Board of Directors' Meeting: IAS-compliant results for nine months to 31 March 2006 approved
11 May 2006
At a Board meeting held today with Gabriele GALATERI di GENOLA in the chair, the Directors
of Mediobanca approved the Group’s results for the nine months ended 31 March 2006 drawn
up in accordance with IAS/IFRS, as illustrated by General manager Alberto NAGEL and Cogeneral
manager Renato PAGLIARO.
Consolidated results
The Mediobanca Group’s results for the nine months show a net profit of € 671m, up 86%
over the € 360m recorded at 31 March 2005. This result was achieved on the back of major
growth in profit from ordinary activities, which rose by 61% to € 815m, plus a gain
amounting to € 110m (31/3/05: € 35m) on disposals of available for sale (AFS) assets, chiefly
due to the Ciments Français transaction completed in the first quarter of the financial year.
Growth by all the Group’s main sources of income in the first six months was confirmed by
results for the third quarter. All earnings items contributed to the 41% increase in total
income to € 1,078m:
- net interest income rose by 19.5% to € 424m, driven by a significant, 28% increase
in corporate lendings to € 13.4bn not including intra-group loans, and ongoing
growth in retail financial services, where new loans disbursed rose by 23% to €
3.3bn;
- net trading income totalled € 176m (€ 60m), reflecting the healthy market conditions,
plus extraordinary gains amounting to € 41m in respect of the Group’s Ciments
Français holding;
- net fee and commission income grew by 15% to € 216m, due to robust
performances from both the corporate and investment banking areas, which account
for some two-thirds of the total, and the retail area;
- income from equity-accounted companies rose 54% to € 245m, reflecting the
positive earnings performances by Assicurazioni Generali and RCS MediaGroup.
Operating costs remained virtually stable, edging up 2% to € 264m, while bad debt writeoffs
rose from € 60m to € 85m but continue to involve exclusively the retail area. Taxes rose 42%
to € 163m, reflecting an average effective tax rate of approx. 35%.
Developments in the main balance-sheet items for the period include a further increase in
loans and advances to customers, from € 21.1bn to € 22.2bn, and growth in funding, from €
23.1bn to € 25.7bn, which led to an increase in treasury positions, from € 759m to € 2,075m,
and the AFS securities portfolio, from € 4.9bn to € 5.6bn. Net equity stood at € 5,994.3m
(€ 5,778.4m).
Divisional results
The consolidated results reflect robust performances by all the Group’s main areas of
operation:
In wholesale banking, profit before tax totalled € 368m, virtually double the € 187m
recorded one year previously. This reflects higher business volumes against a favourable
market backdrop, which led to 59% growth in total income, to € 475m:
- net interest income rose by 11% to € 122m, driven by 28% growth in customer
lendings to € 13.4bn (30/6/05: € 10.5bn, not including intra-group loans); asset
quality remained unchanged, with virtually no bad loans;
- net trading income rose from € 55m to € 168m, including gains of € 41m upon
disposal of Ciments Français securities;
- net fee and commission income delivered a 16% increase to € 150m, following
healthy performances from the lending and structured finance business, which
accounted for roughly one-third of the total, and also the corporate finance and
capital market areas.
The 10% reduction in personnel costs, to € 66m, is due to the diminished share accounted
for by the cost of the Group’s stock option schemes, net of which personnel and total costs
remained stable at € 107m. The net profit of € 373m (€ 137m) includes € 107m in gains on
disposal of AFS securities, € 103m of which in connection with Ciments Français.
Retail financial services. The Compass group’s consolidated highlights as at 31 March
2006 reflect an increase in profit from ordinary activities of 35%, to € 204m. The 23%
increase in total income to € 322m is due to higher average volumes, with finance disbursed
up 23% to € 3,346m, and 7% growth in costs, to € 118m, reflects disciplined management
despite the increase in operating levels and further expansion of the distribution network,
which now totals 130 branches (sixteen new branches have been added in the past twelve
months, 13 for consumer credit activities and 3 in relation to mortgage finance). Net profit
grew by 24%, to € 61m, despite the 42% increase in bad debt writeoffs to € 85m, largely in
connection with consumer finance which increasingly is directed towards higher risk lendings
(e.g. personal loans and credit cards as opposed to specific purpose loans), in line with
market trends. Asset quality remained unchanged, with the bad loans/total loans ratio at
1.3%. The 37% increase in tax, to € 51m, reflects changes to the tax regime applicable in
respect of the writeoffs referred to above.
Turning to the individual areas of operation covered:
- consumer credit, which contributes roughly one-third of the RFS area’s lendings and
two-thirds of its profits, booked new loans worth € 1,696m, an increase of 26%, and
25% growth in profits, to € 45m;
- mortgage finance recorded new loans worth € 367m, up 21%, and net profits up
56% to € 6m;
- leasing posted new business worth € 1,283m, up 21%, and net profit up 10% to
approx. € 10m.
Private banking. The aggregate figures include Compagnie Monégasque de Banque plus
the Group’s 48.5% share in the profits of Banca Esperia. A net profit of € 34m was recorded,
up 25% compared with the € 27m posted one year earlier, following 20% growth in
management fees to € 64m. Assets managed rose by 3% compared with 30 June 2005 to €
11.1bn, representing the sum between € 7.1bn managed by Compagnie Monégasque de
Banque (up 1%), and € 4bn managed by Banca Esperia (up 7%). Banca Esperia recorded net
deposits of some € 350m in the three months under review.
The equity investment portfolio, which as from 1 July 2005 includes only the Group’s
14.12% holding in Assicurazioni Generali and its 13.66% stake in RCS MediaGroup, reflects
an increasing contribution to earnings (i.e. the Group’s pro-rata share in the earnings of
these two companies) with a 43% rise in total income, from € 155m to € 222m4, € 203m of
which is attributable to Generali (€ 142m) and € 19m (€ 13m) to RCS.
The book value of the portfolio including this income, rises accordingly to € 2,224m, from €
1,980m at 30 June 2005, € 1,934m of which is attributable to Generali and € 290m to RCS.
At current prices the portfolio reflects a surplus of market over book value amounting to €
3,767.8m (31/12/05: € 3,586.5m).
With regard to the parent company Mediobanca (figures in compliance with accounting
principles established under Italian Legislative Decree 87/92), the Bank recorded a 22% rise in
net profit to € 272m, which reflects a 20% increase in profit from ordinary operations, to €
304m, € 103m in gains realized on disposals (€ 32m), and net writebacks calculated on the
basis of average prices in the previous six-month period amounting to € 38m (€ 46m). The
12% increase in net interest income, from € 232m to € 260m, is chiefly due to the 20%
increase in loans and advances to customers to € 16.7bn. Net trading income, including
dividends, rose from € 121m to € 127m. Net fee and commission income reflects the positive
trends in investment and corporate banking referred to earlier, with growth of 20%, from
€ 126m to € 152m. Below the operating line and apart from the gains realized on the
investment securities portfolio mentioned above, writedowns of € 118m (€ 10m) were charged
to securities and derivatives held in treasury, more than offset by unrealized gains amounting
to € 338m, up € 133m compared with the figure recorded at 30 June 2005.
* * *
The Directors also approved the report for the Ordinary General Meeting scheduled to be held
on 29 May 2006 to pass resolutions in respect of the possible dismissal of Mr Cesare Geronzi
pursuant to Article 6 of Italian Ministerial Decree 161/98.