGTHEN AND OPTIMISE CAPITAL
MAXIMISE
COMMERCIAL BANK VALUE
IMPROVE
ASSET QUALITY
2
Decisive actions to improve Group asset quality
Improved asset quality in 2017 thanks to proactive actions on stock and disciplined origination
9M17 Group CoR at 54bps, 23bps lower than in 9M16 thanks to strict risk management and write-backs
Gross NPEs down by a further 4.0bn by end 2019, better than initial Transform 2019 target
FINO phase 1 closed, all objectives achieved; phase 2 binding agreements signed to sell down below 20%, closing expected by 1Q18
Self-funded full rundown of Non Core by 2025
Note: Throughout the document numbers might not add due to rounding reasons, 9M16 figures restated assuming new Group perimeter, for 9M17 figures are stated
3
Transparency on expected impacts of regulatory headwinds, both on risk models and KPIs
Post 2019, organic capital generation fully absorbs expected regulatory headwinds
Assumptions on regulation, models and procyclicality up to end 2019 confirmed
Solid capital position allows for a partial anticipation of EBA guidelines during Transform 2019
Proactively providing transparency and clarity on regulatory headwinds
Confirmed 2019 Group CoR target of 55bps1 even with additional impact of regulation and model changes
1. Previously 49bps; delta for line adjustments from accounting changes (see annex slide 35)
4
Asset quality
2017 asset quality improved thanks to proactive actions on stock and disciplined origination
NPEs coverage, %
0.8p.p.
4.5p.p.
Group Core
5.0% 5.8%
Group
10.6% 15.2%
• Group NPEs ratio improved significantly by dropping 4.5 p.p. to 10.6%
• Group Core NPEs ratio at 5.0% close to EBA average of 4.5%1
• Strong NPEs coverage, increasing year on year for Group by 4.3p.p. to 56.5% and for Group Core by 6.1p.p. to 55.7%
Asset quality evolution
Gross NPEs ratio, %
1. EBA Risk Dashboard - data as of 1H17 (including EU banks)
Net NPEs, €bn
9M17
9M16
52.2
35.8
49.6
12.7
Cost of Risk, bps 77 42
9M16 9M17
56.5
22.3
54
55.7
10.0
38
Bad Loans coverage, % 61.4 64.0 66.2 69.5
UTP coverage, % 34.0 34.8 44.0 42.8
9M16 9M17
Comments
5
Group Core dynamics
Net flows YTD
-30%
9M17
2.3
-1.7
4.0
9M16
3.3
-1.4
4.7
Group Core
• Significantly lower net flows to NPEs (-30%)
• Default rate decreased to 1.3%, reflecting strong underwriting and monitoring discipline
• Thanks to effective restructuring management Migration rate to Bad Loans decreased to 15.4% and Cure rate improved to 9.2%
Default rate1,% 1.6 1.3
Cure rate3, % 7.3 9.2
Migration rate2, % 20.7 15.4
1. Default rate: Inflow to NPEs on Performing stock of previous year 2. Migration rate: Inflow from UTP to Bad Loans on UTP stock of previous year 3. Cure rate: Outflow to Performing on NPEs stock of previous year
Outflow to Performing YTD
Inflow to NPEs YTD
Comments
€bn
Significant improvement across all Group asset quality metrics
6
Commercial Banking Italy
Commercial Banking Germany
Commercial Banking Austria CEE CIB
Group Core
Expected Loss evolution confirming strong underwriting discipline
9M16 Stock
0.35 0.34
9M17 Stock
9M17 new business
0.38
9M17 new
business
0.66 0.63
9M16 Stock
0.52
9M17 Stock
Expected loss - Group Core
Expected Loss on performing stock improved by 3bps to 0.35%, Expected Loss on new business at low levels in all divisions
%
Group Core
%
9M16 Stock
0.17 0.19
9M17 Stock
9M17 new
business
0.15 0.34
9M17 Stock
9M17 new
business
0.30 0.25
9M16 Stock
0.48
9M17 Stock
0.85
0.58
9M16 Stock
9M17 new
business
9M16 Stock
0.14
9M17 Stock
0.14
9M17 new
business
0.15
1. Pro-forma including models recalibration occurred end of 2016
1
1
7
Group Core
38
42
9M17 9M16
6670
9M17 9M16
9
-1
9M17 9M16 -19
-8
9M17 9M16
94109
9M17 9M16
20 15
9M17 9M16
Commercial Banking Italy
Commercial Banking Germany
Commercial Banking Austria
CEE CIB
Cost of Risk - Group Core
Low Group Core Cost of Risk thanks to disciplined risk management and write-backs
bps
bps
Group Core
Note: figures do not include line adjustments from accounting changes
8
NPEs deleveraging plan on track thanks to decisive actions in Non Core
57.1 NPEs coverage, % 53.5
Bad loans cov., % 64.2 60.5
UTP coverage, % 45.1 33.3
1. Excluding intercompany and repos 2. 17.7bn as of June 2016 and 17.0bn as of December 2016, thanks to recovery activities. Starting from 31 December 2016 the credit exposures belonging to the FINO portfolio were recognized in item “Non-current assets and disposal groups classified as held for sale" 3. O/w 1bn in 4Q16
Actions of Non Core run down Non Core evolution
Net Loans1, €bn 15.6 29.5
Non Core
Performing
NPE
-23.8
9M17
32.5
28.8
3.7
9M16
56.3
49.6
6.7
Gross Loans, €bn
Gross loans, €bn
Total
-1.9
-0.3
-1.3
-2.23
-23.8
"Back" to Core
Write-offs
Repayments
Recoveries
Disposals
-1.1
-17.02 FINO Disposal of bad loans
Mostly corporate
Mainly driven by corporate, small business, real estate and mortgages
Focus on retail unsecured portfolio, leasing and corporate (single name)
