The items between operating profit and net profit have been reclassified in the following table below for illustrative purposes.
Net profit attributable to the Group (€ million)
2010 2009 AMOUNT % Q2 Q1 Q4 Q3 Q2 Q1
Operating profit 5,482 6,708 - 1,226 -18.3% 2,554 2,928 2,640 2,900 3,968 2,740
Goodwill impariment (162) - - 162 n.s. (162) - - - - -
Provisions for risks and charges (262) (223) - 39 17.3% (106) (156) (232) (154) (155) (68)
Integration costs (11) (309) 298 -96.4% (6) (6) 63 (12) (242) (67)
(3,507) (4,081) 574 -14.1% (1,716) (1,791) (2,068) (2,164) (2,431) (1,650)
Net income from investments 107 (166) 273 n.s. 39 68 217 181 (133) (33)
Profit (loss) before taxes 1,648 1,929 - 281 -14.6% 604 1,044 620 751 1,007 922
Income tax for the period (745) (697) - 48 6.9% (342) (403) (124) (188) (363) (334)
Profit (loss) for the period 903 1,232 - 329 -26.7% 262 641 496 563 644 588
Minorities (119) (166) 47 -28.5% (56) (63) (63) (103) (90) (76)
784 1,066 - 282 -26.4% 206 578 433 460 554 512
Purchase Price allocation effects (115) (129) 14 -10.5% (58) (58) (62) (66) (64) (65)
Net profit (loss) attributable to the Group 669 937 - 268 -28.6% 148 520 371 394 490 447
Net profit (loss) attributable to the Group before PPA
2009 QUARTERLY FIGURES
Net write-downs of loans and provisions for guarantees and commitments
2010
H1 CHANGE
Net profit attributable to the Group (€ billion)
6.71 1.93 1.23 0.94 5.48 1.65 0.90 0.67 - 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 Operating profit Profit (loss) before taxes Profit (loss) for the period
Net profit attributable to
the Group
H1 2009 H1 2010
Goodwill Impairment
Goodwill impairment totaled €162 million in relation to the stake in the subsidiary ATF Bank in Kazakhstan.
Provisions for Risks and Charges
Provisions for risks and charges totaled €262 million, up by €39 million compared with the same period in
2009, mainly due to legal and tax disputes, clawback petitions and provisions for loan-related disputes.
Integration Costs
In the second quarter there was again a reduction in integration costs, which in the first quarter totaled €11 million, mainly linked to the effect of time value on the provisions for the previous financial year, compared to €309 million for the first half of 2009, linked to the restructuring project for the CIB area.
Net Impairment Losses on Loans and Provisions for Guarantees and Commitments
After reaching a high in the second half of 2009, there was a gradual decline in net impairment losses on
loans and provisions for guarantees and commitments, which in June 2010 totaled €3.5 billion, which was
4.2% lower than the previous quarter and 14% lower than the first half of 2009.
The reduction affected all business areas, particularly CIB (-€383 million y/y) and Retail (-€42 million y/y), while CEE showed growth in the quarter (+€63 million q/q, or +19% at constant exchange rates), mainly in
Kazakhstan.
There was an improvement in the cost of risk (calculated on the basis of the average volume of loans to customers), which in June 2010 amounted to 122 b.p., down by 5 b.p. compared with the 127 b.p. reported in the first quarter of 2010, and by 42 b.p. compared with the same period in 2009.
Data on asset quality still reflected the weaknesses in the real economy and corroborated the deterioration in loans that has been occurring for several quarters. The carrying value of total impaired loans was €34.9 billion, an increase of 12% compared with December 2009, accounting for 6.2% of all customer loans, compared with 5.5% at December 2009.
