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>> Report on Operations
Retail
Operating costs stood at 7,026 million at the end of 2009, down 7.7% from the previous year, despite
the increases due to the industry-wide agreement in Italy. The reduction is attributable to payroll costs,
which decreased due to the downsizing plan especially in Italy, following the Group’s integration of the
former Capitalia banks. The number of FTE 2 of the Retail SBA on December 31 2009, in fact, decreased
by 2,756 units (-5.3%) compared with late 2008, concentrated mainly in Italy. Cost containment measures
also applied to other administrative expenses, decreased in 2009 due to a reduction plan.
The cost/income ratio of December 2009 stands at 71.4% from 66.4% in 2008 due to the reduction in
revenues partially offset by greater cost management efficiency.
Staff Numbers
RETAIL
AS AT CHANGE ON DEC '08
12.31.2009 09.30.2009 12.31.2008 AMOUNT %
Full Time Equivalent 49,476 49,954 52,233 -2,756 - 5.3%
Retail SBA’s operating profit of €2,821 million showed a decline of 26.8% compared to 2008. In terms of
the contribution of the three countries to the Retail SBA’s total profit, it highlights Italy’s considerable
contribution, which generated 83% of the overall operating profit in 2009, while Austria and Germany
contributed the remaining 17%.
Profit before taxes was affected by the negative trend of the net write-downs on loans which in 2009
recorded a sharp increase compared with the previous year, totaling €1,700 million compared to €1,179
million in 2008 (+44.1% y/y). This increase, entirely attributable to the Italian portfolio, is due to the
progressive credit deterioration following the financial crisis, affecting both private individual and small
business portfolios, which recorded default rates of around 25% higher than last year. The €314 million
write-downs recorded in the last quarter of 2009 showed a significant decline in respect to the previous
quarter and the fourth quarter of 2008 (nearly -20%) due to the benefits generated by the two programs of
economic support launched in Italy at the end of the first quarter and due to the reduction in the cost of
discounting of net impaired loans through the adjustment of the interest rates used.
The Retail SBA achieved a profit before tax in 2009 of €945 million, a decline on the previous year (-
68.8%) closing the fourth quarter of 2009 with €217 million of profit before taxes with an increase of
30.4% compared with the previous quarter.
Key Ratios and Indicators
YEAR CHANGE
2009 2008 AMOUNT %
RETAIL
EVA (€ million) 130 992 -861 - 86.9%
Absorbed Capital (€ million) 4,991 5,892 -902 - 15.3%
RARORAC 2.61% 16.83% n.s.
Operating Income/RWA (avg) 13.62% 12.93% 68bp
Cost/Income 71.4% 66.4% 497bp
Cost of Risk 0.98% 0.64% 34bp
With regard to credit quality, in December 2009 the Retail SBA reported an annualized cost of risk of 98
basis points, an increase of 34 basis points compared with December 2008 as a result of increased net
write-downs due to the worsening credit scenario over the last 12 months and the decrease of average
credit volumes.
2 FTE - Full Time Equivalents