In line with expectations
Active portfolio management and cost optimisation
9
FINO phase 1 closed, all objectives achieved; phase 2 binding agreements signed to sell down below 20%
FINO Phase 1
Non Core
Objectives
• Decisive
• Timeframe
• Impactful (17.7bn1)
• Further reduce the risk profile of the Bank
• Optimise capital structure of FINO
Execution Strategy
• Phase 2 binding agreements signed to sell down below 20%, closing expected by 1Q18
• Rating on FINO received and application for GACS3 in progress
• Significant Risk Transfer application in progress
FINO Phase 2
1. 17.7bn as of June 2016 and 17.0bn as of December 2016, thanks to recovery activities. Starting from 31 December 2016 the credit exposures belonging to the FINO portfolio were recognized in item “Non-current assets and disposal groups classified as held for sale" 2. As per information published in the rights issue prospectus in January 2017, the average price of the transfer of the portfolios sold as part of the FINO transaction was approximately 13 per cent of the gross book value (17.7bn, calculated as at 30 June 2016) 3. GAranzia sulle Cartolarizzazioni delle Sofferenze
Achievements
• Framework Agreements signed in December 2016 and executed in July 20172
• Pricing confirmed. No additional provisions
Objectives
10
EBA guidelines (remaining)
Transparency on sector-wide regulatory headwinds1 up to end 2019 and beyond
Regulation, models and procyclicality
Calendar provisioning
FRTB
Basel IV
Model changes, recalibrations and other impacts from regulation
Definition of common standards for credit risk regulatory models
Inflow to NPEs to be fully provisioned 2 years (unsecured) and 7/8 years (secured) after default
Revision of capital framework for market risks
Credit and operational risk requirements, introducing constraints to use internal models for capital
IFRS9 First time adoption of Fair Value accounting and new provisioning rules
EBA guidelines (anticipation)
Definition of common standards for credit risk regulatory models
During Transform
2019
Beyond Transform
2019
1. No impacts have been considered in terms of prudential measures on Sovereign exposure, considering that as of now no changes to current rules have been introduced while a discussion paper was published by Basel Committee on 7 December 2017. Given the duration and composition of Sovereign portfolio proactive actions to manage potential capital impacts would be taken
Assumptions on regulation, models and procyclicality up to end 2019 confirmed
Solid capital position allows for a partial anticipation of EBA guidelines during Transform
2019
Post 2019, organic capital generation fully absorbs expected regulatory headwinds
Regulatory headwinds
partial anticipation mainly on Italian models
11
EBA guidelines defining European standards for credit risk regulatory models
• Final document issued on 20 November 2017
• Requested implementation starting in 4Q20 and to be completed in 2021
• Sector-wide regulation;
mostly impacting banks with high NPEs ratios and countries with long judicial procedures
12
Others including: - higher weight of stressed macro-economic
scenarios - revised treatment of temporary cured cases - framework for the treatment of extraordinary
disposals (technical guidance expected)
More conservative discounting of recoveries (historical risk free rate + fixed spread of 5%)
Realised and projected losses of all defaults to be included in LGD computation
Introduction of prudential factors to compensate estimation errors
Description of requirements Relative weight3 Requirements Status
1. LGD (Loss Given Default) model estimates future losses based on historically realised losses 2. Incomplete workout includes defaulted positions on which collection activities are still ongoing 3. Relative weight on total expected impact based on preliminary assessment
High weight Low weight
LGD1 discount rate on recoveries
LGD incomplete workout2 treatment
Margin of conservatism
Other requirements
Regulatory headwinds
Basel IV introducing constraints for use of internal models for capital
1. Our expectation is that a phase-in approach will be introduced through the EU transposition in law; assumption of 5 years is consistent with foreseen phase-in period for output floor implementation
2. Standardised approach: Regulatory defined risk weights applied by asset class according to the type of exposure/collateral
3. IRB: Internal Rating Based approach
13
No Advanced IRB3 treatment for Banks and Large Corporate (no LGD model) Overall review of risk weights of the Standardised2 approach
Capital absorption for all off-balance exposures
Conservative floors on PD and LGD parameters
No internal model allowed
Overall review of Standardised approach
Set at 72.5%
• Final document issued on 7 December 2017
• Requested implementation date on 1 January 2022
• Assumed 5-years phase-in period1
