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| Download table (.xls) |
|
€ M |
2006 |
2005 |
CHANGE |
ADJUSTED | |
|
Net interest income |
124 |
150 |
–25 |
–17 % |
–17 % |
|
Net non-interest income |
277 |
125 |
153 |
122 % |
>100 % |
|
Total revenues |
402 |
274 |
127 |
46 % |
46 % |
|
Operating expenses |
–167 |
–99 |
–68 |
68 % |
74 % |
|
Operating profit |
235 |
175 |
60 |
34 % |
31 % |
|
Net writedowns of loans |
1 |
10 |
–9 |
–86 % |
–86 % |
|
Net income from investments |
7 |
19 |
–12 |
–61 % |
–61 % |
|
Integration costs |
–31 |
0 |
–31 |
n,a, |
n,a, |
|
Profit before tax |
207 |
206 |
1 |
1 % |
12 % |
|
... share of BA-CA total |
6 % |
16 % |
|
|
16 % |
|
Equity – share of total |
4 % |
5 % |
|
|
4 % |
|
ROE before tax |
66.4 % |
62.7 % |
|
|
76.2 % |
|
Cost/income ratio |
41.6 % |
36.2 % |
|
|
41.6 % |
|
–1.2 % |
–6.9 % |
|
|
–1.2 % | |
|
One-off effects in 2006: integration costs: –€ 30 m; in 2005: other administrative expenses: –€ 4 m, integration costs: –€ 3 m. |
Markets & Investment Banking (MIB) is fully integrated, via a virtual management structure, in UniCredit Group’s Markets & Investment Banking Division, which combines trading and sales activities and structured products across all asset classes in international financial markets, as well as investment banking operations. UniCredit’s MIB Division operates on the basis of global product responsibilities, focusing on the markets of Germany, Austria, Italy and CEE (including the Polish market); Turkey and Russia are those countries where the strongest growth is to be achieved in the future. MIB maintains trading units in the world’s major financial centres, including London, New York, Tokyo, Hong Kong and Singapore.
For BA-CA’s Markets & Investment Banking Division, which emerged from the former International Markets (INM) business segment, 2006 was another record year. Total revenues increased by 46 % to € 401.6 m. Having generated record revenues in the first quarter of 2006, our broadly diversified teams continued to achieve good revenues in the remaining part of the year, despite the serious market setback in May/June.
Contributions to the strong overall performance came from both customer business and trading in all product areas. Quite generally, our focus on customer business in the past years, together with the closely related structuring units which provide innovative solutions for interest-rate and currency risk management, has created a strong basis for good revenue growth. Numerous bond issues in Austria and in CEE increased our market share significantly. Financial Engineering contributed to profits by expanding its interest rate derivatives business and structuring several retail funds. CA IB subsidiaries were involved in major transactions and confirmed their expertise in connection with capital increases for real estate companies. In the equities business we were also successful with innovative structured solutions via equity derivatives. Our CEE subsidiaries, whose capital market activities are coordinated by the MIB Division from Vienna, broadened their customer base – especially through derivatives for interest-rate and currency risk management – and supported by recognised research expertise strengthened their position.
Net trading income increased by 71 % to € 201 m, core net interest rose by 4 % and net fee and commission income increased from € 40 m to € 70 m.
While CA IB International Markets and CA IB UniCredit Polska contributed to profits via dividends in 2005, their full inclusion in the consolidated income statement means that they now make a large contribution primarily to net fee and commission income, reflecting their business structure. The increase in operating expenses from € 99 m to € 167 m was mainly due to the consolidation effect described above. Nevertheless, the MIB Division operated with a cost/income ratio of 41.6 % (2005: 36.2 %), a low level in an international comparison of investment banks.
Profit before tax for 2006 was € 207 m, only slightly higher than in the previous year (€ 206 m) because the figure for 2006 reflects integration costs. On an adjusted basis, profit before tax improved by 12 %. The ROE before tax was 66.4 % (or 76.2 % on an adjusted basis).
Outlook: 2007 will present Markets & Investment Banking with significant challenges in an environment characterised by growing competitive pressure, and it will also bring greater opportunities in global markets. With the acquisition of Aton, a Russian broker, which is to be completed in the first half of 2007, UniCredit MIB aims to become a leading market participant in the Russian capital market in cooperation with International Moscow Bank. With the introduction of the new divisional structure of BA-CA, and with effect from the beginning of 2007, MIB’s product competencies were extended to include structured finance and syndication business as well as equity capital market activities, M&A advisory services and merchant banking. There are also plans for closer integration of those areas within BA-CA which are part of the MIB Division, together with the related subsidiaries. The objective of this move is to establish a clear governance structure within UniCredit’s MIB Division and to create a uniform market presence as one of the leading European investment banks. The strong position in selling and structuring products across all asset classes and in investment banking in Austria and Central and Eastern Europe as well as technical expertise in developing innovative solutions for customers provide the basis for further growth of the Markets & Investment Banking Division.