UniCredit press release: Guidelines of Strategic Plan 2013-18 and 4Q13 and FY13 Group Results

- UniCredit Takes Strong Stance and Brings Cash Coverage Ratio on Impaired Loans to 52%, back to Pre-Crisis Levels, by far the Highest in Italy and in Line with Best European Peers

- Balance Sheet Review leading to Net Loss of €14.0 bn in FY13 from Goodwill Impairment and Additional Loan Loss Provisions

- Strong Capital with CET1 Ratio at 10.4% Phased-in (9.4% fully loaded)
no Need for Capital Increase

- Proposal to Distribute 10 eurocent per Share Scrip Dividend

- Group Net Profit 2014 Expected at ca. €2 billion

- Further Emphasis on Asset Quality Improvement with Non-Core Portfolio Segregation already in April 2013

- Strategic Plan 2018 Targets: Net Profit €6.6 bn, 13% RoTE
and 10% CET1 ratio fully loaded

- €4.5 bn Investments to Support Revenues; Additional Cost Savings of €1.3 bn

- UniCredit is Poised to Increase Lending to Corporates and Households to Support the Growth of the Economy

- Actions to Free up ca. 30 bp of Capital Through Active Portfolio Management already Identified, e.g. Fineco Listing

The Board of Directors of UniCredit approved today the Strategic Plan 2013-18 and Group FY13 results. Federico Ghizzoni, CEO of UniCredit commented:

"For UniCredit, 2013 was a turning point and we are now poised to further increase our lending and support of the real economy in Italy and in Europe. With the actions announced today, we have further reinforced our balance sheet and finalized the process started in 2010. Thanks to our solid capital position, we have taken clear and transparent decisions following which our CET1 ratio stands well above Basel 3 requirements. Thanks to the additional provisions booked, UniCredit now has by far the highest impaired loan coverage ratio of the Italian banking system and amongst the best in Europe, in line with pre-crisis levels.Today we also announced the launch of our new 2013-18 strategic plan. The plan is based on solid fundamentals, a strong risk culture and an improving macro-economic climate. Whilst in 2014 we estimate a net profit around €2 billion, we intend to more than triple this to €6.6 billion in 2018, with an ROTE target of 13 per cent. We are also planning to invest €4.5 billion to grow revenues and to cut an additional €1.3 billion out of our cost base. Our objective is to consolidate our leadership in corporate services across Europe, drive innovation in our retail networks and develop a leading edge digital footprint.Based on the successful repositioning of the bank, the strengthening of our already solid balance sheet in an improving macro-economic environment, UniCredit is stronger and ready to play an increasingly important role in lending to households and corporates in Italy and across Europe.

I look forward to delivering sustainable value to all our stakeholders in the years to come."

-    Strategic Plan 2013-18: Accelerating the Journey towards Sustainable Profitability

-    ·Since 2010, UniCredit's main focus has been on strengthening the capital, de-risking the balance sheet, restoring a sound liquidity profile and reducing complexity and costs

-    At year-end 2013, UniCredit has a strong capital base with a CET1 ratio Basel 3 phased-in of 10.4% (9.4% fully loaded[1] including the gain from the valuation of the stake in Banca d'Italia), a sound balance sheet (19x leverage ratio[2] vs. 32x in 2008), a reduced funding gap (€29 billion vs. €163 billion in 2008) and an impaired loan coverage ratio of 52% in line with the best European peers and well ahead of other Italian banks

-     Revised risk management framework now in place with more prudent underwriting processes, disciplined monitoring and streamlined workout processes. Riskier Italian exposures (Non-Core portfolio) segregated in a new dedicated organisational structure up and running since April 2013 engaging 1,100 dedicated professionals

-    UniCredit launches new Strategic Plan 2013-18 and targets a Group RoTE of 13% and a solid capital base with CET1 ratio Basel 3 fully loaded at 10%. A dividend distribution with an average payout ratio of ca. 40% is envisaged. Asset quality remains a key priority with a target coverage ratio above 50% on impaired loans and cost of risk below 70 bps in 2018