Status Description of requirements Requirements Relative weight5
Credit Risk
(Standardised2 and IRB3)
Operational Risk
Output floor4
High weight Low weight
Regulatory headwinds
4. Output floor: minimum capital level calculated according to Standardised approach requirement (i.e. new standardised + IRB capital requirement >= 72.5% capital requirement considering the full portfolio under standardised treatment)
5. Relative weight on total expected impact based on preliminary assessment
2019 CET1 ratio target confirmed whilst anticipating additional regulatory headwinds
Fully loaded CET1 ratio, %
1. Occurred between 4Q16 and 9M17 2. IFRS9 to be implemented on 1 January 2018 3. Partial anticipation impacts include EBA guidelines related effect and other minor adjustments 4. Includes: retained earnings net of dividend payout (FY17: 20%; FY18: 20%, FY19: 30%) and of AT1 coupons, RWA growth and other; for 2018 includes FINO Significant Risk Transfer benefit
Regulation, models and procyclicality
IFRS92
EBA guidelines (anticipation) etc.3
Organic Capital Generation4 +0.4 +0.5
-0.3 -0.4 -0.1
-0.4
-0.8
>13.04,5 12.2/12.7 >12.5 13.8
Dividend payout 20% 20% 30%
-0.31 Confirmed expected
regulatory impacts of -1.5
9M17 4Q17 2018 2019
Total CET1 impact, % -0.8 +0.3 -0.7
%
Regulatory headwinds
Fully loaded CET1 ratio evolution to 2019, %
Partial anticipation mainly on Italian models6
14
5. Pro-forma for IFRS9 6. Including LGD incomplete workout treatment, margin of conservatism and higher weight of stressed macroeconomic scenario in selected Italian models
-0.1
% of cumulative phase-in
EBA guidelines (remaining)
Calendar provisioning1
FRTB2
Basel IV3
Estimated CET1 impact, %
< -0.9
-0.4
-0.1
-0.9
Estimated CET1 impact, % 2020 2021 2022 2023
20% 100%
13% 37% 54%
20% 40%
2024 2025
60%
66%
80%
86%
100%
< -0.8 -0.3 -0.2 -0.3 -0.3 -0.2
up to 2027
100%
100%
-0.2
65% 65%
1. Conservative approach based on ECB proposal has been used 2. Expected phase-in period of 2 years; no impact expected during phase-in, full impact in 2024 3. Our expectation is that a phase-in approach will be introduced through the EU transposition in law; assumption of 5 years is consistent with foreseen phase-in period for output floor implementation 4. Assuming net annual organic capital generation equivalent to 2019 of +0.5, net of 30% dividend payout
Cumulative net CET1 impact including organic capital generation4, %
< +0.1 +0.3 +0.5 +0.7 +1.0 +0.3 > +1.7
Regulatory Headwinds post 2019 – CET1 ratio impact (managerial estimates)
Providing transparency and clarity on regulatory headwinds post 2019
Regulatory headwinds
15
EBA guidelines impact on KPIs through model changes, mainly Loss Given Default
Input Model Parameter Impacts on KPIs
1. Incomplete workout includes defaulted positions on which collection activities are still ongoing 2. Expected Loss: Loss Given Default (LGD) * Probability of Default (PD) * Exposure at Default (EaD)
Higher Expected loss2
Higher CoR
Increase of Loss Given Default (LGD)
All historically realised losses factoring new EBA Guidelines (i.e.
incomplete workout1)
Regulatory headwinds
Quality of underlying business unchanged
16
2019 Group CoR confirmed even with impact of regulation and model changes
0.41%
Group Cost of Risk1
51
55
2019 2018
4
53
68
15
Bps
Comments
2019 Group CoR unchanged thanks to improvement of underwriting, offsetting impact of model changes, equal to 4bps
Higher one-off impact of model changes in 2018, mainly due to partial anticipation of EBA guidelines, affecting both stock and flows
Main effect on Commercial Banking Italy with 17bps in 2018 and 5bps in 2019, including partial anticipation of EBA guidelines
Impact from model changes in 2018 and 2019
Underlying business
1. Delta for line adjustment from accounting changes
Regulatory headwinds
improved from previous
551
17
1. CEE Division excluding Turkey
2019 NPEs targets
• 2019 NPEs target for Group Core down a further 2.0bn thanks to active recovery strategy and disposals in CEE
• Decisive de-risking resulting in an additional 2.0bn reduction of 2019 Non Core NPEs target
Comments
Gross NPEs, €bn
Non Core
17.2 19.2
Group Core1
23.1 25.1
Group1
40.3 44.3
2019 target
Previous target 4.0bn lower than previous
target
2.0bn lower than previous
target 2.0 bn lower than previous
target
Group
Gross NPEs down by a further 4.0bn by end 2019 thanks to decisive de-risking
18
2019 Gross NPEs ratio target for Group Core down to 4.7%
19
NPEs Coverage, %
Group Core - NPEs evolution
55.7 49.6
38 42 CoR, bps
• 2019 Gross NPEs ratio target improved from 5.0% to 4.7% thanks to 2.0bn lower NPEs stock target
• 2019 NPEs coverage ratio target confirmed >51%
• 2019 CoR target revised lower by 2bps to 43bps
>51
43
Group Core
Bad Loans Coverage, % 69.5 64.0
UTP Coverage, % 42.8 34.8
0.3% 2.4%
3.0%
5.8% 5.0%
2.5%
2.2%
9M16
0.3% 4.7%
2.2%
2.2%
9M17
0.3%
2019
Bad Loan
UTP
PD
>64
>39
Comments
previously 5.0%
