Annual Accounts and Report as at 30 June 2011 Draft - Mediobanca

Costs continued to increase, up 6.6%, from €772.9m to €823.9m, chieflyon the back of an 8% increase in staff costs linked inter alia to the rise inheadcount, with 84 more staff in wholesale banking and 78 on the retail side.Loan loss provisions fell significantly, by 32.5%, from €516.8m to€348.8m, in particular in the Corporate and investment banking division(down from €156m to €25.3m) in part due to a one-off writeback in anamount of €75m (net of which a 35.7% reduction would in any case havebeen recorded). Provisions for loan losses were also lower on the retailside, down from €360.8m to €323.5m, bearing out the improving trendwitnessed in recent quarters.As mentioned above, provisions for financial assets rose considerably,from €150m to €275.5m, €119.7m of which in respect of bonds, including€108.9m on Greek government securities (in line with market prices as atthe reporting date), and €155.8m of equities, including €119.6m on Telco– which wrote down the book value of its Telecom Italia shares from €2.2to €1.8 per share – plus €32.9m on unlisted shares and investments inprivate equity and venture capital funds (chiefly Delmi). After theseadjustments, the net equity valuation reserve as at 30 June 2011 waspositive for the equity and other securities component (at €54.6m) but stillnegative for the bond component (minus €105.7m). Based on currentprices the value of the AFS reserve reduces by €150m for equities and by€200m for bonds.Turning now to the individual areas of the Group’s activities:— Corporate and investment banking (CIB): net interest income held upwell, at €429.3m (compared with €428.9m), while net fee andcommission income declined slightly, from €332.4m to €315.1m, andnet trading income shrank considerably (from €244.4m to €169.4m)due to lower gains on disposals of AFS securities. Net profit of€242.2m (compared with €243m last year) was boosted by the lowerloan loss provisions (down from €156m to €25.3m) which more thanoffset the increase in provisions for financial assets (€150.4m,compared with €135.8m last year);— Principal investing (PI) showed a profit for the twelve months of€69.3m, lower than the €184.5m reported last year due to thewritedown charged to the Telco investment (€119.6m) and the itemsrelated to Assicurazioni Generali described earlier;10 –