-    The Strategic Plan 2013-18 envisages a separate reporting of the Italian Non-Core portfolio which is planned to be reduced by 63% in 2018. The Non-Core portfolio consists of ca. €87 billion[3] gross loans, including both performing (33%) and impaired loans (67%) of which more than 80% originated before 2009. UniCredit is the first bank in Italy to be fully operative on a segregated portfolio and to provide full transparency on the run-down process on a quarterly basis

-    UniCredit reaffirms its leadership as a European commercial bank with a 17% target ROAC in 2018 on the Core Bank. The three key pillars supporting the Core Bank are: 1) the multi-channel transformation of commercial bank in Western European markets and UniCredit's positioning as a European leader in corporate banking; 2) a strong focus on growth businesses such as selected CEE regions and capital-light businesses, and 3) consolidation of CIB leadership and of operational excellence

-    Investments of €4.5 billion spread through the Plan will drive network restructuring and digitalization in Western Europe, foster growth in CEE and achieve group synergies

-    Strict cost control will lead to cost savings for €1.3 billion in 2018 thanks to dedicated initiatives targeting business simplification which include FTEs reductions, leading to a drop of the cost/income ratio to 51%

-    As part of its active portfolio management, UniCredit will list on the market Fineco to further accelerate its growth. In parallel, it will explore the potential disposal of UniCredit Credit Management Bank (UCCMB), the largest collections platform in Italy, to a specialized player, enabling UniCredit to extract additional value by enhancing collections. The effects of these potential transactions are not factored into the Strategic Plan 2013-18

4Q13 and FY13 Results Highlights

    UniCredit Group reports a 4Q13 net result of -€15.0 billion (-€14.0 billion in FY13) mostly attributable to non-recurring items, driven by revised macroeconomic assumptions and a tougher regulatory framework and to lay the foundations of the success of the Strategic Plan 2013-18. These actions include:

-  €9.3 billion impairment of goodwill and customer relationships in 4Q13, leading to the full write down of the goodwill allocated to Italy, CEE and Austria. Goodwill remaining on balance sheet equal to €3.5 billion, broadly in line with 2004 level

-  €7.2 billion additional loan loss provisions, leading to total LLPs of €9.3 billion in 4Q13 (€13.7 billion in FY13, +46.8% Y/Y). The overall provisions bring the impaired loan coverage ratio from 45% as of 3Q13 to 52% as of 4Q13, in line with best European peers. Cash coverage of Group NPLs (sofferenze) increased from 56% to 62%. Quarterly flow from performing to impaired loans broadly in line with previous quarter, while impaired interclass migration was done with a very rigorous approach

-   €699 million restructuring costs in 4Q13, part of a wider plan to reduce FTEs by ca. 8,500

-    Gross Operating Profit shows the first signs of recovery in 4Q13 reaching €2.1 billion, inverting the trend with an increase of 2.7% Y/Y and 1.1% Q/Q driven by Revenues (+5.2% Y/Y and 5.8% Q/Q), and despite an upward quarterly cost trend (+6.6% Y/Y and 8.6% Q/Q) affected by one-off items of €241 million. Net of one-offs, Gross Operating Profit was up by 12.7% Q/Q

-    Positive dynamic of the Revenues mix: Net Interest Income totalled €3.3 billion, +2.0% Q/Q (€13.0 billion FY13) thanks to continuous re-pricing on deposits which grew by 2.8% Q/Q strengthening the funding profile of the Group. Net Fees and Commissions reached €2.0 billion, +5.1% Q/Q (€7.7 billion in FY13) thanks to the positive dynamic of Investment Services Fees (+11.8% Q/Q) and Financing Services Fees (+5.1% Q/Q), which more than compensated for the decrease in transactional and banking services fees (-1.8% Q/Q). Trading Income totalled €0.6 billion benefiting from the gains on the sale of non-core equity investments

-    The gain from the valuation of the stake in Banca d'Italia is equal to €1.4 billion pre-tax and it has been recognized through the P&L as Net Income from Investments in 4Q13. The application of IAS/IFRS to the transaction is currently being discussed by competent authorities, a different interpretation versus the adopted accounting treatment may arise, leading to the recognition of the same gain through equity valuation reserves, instead of through P&L. In case of recognition through equity valuation reserves, net loss FY13 and 4Q13 would increase by €1.2 billion, while CET1 ratio Basel 3 fully loaded would remain at 9.4% (CET1 ratio phased-in would be at 10.0%).