1. Including repos, excluding intercompany and line adjustment effect 2. Calculated as: Gross NPEs / Gross Loans 3. Including line adjustments from accounting changes
Gross loans1, €bn 437 449 498
Gross NPEs ratio2, %
previously 453
Gross NPEs, €bn 25.2 22.5 23.1
2.0bn better than previous target
of 25.1bn
Further reduced 2019 Gross NPEs target thanks to proactive actions on Non Core
>57 NPEs coverage, % 57.1
Bad loans cov., % >63 64.2
UTP coverage, % >38 45.1
1. Excluding intercompany and repos 2. 13.3bn Bad Loans (19% Corporate, 15% Small business, 4% Old Vintage, 3% Individuals, 39% Mortgages,20% Leasing), 3.7bn UTP (67% Corporate,
6% Small business, 1% Individuals, 12% Mortgages, 14% Leasing) and 0.2bn Past Due 3. Including Debt to Equity swap 4. Including 0.4bn Leasing asset disposals
Non Core dynamics 9M17 - 2019
Gross loans, €bn
Total
-3.3
-1.0
-3.2
-4.6
-15.3
"Back" to Core
Write-offs
Repayments3
Recoveries4
Disposals
-3.2
Non Core evolution
Net Loans1, €bn 7.4 15.6
Non Core
Performing
NPEs
3.7
28.8
-15.3
2019
17.2
9M17
32.5
Gross Loans, €bn
2.0bn lower than previous
target of 19.2bn
Mostly corporate and mortgages
Mainly driven by corporate, small business
Both single name and portfolios
Cash recoveries on workout and UTP
Active portfolio management and cost optimisation
1
8.1 previous target
20
Non Core reduction of 2.0bn thanks to clear leasing run down strategy
Residual claims portfolio disposal
• Disposals of residual claims portfolio (i.e. difference between the disposal of the underlying collateral owned by UC Leasing and the original claim)
Single asset disposals/ recovery
• Increase asset sales by intensifying remarketing activity and improved sale process
Write-off
• Write-offs of NPEs with full provision and old vintage
Non Core
Leasing Non Core evolution
Gross Loans, €bn
Actions to reduce the Leasing Non Core portfolio
-2.0
2019
3.1
9M17
4.5
9M16
5.1
21
Active disposals and recovery drive the run down strategy
• Transform 2019 disposal activity has two main areas of focus:
- Portfolios, 2.9bn
- Single names, 2.9bn
Non Core
Non Core disposals (excluding FINO transaction)
Gross loans, €bn
• Securitisation vehicles: Sandokan (Real Estate), and Pillarstone (Large Industrial)
• Implementation of turnaround plans with dedicated restructuring specialists in order to optimise recoveries and migration from UTP to Bad Loans
• Current portfolio managed through securitisation vehicles kept on balance sheet, but deconsolidation potentially achievable
Recovery strategies
Total
5.8
2.9
2.9
2019
1.9
0.9
1.0
2018
1.7
0.7
1.0
2017
2.21
1.2
1.0
Portfolio
Single Names
1. Of which 1bn planned in 4Q17
22
Self-funded full rundown of Non Core by 2025 Non Core
• Performing component of Non Core reduced to zero by end 2018, meaning no new NPEs flows onwards
• 2019 NPEs target down by 2.0bn from 19.2bn to 17.2bn
• Decisive drop until 2022, especially on Mortgages, Leasing and Corporate portfolios
• Full rundown by 2025 leveraging on improving recoveries and active disposals on Leasing, Residential Mortgages and Corporate
Non Core rundown strategy
Gross loans, €bn
Non Core evolution
-10.1
Rundown
-15.3
2025 2022
7.1
5.5
1.6
2019
17.2
13.3
3.7 0.2
32.5
3.7
18.2
10.4
0.2
9M17
Performing Bad Loans UTP PD
23 1. 13.3bn Bad Loans (19% Corporate, 15% Small business, 4% Old Vintage, 3% Individuals, 39% Mortgages,20% Leasing), 3.7bn UTP (67% Corporate, 6% Small business, 1% Individuals, 12% Mortgages, 14% Leasing) and 0.2bn Past Due
1
Closing remarks
2019 CoR target of 55bps1 unchanged thanks to disciplined risk management
Improved asset quality in 2017 thanks to proactive actions on stock and disciplined origination
FINO phase 1 closed, all objectives achieved; phase 2 binding agreements signed to sell down below 20%, closing expected by 1Q18
Proactive anticipation of European regulatory changes
Gross NPEs down by a further 4.0bn by end 2019, better than initial Transform 2019 target
Self-funded full rundown of Non Core by 2025
24
1. Previously 49bps; delta for line adjustments from accounting changes (see annex slide 35)
London, 12 December 2017
M. Bianchi
One Bank, One UniCredit Transform 2019 CFO presentation
One Bank, One UniCredit The five pillars
2
5 STRATEGIC PILLARS
TRANSFORM
OPERATING MODEL
ADOPT LEAN
BUT STEERING CENTRE
STRENGTHEN AND OPTIMISE CAPITAL
MAXIMISE
COMMERCIAL BANK VALUE
IMPROVE
ASSET QUALITY
ONE BANK ONE
• 2019 revenues target confirmed: higher relative contribution of fees and commissions
• 2019 cost target confirmed: higher HR savings allowing for additional IT investments
• 2019 RoTE target confirmed: >9%
Transform 2019 key targets confirmed with an improved risk profile
3
FY19 dividend3 payout increased from 20% to 30% thanks to a solid capital position Post 2019 dividend payout to increase from 30% up to 50% once upcoming regulatory impacts are confirmed
Transform 2019 on track
Improved asset quality
