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

This division reported a net profit of €242.2m for the twelve months,substantially in line with the €243m posted last year, despite lower gainson disposals of AFS securities (last year the final tranche of the Fiatholding was sold, generating income of over €90m) and higher provisionsfor financial assets, up €14.6m, which were offset by the €130.7mimprovement in loan loss provisioning. Total income declined from€1,006m to €912.6m, with the main items performing as follows:— net interest income remained stable, at €429.3m (€428.9m), in boththe wholesale segment (up from €353.5m to €356m) and leasing(down from €75.4m to €73.3m);— net trading income declined from €244.4m to €169.4m, due to thereduction in income from the banking book (€18.9m, compared with€125.3m) which outweighed the increase in dealing profits (up from€119.1m to €150.5m);— net fee and commission income decreased by 5.2%, from €332.4m to€315.1m, reflecting the weak market in Europe for corporate andinvestment banking business.The 12.4% increase in costs, from €303.1m to €340.6m, reflects therise in labour costs (up from €207.2m to €234.4m) due largely toextremely positive performances by some of the Bank’s internationalbranches. The related increase in administrative expenses, which rosefrom €95.9m to €106.2m, also reflect the upgrade in IT infrastructure.Loan loss provisions of €25.3m were drastically below the total of €156mrecorded last year, due entirely to the corporate segment’s provisioning beingwiped out (with €0.8m being reversed, as against €115.4m set aside last year)as a result of a €75m writeback on a single exposure (net of which a 35.7%reduction would in any case have been recorded). The market crisis led to anincrease in the provisions set aside for the securities portfolio, up from€135.8m to €150.4m, €108.9m of which in respect of Greek governmentsecurities, €10.8m other bonds, and €30.7m AFS equities.Lending and structured finance — lending to corporates, excludingGroup companies, grew by 8.8%, from €16,599.6m to €18,062.1m, due toan upturn in demand despite the ongoing competitive scenario on thesupply side. Nearly 40% of the Group’s total exposure is to non-Italiancompanies, in particular those based in France (9.3%), Spain (8.4%) and34 –