LOANS TO CUSTOMERS ASSET QUALITY (€ million)
NON-PERFORMING DOUBTFUL RESTRUCTURED PAST-DUE IMPAIRED PERFORMING TOTAL
LOANS LOANS LOANS LOANS LOANS LOANS CUST. LOANS
As at 06.30.2010
Face value 36,979 18,755 4,076 3,882 63,692 526,910 590,602
as a percentage of total loans 6.26% 3.18% 0.69% 0.66% 10.78% 89.22%
Writedowns 22,106 5,421 880 405 28,812 3,020 31,832
as a percentage of face value 59.8% 28.9% 21.6% 10.4% 45.2% 0.6%
Carrying value 14,873 13,334 3,196 3,477 34,880 523,890 558,770
as a percentage of total loans 2.66% 2.39% 0.57% 0.62% 6.24% 93.76%
As at 12.31.2009
Face value 32,836 16,430 4,436 3,932 57,634 537,032 594,666
as a percentage of total loans 5.52% 2.76% 0.75% 0.66% 9.69% 90.31%
Writedowns 20,144 4,883 1,130 428 26,585 3,095 29,680
as a percentage of face value 61.3% 29.7% 25.5% 10.9% 46.1% 0.6%
Carrying value 12,692 11,547 3,306 3,504 31,049 533,937 564,986
as a percentage of total loans 2.25% 2.04% 0.59% 0.62% 5.50% 94.50%
The increase in impaired loans compared with December 2009 came from non-performing loans (+€2.2 billion), doubtful loans (+€1.8 billion), in contrast to restructured loans (-€110 million) and past due loans (-€27 million), which showed a slight improvement.
Net Income from Investments
In the first six months of 2010 net income from investments totaled €107 million.
In particular, the assets sold in the first half of 2010 included the stakes held in the real estate funds Omicron Plus and Core Nord Ovest, which generated a capital gain of €65 million, the sale of the following investments: the private equity investment in the company Russian Alcohol (€13 million), the VISA stocks held in the portfolio (€16 million), the pension fund Otan (€5 million), some of the shares held in Pioneer funds, generating income of €28 million, the investment in Heidelberger Cement with income of €28 million, and SGSS with income of €16 million.
In addition, the stake held in Assicurazioni Generali was also sold in the first half of the year with a capital loss of €72 million.
Profit before Tax from operations
For the first half of 2010, taking into account provisions, integration costs and net impairment losses on loans as well as net income on investments, profit before tax totaled €1.6 billion compared with €1.9 billion for the corresponding period of the previous year.
The following table shows profit before tax broken down by business segment.
Profit before tax by business segment (€ million)
H1 2010 H1 2009
Retail 1,282 - (13) (7) (975) 7 296 670
Corporate & Investment Banking (CIB) 3,404 - (34) (1) (1,787) 55 1,637 1,223
Private Banking 135 - (3) - (2) - 129 168
Asset Management 169 - (3) 1 - - 167 123
Central Eastern Europe (CEE) 1,179 - (17) (2) (691) 19 489 720
Parent Company and other companies (687) (162) (193) (2) (52) 27 (1,070) (976)
Group Total 5,482 (162) (262) (11) (3,507) 107 1,648 1,929
OPERATING PROFIT
PROVISIONS FOR RISK AND CHARGES INTEGRATION COSTS GOODWILL IMPAIRMENT NET WRITE DOWNS OF LOANS AND PROV. FOR GUAR. AND COMM. NET INCOME FROM INVEST.
PROFIT BEFORE TAX
Income Tax for the Period
Income tax for the period totaled €745 million, with a tax rate of 45.2% compared with 36.1% for the first six
months of 2009. The substantial impact of taxes on the Group’s net profit was mainly due to the non-
deductibility of goodwill impairment (which, if excluded, gives a rate of 41.2%) and the significant effect of IRAP (Regional Tax on Productive Activities) on Italian businesses.
Profit for the Period
Profit for the period of €903 million, less minorities (-€119 million) and the effects of purchase price allocation, mostly arising from the acquisition of the Capitalia Group (-€115 million), resulted in a net profit of