• SREP Pillar 2 requirement lowered by 50bps to 200bps. CET1 MDA buffer confirmed above 200bps until end 2019, above 250bps after 2019
• 2019 fully loaded CET1 ratio target confirmed >12.5% including partial anticipation of regulatory headwinds
• Post 2019, annual CET1 ratio2 target >12.5% thanks to organic capital generation fully absorbing expected regulatory headwinds
• Gross NPEs down by a further 4.0bn1 by end 2019, better than initial Transform 2019 target
• Thanks to decisive actions Group NPEs exposure has materially reduced
• Self-funded full rundown of Non Core by 2025
Confirm capital target
Transform 2019
1. Of which: Non Core down by 2.0bn from 19.2bn to 17.2bn and Group Core down by 2.0bn from 25.1bn to 23.1bn 2. Refers to CET1 ratio phasing-in regulatory headwinds post 2019 (managerial estimates) 3. To be paid in 2020 Note: CET1 ratio fully loaded and data in Euro throughout the document unless otherwise stated
Macro
2.2
1.8 1.5 2017 2018 2019
Supportive economic outlook whilst increase in rates now expected in 2H19
4
1. Average 2017- 2019 calculated on a quarterly basis 2. Previously included in Transform 2019 3. GDP growth: Consensus Forecast (Eurozone) and Focus Economics (CEE); 3M Euribor: future from Bloomberg as of 6th December 2017; Swap 10Y: forward from Bloomberg as of 6th December 2017
Real GDP growth y/y and average, % Bps, EoP
Euro
zon
e
Mid
Sw
ap 1
0Y
Euri
bor
3M
CEE
Growth in line with consensus Interest rates and yield environment
1Q 2Q 3Q 4Q
2017 2018 2019 Avg. 2017-20191
Avg. 2017-20191
Avg. 2017-20191
-33 -33
-14 0
2017 2018 2019 Avg. 2017-20191 2017 2018 2019
UC current estimates UC current estimates
UC current estimates UC current estimates
1.8
2.6 2.4
2.2
2.8
-33 -33
0
84 106
129 94
-25
2.6
1.2
-26
67
UC estimates Dec 162
UC estimates Dec 162
UC estimates Dec 162
UC estimates Dec 162
Current Consensus3 Current Consensus3
Current Consensus3 Current Consensus3
Bps, average
Transform 2019
• Strengthened corporate governance as well as simplified share capital structure
• Decreasing weight of Group Corporate Centre on Total Costs
• FTE reductions and branch closures progressing ahead of schedule
• Improving customer experience thanks to streamlined processes
• All announced decisive strategic actions successfully completed: 13bn rights issue, Pioneer and Pekao disposals
• Strengthened capital and enhanced liquidity buffer, well in excess of 195bn
• FINO phase 1 closed, all objectives achieved; phase 2 binding agreements signed to sell down below 20%, closing expected by 1Q18
• Active NPEs portfolio management with disposals in Italy and CEE
• Strong commercial dynamics thanks to network revamp
• "One Bank" business model replicated across full network, driving synergies and streamlined operations
Transform 2019 yielding tangible results underpinned by group-wide business momentum
5
Adopt lean but steering centre
Transform 2019 fully on track
Transform operating model
51% of planned FTE reductions
59% of planned branch closures
58% cost income ratio, down 0.7p.p. vs 9M16
Strengthen and optimise capital
>500bps generated by strategic actions
>100% LCR/NSFR
Improve asset quality
3.6bn of NPEs disposal completed since 3Q16, excluding FINO
10.6% gross NPEs ratio, down by 4.5p.p. vs 9M16
Weight of Group Corporate Centre of total costs down from 5.1% in 2015 to 3.8% in 9M17 to 3.5% by 2019
Achievements as of 9M17
Maximise commercial bank
value
52bn new loan production in 9M17, +14% vs 9M16
13bn AuM Net Sales in 9M17, +7bn vs 9M16
Financial assets
NII
LLP
Line adjustments from accounting changes (1/2)
6
Description Accounting change1 Impact
NPEs time value accounting2
NPEs accrued interest
Reclassification of customers loans
No Net Income and RoTE impact
NII
LLP
Loans to customers
0
0
0
New Bank of Italy regulation requires to account for Time value release as NII and no longer as LLP write-back
Interest from UTP and Past Due calculated on Net Book Value rather than Gross Book Value resulting in lower NII and lower associated LLP, according to IFRS9 guidance
Customers debt securities in issue3 excluded from customers loans and included in financial asset
Line adjustments
Net effect
1. All effects from 2018 2. Difference between (i) the sum of expected recoverable cash flows of NPEs and (ii) its Net Present Value (i.e. Net Book Value) 3. Currently included in loan book
Combined effect in 2019
NII
LLP
+0.2
-0.2
Financial assets
Loans to customers
€bn
-12
+12
Line adjustments
4.7
Line adjustments from accounting changes (2/2)
7
2015
Previous Delta Restated Previous Delta Restated
of which NII
LLP
CoR4, bps
Net income
10.9 0.51 11.5
-4.0 -0.51 -4.5
1.5 0 1.5
89 145 103
10.9 0.21 11.1
-2.4 -0.21 -2.6
4.7 0
49 65 55
Cost/Income6 61.6% -1.6p.p.1 60.0% <52% -0.6p.p.1 <52%
P&L, €bn
Other
Loans2, €bn 418 -93 409 467 -123 455
Revenues 19.9 0.5 20.4 20.4 0.2 20.6