-    The funding gap improved to €29.2 billion as of December 2013 (-€31.5 billion Q/Q), also thanks to deposits growth across all the regions (+2.8% Q/Q) while loans still display a negative trend (-4.0% Q/Q) due to ongoing weak demand in Western Europe

-    The 2014 Funding Plan is well on track, thanks to strong access to wholesale markets, with a significant diversification of issuances as well as robust demand from retail

-    Strong regulatory capital base confirmed, with CET1 ratio Basel 3 phased-in at 10.4% (9.4% fully loaded, including the gain from the valuation of the stake in Banca d'Italia)

-    At the Annual General Meeting on 13 May 2014, the UniCredit Board of Directors will propose for the financial year 2013 a distribution of a 10 eurocent scrip dividend per share out of reserves of profits via a newly issued shares assignment or, upon shareholders' request, cash payment. The ex-dividend date has been set on May 19th 2014, the record date on May 21st 2014 and payment date on June 6th 2014

FY13 - Key Financial Data

    Group Net Result: -€14.0 billion[4]
    Revenues: €24.0 billion (-4.1% Y/Y)
    Operating Costs: €14.8 billion (-0.1% Y/Y)
    Cost/Income ratio: 61.7% (+2.5 p.p. Y/Y)
    Gross Operating Profit: €9.2 billion (-9.9% Y/Y)
    Loan Loss Provisions: €13.7 billion (+46.8% Y/Y)
    Regulatory capital: CET1 ratio Basel 3 fully loaded at 9.4%, estimated pro-forma on the basis of actual data and current understanding of new regulatory framework

4Q13 - Key Financial Data

    Group Net Result: -€15.0billion
    Revenues: €6.0 billion (+5.2% Y/Y, +5.8% Q/Q)
    Operating Costs: €3.9 billion (-1.7 Y/Y, +1.9% Q/Q, both net of €241 million of impairments on Customer Relationships and write offs in Depreciation and Amortization)
    Cost/Income ratio: 64.9% (+0.9 p.p. Y/Y, +1.7 p.p. Q/Q)
    Gross Operating Profit: €2.1 billion (+2.7% Y/Y, +1.1% Q/Q)
    Loan Loss Provisions: €9.3 billion
    Leverage ratio[5]: 18.8x (+0.4x Y/Y, +1.4x Q/Q) due to 4Q13 loss, still lower than the average of European peers

Notes:

[1] CET1 ratio Basel 3 phased-in (10.4% as of December 2013) is an estimate based on the current understanding of the regulatory framework in force in 2014 and on the outputs of certain models not yet formally approved by the Competent Authorities. CET1 ratio Basel 3 fully loaded (9.4% as of December 2013) is estimated on the basis of current understanding of the regulatory framework which will be in force starting from 2019, hence anticipating all the effects that will gradually be factored in.

[2] Calculated as the ratio of Total Assets net of Goodwill and Other Intangible Assets (numerator) and Equity (including Minorities) net of Goodwill and Other Intangible Assets (denominator).

[3] Pro-forma for the inclusion Trevi which will be consolidated starting from 1 January 2014.

[4] Accounting figures for 4Q13 include the following post tax non-recurring items (amounts gross of tax in brackets): goodwill impairment of -€8.0 billion(-€8.0 billion gross); Impairment of PPA for -€1.3 billion (-€1.9 billion gross); assets held for sale related to Ukrotsbank of -€0.6 billion (-€0.6 billion gross); loan loss provisions to increase cash coverage ratio of -€4.8 billion (-€7.2 billion gross), additional to the baseline of €6.5 billion for 2013; gain form valuation of Banca d'Italia stake of +€1.2 billion (+€1.4 billion gross); integration costs of -€0.5 billion (-€0.7 billion gross); few large Risks & Charges of -€0.2 billion (-€0.3 billion gross); capital gain from the sale of MOEX and FonSAI of +€0.2 billion (+€0.2 billion gross); write-downs of customer relationship and other write offs in Depreciation and Amortization of -€0.2 billion (-€0.2 billion gross).

[5] Calculated as the ratio of Total Assets net of Goodwill and Other Intangible Assets (numerator) and Equity (including Minorities) net of Goodwill and Other Intangible Assets (denominator).

Milano, March 11th 2014