HVB Group: good profit before tax of around €1.2 billion in the first half of 2013

Pre-tax profit of €1.2 billion, consolidated profit after tax of €818 million
Pleasingly stable profit development in both quarters of 2013
All business segments with positive profit contribution
Gratifying increase in net fees and commissions
Further year-on-year reduction of 1.1% in operating costs
Record high core Tier 1 ratio of 19.1% – an excellent, competitive level

Today, UniCredit Bank AG (also referred to as HypoVereinsbank) presents its figures for the first half of 2013. To download the complete Half-yearly Financial Report as of 30 June 2013, please visit HVB's Investor Relations website at www.hvb.de/ir .

Performance in the period from 1 January to 30 June 2013

Results of HVB Group

In a persistently challenging economic and financial environment, HVB Group generated a good profit before tax of €1,222 million in the first half of 2013. At €613 million in the first quarter and €609 million in the second, the quarterly results in this financial year have provided pleasingly consistent contributions to earnings.

Based on the half-year result, there was a decline in the profit before tax compared with the figure of €1,557 million posted for the first six months of last year. However, it should be taken into account in this context that the year-ago total benefited from a non-recurring item of €395 million in net trading income resulting from the reversal of credit value adjustments. Without this one-off effect last year, the profit before tax in 2013 would have been €60 million higher than last year’s figure. Consolidated profit after tax amounted to €818 million in the reporting period (2012: €912 million).

The decline in reported profit before tax can be attributed to a fall of €331 million in net interest to €1,465 million on the back of persistently low interest rate levels and the decline in net trading income to €709 million caused by the non-recurrence of the one-off income item. At the same time, net fees and commissions developed extremely well, rising by 9.1%, or €54 million, over the equivalent period last year to €650 million. Furthermore, net other expenses/income increased by €32 million to €91 million.

Operating costs were reduced by a pleasing 1.1%, to €1,764 million, compared with the first half of 2012, despite an inflation rate of 1.5% and higher regulatory costs. The cost-income ratio of 59.4% for the first six months of 2013 (first half of 2012 excluding non-recurring effects in net trading income: 58.2%) remained at a very good level for a universal bank by both national and international standards. At €86 million, net write-downs of loans and provisions for guarantees and commitments were significantly lower than the €265 million recorded last year.

Dr Theodor Weimer, Board Spokesman of HypoVereinsbank:

"HypoVereinsbank once again generated a good pre-tax profit of €1.2 billion in the first half of the year. It is especially pleasing that the results in the second quarter were just as high as in the first. Our good performance is based on a stable business model, broad-based cost discipline, a good risk result and – what is particularly gratifying – a significant rise in net fees and commissions. The low interest rates are of course a burden, but we have managed to offset their negative impact on earnings. Over the year as a whole, we are confident that we will again match last year's good profit before tax adjusted for non-recurring effects."

Business segments

The Commercial Banking (CB) business segment recorded a profit before tax of €218 million, down €41 million on the year-ago figure. Within this total, operating income fell by €39 million to €1,233 million, primarily on account of lower net interest. Operating costs rose slightly, while net write-downs of loans and provisions for guarantees and commitments decreased to what continues to be a very low level.

The Corporate & Investment Banking (CIB) business segment generated operating income of €1,387 million (first half of 2012: €1,848 million). The year-on-year decline of €461 million results mainly from the non-recurring item mentioned above of €395 million from credit value adjustments no longer included in the first half of 2013, which led to a decline of €249 million in net trading income, coupled with a decrease of €288 million in net interest.

There was a substantial decline in net write-downs of loans and provisions for guarantees and commitments. Profit before tax amounted to €604 million after €900 million last year (without the non-recurring item mentioned above, profit before tax would have been €99 million higher than the adjusted year-ago total).

The Asset Gathering business segment generated a profit before tax of €10 million, which failed to fully match the pre-tax profit of €16 million recorded in 2012 due mainly to lower net interest. By contrast, there was a pleasing rise of 16% in net fees and commissions compared with the equivalent period last year.

Capital and liquidity

HVB Group has had an excellent capital base for years. The core Tier 1 ratio increased again to 19.1% at 30 June 2013 (year-end 2012: 17.4%), which is an excellent level by both national and international standards. The shareholders’ equity shown in the balance sheet fell by €1.7 billion compared with year-end 2012 to €21.6 billion as a result of the dividend payment totalling €2,462 million as resolved in the second quarter of 2013 by the Shareholders’ Meeting. This was only partially offset by the consolidated profit (attributable to the shareholder of UniCredit Bank AG) of €808 million generated in the first half of 2013. With total assets down by 8.3% compared with year-end 2012 to €319.5 billion, the leverage ratio (ratio of total assets to shareholders’ equity shown in the balance sheet) amounted to 14.8x at 30 June 2013 after 15.0x at year-end 2012.

HVB Group enjoyed a very comfortable liquidity base and a solid financing structure at all times in the reporting period. In this context, it is worth mentioning that HVB Group has placed a large part of its excess liquidity with Deutsche Bundesbank. The funding risk remained low on account of the diversification in our products, markets and investor groups, meaning that adequate funding of our lending activities was ensured at all times. Pfandbriefs continued to represent an important source of funding thanks to their very good credit rating and liquidity.