1. Delta given by effect of: NPEs time value accounting, NPEs accrued interest 2. Excluding repos 3. Delta given by effect of: reclassification of customers loans 4. Cost of Risk computed as LLP over average loans
Combined effect equal to zero
Transform 2019 targets
5. Delta given by effect of: NPEs time value accounting, NPEs accrued interest, reclassification of customers loans 6. Cost/Income computed as total operating cost over revenues
improved
2019 key targets confirmed RoTE target >9% and further 4.0bn reduction of NPEs
8
LLP
Revenues
Net Income
Cost
-2.6
2019
20.6
4.7
-10.6
€bn, unless otherwise stated
Cost of risk
Cost/income
RoTE
CET1 ratio
Gross NPEs stock
55bps
<52%
>9%
>12.5%
40.3
2018
20.1
-11.0
68bps
12.2 – 12.7%
<55%
Key targets
-0.21
+0.21
+6bps1
unchanged
unchanged
unchanged
unchanged
unchanged
Line adjustment
1. 2019 line adjustment due to accounting changes
down by 4.0bn from 44.3bn
2019 overall revenues target confirmed: higher relative contribution of fees and commissions
9
1. Figures included line adjustment restatement as per slide 7
P&L - Revenues
Revenues target confirmed1
\
2019 different mix1
20.6
CAGR: +0.2%
2019
7.1
11.0
20.4
11.5
2.4
6.5
2015
2.5
NII Fees & Commissions Trading Income, Dividends and Other
€bn
2019 target confirmed
€bn
7.0
11.1 11.0
7.1
2.5
20.6
Restated
20.6
New
2.5
+0.1
-0.1
NII
Fees & Commission
Trading Income, Dividends and Other
Increased fee target thanks to higher investment and transactional fees
10
€bn
P&L - Fees
Fees and commissions mix evolution
2015 9M17 2019
Investment
Financing
Transactional
6.5 5.0
7.1
AuM, €bn
AuM/TFA, %
CAGR: +2.3%
AuM penetration and dynamics in Italy
148123111
9M17 2015 2019
33% 36% 41%
TFA1 771 804 858
increased from previous target of 7.0bn
1. 2015 TFA restated to include elisions of intragroup custody services
NII target affected by lower for longer interest rate scenario and less dynamic loan growth
11
1. Delta calculated versus target 2019 restated at 11.1bn, as per line adjustments in slide 7 2. Line adjustments on 2017 guidance 3. Including 2017/2019 time value reduction 4.Excluding repos
CAGR '15-19 updated: [xx]%
P&L – NII
NII evolution by year
€bn
NII evolution − Main components
409 Net
Loans4 444
2019 net loans4
467 455
444
New Loan dynamics
-11
Restated line adjustment
-12
Previous
€bn
4Q19 annualised
11.6
2019
11.0
2017 guidance
10.2
Lower by 0.1bn vs. previous
target1
€bn
Commercial dynamics: +0.7bn
Term funding
-0.1
Deposits
0.3
2019 Other3
0.5
Loans
11.0
Line adjust.2
2017 guidance
2015
-0.2
Invest.ptf & markets/treasury
FX effect
10.2 -0.1
0.3 11.5
-0.1
12.2 <11.7
11.0 10.6
2015 2017guidance
2018 2019
2019 cost target confirmed: adjusted mix with higher HR savings
12
60.0% <52% Cost/
income
€bn
Cost reduction confirmed
P&L – Cost
>34% cost saving
57.9%
9M17 2015 2019
Cost evolution by year
CAGR '15-19 updated: [xx]% 2019 savings: adjusted mix
2015
-1.2
HR Savings
10.6
4.3
6.3
-0.5
Non-HR Savings 2019
1.7bn annual recurring net cost savings
12.2
4.8
7.5
2019 target confirmed
Non-HR Costs HR Costs
65% 70%
35% 30%
Previous New
1.7 1.7
Non-HR Cost HR Cost
€bn
€bn
Additional IT investments thanks to higher HR savings
72%3 achieved as of November
FTE and branch reductions ahead of schedule
13
€bn
HR costs evolution
P&L – Cost
Non-HR costs evolution
-14k / -14%
FTE, '000
101 87 99 94
€bn
-944
Branches2, #
3,809 2,865 3,629 3,252
1. 9M16 equal to 3,438m, 9M17 equal to 3,353m 2 .Western Europe retail branches 3. Including additional 121 branch closures in Italy already completed as of November 17
CAGR: -4.2%
-4.7%
2019
6.3
9M17
5.2
9M16
5.5
2015
7.5
CAGR: -2.8%
-2.5%1
2019
4.3
9M17
3.4
9M16
3.4
2015
4.8
51% achieved
50.8 52.2 56.5 >54
2015 9M16 9M17 2019
34.2 34.0 44.0
>38
2015 9M16 9M17 2019
60.6 61.4 66.2 >63
2015 9M16 9M17 2019
103
68 55
2015 2018 2019
Improved NPE ratio thanks to decisive de-risking actions
14
CoR evolution2
Risk – Ratios
16.0 15.2
10.6
7.8
2015 9M16 9M17 2019
%
5.2 4.6 4.3
2.9
2015 9M16 9M17 2019
10.2 10.1
6.1 4.7
2015 9M16 9M17 2019
53 51
2019
55 4
2018
68
15
bps
Gro
ss R
atio
UTP1 Bad Loans1 NPE1
Cov
erag
e R
atio
Model changes Underlying business
2019 target confirmed
1. 2015, 9M16 and 9M17 stated figure 2. Includes line adjustment 3. Includes line adjustments: for 2018 equal to 7bps and for 2019 equal to 6bps
3
Gross NPEs down by a further 4.0bn by end 2019, better than initial Transform 2019 target
15
Asset Quality
2.0bn better
than previous target of 19.2bn
Gross NPEs ratio3, %
NPEs Coverage ratio, %
Group Core – NPEs evolution1
5.8
49.6
CoR, bps 42
Gross NPEs, €bn
5.0
55.7
38
4.7
>51
434
NPE
Non Core evolution1
Gross loans, €bn
29.5
53.5
Net loans2, €bn
NPEs Coverage ratio, %
15.6
57.1
7.4
>57
Self-funded full rundown of Non Core by 2025
Performing
2.0bn better than
previous target of 25.1bn
FINO phase 2 signed5
2019
23.1
10.8
11.0
1.4
9M17
22.5
11.2
10.0
1.2
9M16
25.2
13.0
10.7
1.5
Bad Loan
UTP
PD
2025 2022
7.1
2019
17.2
9M17
32.5 3.7
28.8
9M16
56.3
6.7
