HVB Group: Good start in the first quarter, profit before tax of €613 million proves solid state of both the business model and the Bank, excellent capital base

Consolidated profit after tax amounts to €403 million
Profit before tax in Q1 2012 distorted by positive CVA effect of €395 million
All business segments with positive profit contribution
Further increase in the Core Tier 1 ratio to a record high of 18.0%
Year-on-year decline of 1.9% in operating costs
New segment structure as a result of strategic reorientation

Today, UniCredit Bank AG (also referred to as HypoVereinsbank) presents its figures for the first quarter of 2013. To download the complete Interim Report as of 31 March 2013, please visit HVB's Investor Relations website at www.hvb.de/ir .

Performance in the period from 1 January to 31 March 2013

Results of HVB Group

In a persistently challenging capital markets environment, HVB generated a good profit before tax of €613 million. It should be taken into account that Q1 2012 benefited from a non-recurring item of €395 million in net trading income resulting from the reversal of credit value adjustments (CVA). Without this effect, the decline in profit before tax compared with the first quarter of 2012 amounts to €113 million on a normalised basis.

A significant factor for the decline in profit is the decrease in net interest (down €160 million) on the back of consistently low interest rates and a persistently weak credit demand. At the same time, net fees and commissions developed well, rising by 3.8%, or €12 million, over the equivalent period last year to €327 million, despite the ongoing restraint on the part of customers, who turned increasingly to products with lower margins. All the trading units generated a profit. The significant decline of €432 million in net trading income compared with the first quarter of 2012 is mainly attributable to the non-recurring effect arising from the reversal of credit value adjustments in 2012 (€395 million); the decline only amounted to €37 million on a normalised basis. In addition, net other expenses/income rose by €21 million to €49 million.

The Bank succeeded in reducing operating costs by a pleasing 1.9%, to €883 million, compared with the first quarter of 2012, despite an inflation rate of 1.8% and higher regulatory costs. The cost-income ratio of 57.9% for the first quarter of 2013 remained at a very good level for a universal bank by both national and international standards. At €89 million, net write-downs of loans were almost unchanged from the €90 million recorded last year.

The strategic reorientation of UniCredit Group has resulted in a reallocation of responsibilities and a full re-regionalisation of its commercial banking operations. At the turn of the year, HVB Group adjusted its segment structure accordingly. Starting in the first quarter of 2013, the operations of the Private Clients Bank and the Unternehmer Bank in Germany are being bundled in the Commercial Banking segment. In addition, HVB Group reports the following business segments: Corporate & Investment Banking and Asset Gathering (direct banking business) as well as the following cost centres: Global Banking Services and Other/ consolidation. Financial figures for Q1 2013 as well as previous year's figures have been presented in accordance with the new segment structure in the present Interim Report.

Dr. Theodor Weimer, Board Spokesman of HypoVereinsbank:

"We once again achieved a good result in the first quarter, which is further evidence of the solid state of both our business model and our Bank. As a strongly customer-oriented bank, we also had to tolerate declines in earnings as a result of low interest rates but on the other hand managed to achieve further cost reductions.

After the organisational changes made at the level of UniCredit Group and HypoVereinsbank, we are reporting in the new structure in this quarter for the first time: Among other things, we are showing the results for Commercial Banking and Corporate & Investment Banking separately; a reporting structure which is in line with the Group and other large universal banks. We are convinced that our new line-up in Commercial Banking is enabling us to further strengthen our position in the German banking market."

Business segments

The Commercial Banking (CB) business segment generated a profit before tax of €115 million, which was €24 million down vs. previous year's figure. The rise of €7 million in operating profit was more than offset by an increase of €14 million in net write-downs of loans reflecting the start of a return to more normal levels as well as by the non-recurrence of income from the reversal of provisions.

The Corporate & Investment Banking (CIB) business segment recorded a profit before tax of €282 million (first quarter of 2012: €893 million; normalised by the CVA effect: €498 million). The year-on-year decline results mainly from the non-recurring income from credit value adjustments no longer included in the reporting period, which led to a decline of €533 million in net trading income, coupled with a decrease of €134 million in net interest.

The Asset Gathering business segment generated a profit before tax of €5 million, which failed to match the pre-tax profit of €8 million recorded in 2012 mainly due to lower net interest.

Capital and liquidity

At 31 March 2013, the core capital of HVB Group compliant with the German Banking Act excluding hybrid capital (Core Tier 1 capital) had increased by a slight €0.1 billion to €19.2 billion compared with year-end 2012. As a result of the decline in total risk-weighted assets in particular, the Core Tier 1 ratio rose to a new record high of 18.0% at 31 March 2013 (31 December 2012: 17.4%). The core capital of HVB Group (Tier 1 capital) amounted to €19.3 billion at 31 March 2013 (31 December 2012: €19.5 billion). Due to the decline in total risk-weighted assets, the core capital ratio under Basel II (Tier 1 ratio) rose to 18.1% (31 December 2012: 17.8%). Total capital amounted to €20.9 billion at 31 March 2013 (31 December 2012: €21.2 billion). Total capital ratio was 19.6% at the end of March 2013 (31 December 2012: 19.3%).

A bank’s liquidity is evaluated using the liquidity ratio defined in the German Banking Act/German Liquidity Regulation (KWG/ LiqV). This figure is the ratio of cash and cash equivalents available within a month to the payment obligations falling due in this period. Liquidity is considered adequate if this ratio is at least 1.00. At HVB, this figure was 1.30 at the end of March 2013 after 1.38 at year-end 2012.