49.6
0
397 405 437 Net Loans2, €bn
1. For 9M16 and 9M17 stated figure 2. Excluding intercompany and repos 3. Calculated as: Gross NPEs / Gross Loans including repos
4. Includes line adjustment, previously 45bps 5. Closing expected in 1Q18
Capital
2019 fully loaded CET1 ratio target confirmed and FY19 dividend payout increased from 20% to 30%
16
Fully loaded CET1 ratio, %
1. Occurred between 4Q16 and 9M17 2. IFRS9 to be implemented on 1st January 2018 3. Partial anticipation, impacts include EBA guidelines related effect and other minor adjustments
Regulation, models and procyclicality
IFRS92
EBA guidelines (anticipation) etc.3
Organic Capital Generation4 +0.4 +0.5
-0.3 -0.4 -0.1
-0.4
-0.8
>13.04,5 12.2/12.7 >12.5 13.8
Fully loaded CET1 ratio evolution to 2019, %
Dividend payout 20% 20% 30%
-0.31 Confirmed expected
regulatory impacts of -1.5
9M17 4Q17 2018 2019
Total CET1 impact, % -0.8 +0.3 -0.7
%
4. Includes: retained earnings net of dividend payout (FY17: 20%; FY18: 20%, FY19: 30%) and of AT1 coupons, RWA growth and other; for 2018 includes FINO Significant Risk Transfer benefit 5. Pro-forma for IFRS9
-0.1
Cumulative organic capital generation above estimated regulatory impacts post 2019
17
Post 2019 dividend payout to increase from 30% up to 50% once upcoming regulatory impacts are confirmed with CET1 ratio5 >12.5%
% of cumulative phase-in
EBA guidelines (remaining)
Calendar provisioning1
FRTB2
Basel IV3
Estimated CET1 impact, %
< -0.9
-0.4
-0.1
-0.9
Estimated CET1 impact, % 2020 2021 2022 2023
20% 100%
13% 37% 54%
20% 40%
2024 2025
60%
66%
80%
86%
100%
< -0.8 -0.3 -0.2 -0.3 -0.3 -0.2
up to 2027
100%
100%
-0.2
65% 65%
Cumulative net CET1 impact including organic capital generation4, %
< +0.1 +0.3 +0.5 +0.7 +1.0 +0.3 > +1.7
Regulatory Headwinds post 2019 – CET1 ratio impact (managerial estimates)
1. Conservative approach based on ECB proposal has been used 2. Expected phase-in period of 2 years; no impact expected during phase-in, full impact in 2024 3. Our expectation is that a phase-in approach will be introduced through the EU transposition in law; assumption of 5 years is consistent with foreseen phase-in period for output floor implementation 4. Assuming net annual organic capital generation equivalent to 2019 of +0.5, net of 30% dividend payout 5. Refers to CET1 ratio phasing-in regulatory headwinds post 2019 (managerial estimates)
Capital – Requirements
SREP Pillar 2 requirement lowered by 50bps to 200bps, CET1 MDA buffer above 250bps after 2019
18
1. Transitional requirements and ratios CET1r fully loaded requirements and ratios for 2019 2. New Pillar 2 Requirements for 2018 at 200bps, assumed constant for 2019 3. Includes: (i) Pillar 1, (ii) Pillar 2, (iii) Capital Conservation Buffer, (iv) G-SIFI and (v) Countercyclical buffer; see annex for further details
2019 MDA buffers confirmed above 200bps, fully loaded requirements already fulfilled
2019
9.20
12.2/12.7 >12.5
3.0/3.5
2018
10.07
>2.4
Requirement Buffer
Capital evolution1
11.57
2019
>14.0
>2.4
2018
13.7/14.2
3.0/3.5
10.70
>16.0
>2.4
16.1/16.5
12.70
2019
3.4/3.8
13.57
2018
%
Lower Pillar 2 Requirement
by 50bps2
CET1 ratio Tier 1 Capital ratio Total Capital ratio
3
Optimised TLAC funding plan
19
TLAC
1. 2019 TLAC transitional requirement (Pillar 1 MREL). MREL binding requirement to be communicated by SRB in 1Q 2018 2. 5.6bn, outstanding senior bonds, not part of the funding plan 3. 3.5bn AT1 planned of which 500m AT1 already executed in December'16 4. For comparison purposes vs. Previous Funding Plan, 1.7bn Supranational funding in Bank Austria would have to be excluded
Updated funding plan
3.53
3.4
4.5
6.0
1.75
2.4
6.0
4.5
of which to be issued
17.4 14.7 CET1 ratio
AT1
Tier 2
TLAC requirement1: >19.6%
Senior outst. TLAC eligible2
Senior Preferred
Senior Non Preferred
Subordinated req.: >17.1%
2.5% Senior bond
exemption
€bn
Previously 13.35bn
Previously 26.4bn
Target 2019
>20.5%
>18.0%
UniCredit SpA TLAC funding plan: 2017 - 2019 UniCredit Group funding plan 2017 – 2019
€bn
Total
26.3
5.8
17.4
26.5
78.7
18.3
20.0
14.1
26.4
Previous New
76.0
Supranational and other m/l term funding
Covered Bonds
Unsecured funding
TLAC funding plan
4
2019 Group Core profitability above 10%
20
1. Allocated Capital based on RWA equivalent figures calculated as 12.5% of divisional RWA, net of capital deductions 2. Tangible Equity calculated as 2019 Tangible Equity net of 2019 Non Core Allocated Capital (12.5% of RWA) 3. 2019 Group NPE ratio equal to 7.8%
..hence, Group Core represent future normalised view
2019 Group profitability
RoAC1, %
Non Core GCC CIB
11.7
CEE
13.4
CB Austria
13.3
CB Germany
9.1
CB Italy
12.9
13.2
-0.3bn net result in
2019
2019 Allocated Capital1, €bn
4.5 2.8 11.9 11.6 3.5
Fully run down in
2025
2019 Group RoTE >9%
4.3
2019 Group Core RoTE2 >10%
2019 Group Core NPE ratio3 4.7%
Non Core Allocated Capital to cover all future losses until final rundown….
3.5bn
Group Core profitability
Cost/income, % 60.01 57.9 <521 <551
Cost of Risk, bps 1031 54 551 681
Cost, €bn -12.2 -10.6 -11.0
2019 key targets confirmed
21
1. Including line adjustment from accounting changes as per slide 7 2. Adjusted to exclude net income from Pekao and Pioneer disposals and a one-off charge booked in Non Core related to FINO; RoTE calculated considering also the capital increase and Pekao and Pioneer disposals as at 1 January 2017
Net Income and RoTE target confirmed
Revenues, €bn
CET1 ratio,%
RoTE, %
RWA, €bn
2015 2018 2019 9M17
Gross NPEs ratio – Group, %
Gross NPEs ratio – Group Core, %
Gross NPEs, €bn
361 350 406
10.4 13.8 12.2 / 12.7 >12.5
51.3 40.3
4 82 >9
20.61
10.6 7.8
5.0 4.7
20.11
Net income, €bn 1.5 4.7
77.8
16.0
6.1 down by 0.3 from of 5.0
Key targets
Net NPEs, €bn 22.3 17.7 38.3
20.41
down by 4.0bn from 44.3bn
down by 0.6 from 8.4
down by 2.5 from of 20.2
Closing remarks
22
Gross NPEs down by a further 4.0bn by end 2019, better than initial Transform 2019 target Self-funded full rundown of Non Core by 2025
SREP Pillar 2 requirement lowered by 50bps to 200bps, CET1 MDA buffer above 250bps after 2019
2019 fully loaded CET1 ratio target confirmed >12.5% including partial anticipation of regulatory headwinds
Post 2019, annual CET1 ratio1 target >12.5% thanks to organic capital generation fully absorbing expected regulatory headwinds
2019 key targets confirmed
FY19 dividend2 payout increased from 20% to 30% Post 2019 dividend payout to increase from 30% up to 50% once upcoming regulatory impacts are confirmed
1. Refers to CET1 ratio phasing-in regulatory headwinds post 2019 2. To be paid in 2020
Closing remarks
Transform 2019 yielding tangible results underpinned by group-wide business momentum
Q&A session
J. P. Mustier
London, 12th December 2017
One Bank, One UniCredit Transform 2019 Closing Remarks
STRENGTHEN AND OPTIMISE CAPITAL
Transform 2019: key targets confirmed with an improved risk profile (1/2)
2
• SREP Pillar 2 requirement lowered by 50bps to 200bps, CET1 MDA buffer above 250bps from 2019
• 2019 fully loaded CET1 ratio target confirmed >12.5% including partial anticipation of regulatory headwinds
• Post 2019 CET1 ratio1 target >12.5%
• Transform 2019 fully on-track yielding tangible results supported by group-wide business momentum
• Improving customer experience thanks to streamlined processes TRANSFORM OPERATING MODEL
IMPROVE ASSET QUALITY
• FINO phase 1 closed, all objectives achieved; phase 2 agreements signed to sell down below 20%, closing expected by 1Q18
• Group gross NPEs down by a further 4.0bn2 by end 2019, better than initial Transform 2019 target
• Self-funded full rundown of Non Core by 2025
1 Refers to CET1 ratio phasing-in regulatory headwinds post 2019 (managerial estimates) 2. Of which: Non Core down by 2.0bn from 19.2bn to 17.2bn and Group Core down by 2.0bn from 25.1bn to 23.1bn
ADOPT LEAN BUT STEERING CENTER
MAXIMISE COMMERCIAL BANK VALUE
• Strong commercial dynamics thanks to network revamp
• "One Bank" business model replicated across full network, driving synergies and streamlined operations
• Corporate governance in line with European public company
• Simplified share capital structure
FY2019 dividend payout increased from 20% to 30% further increase up to 50% once upcoming regulatory impacts are confirmed with CET1 ratio1 >12.5%
3 1. Refers to CET1 ratio phasing-in regulatory headwinds post 2019
Transform 2019: key targets confirmed with an improved risk profile (2/2)
A simple successful Pan European Commercial Bank, with a fully plugged in CIB, delivering
a unique Western, Central and Eastern European network to its extensive client franchise
UniCredit: a pan European winner
UniCredit post 2019
4