UniCredit unlocked: 2022-2024 Strategic Plan. Empowering communities to progress

OPTIMISE TODAY: CLIENTS, PEOPLE AND ORGANISATION

We are building the bank for Europe's future, putting our clients at the heart of all that we do: connecting 15 m clients and 87,000 people[1] in a unified way across 13 banks and 4 regions in Europe - Italy, Germany, Central Europe and Eastern Europe. The cornerstone of our strategy is leveraging our 13 banks to reap our inherent scale advantage. In addition the combination of the countries where we are present creates a better growth and returns profile, the benefit of diversification and unique optionality.

We are putting in place reunified client segments, a harmonised service model, simplified processes and a common organisational structure group-wide. We are unifying our technology and data platforms and cementing our principles to deliver our clients the best products and services. Our people will be empowered within well-defined behaviour and risk guidelines in order to progress and take ownership of decisions, unlocking talent and taking back market share.

This includes uniting behind a single ambition and common purpose: empowering communities to progress.

Corporate and Individual Solutions serving all our clients and regions

Our four regions will be supported by two centralised product factories, Corporate and Individual Solutions, leveraging group scale and with a comprehensive offering of best-in-class products for all our clients. These will be developed internally or by partners and will leverage Digital & Data as key enablers for a seamless corporate and retail client experience:

Corporate Solutions, a true value-added service model, comprising Client Risk Management, Advisory & Capital Markets, Specialised Lending and Transactions & Payments, is differentiated for three main reasons:

· 1 m corporate client base with existing long-standing relationships;

· ability to leverage on existing high quality products;

· cross border positioning allowing us to support clients in trade, transaction and growth ambitions.

Corporate Solutions is expected to generate over €5 bn of 2021 revenues, with an ambition for a 4 per cent CAGR 2021-2024, and increased RoAC to 17 per cent in 2024 from 13 per cent in 2021, through capital-light growth.

Individual Solutions, the right model for our clients and for us, comprises of Life Insurance, Protection, Funds, Portfolio Management and Brokerage & Assets under Custody. The model delivers strong results for all our stakeholders:

· high retention of the value chain and partnering with best-in-class providers;

· targeted scale and leading market share where it counts;

· very high returns that we are well positioned to maximise.

Individual Solutions is expected to generate just over €3 bn of 2021 revenues, with an ambition for a 5 per cent CAGR 2021-2024, and very high returns on attributed capital. Our insurance offering is a core priority and, as we invest in our Business and our IT platforms, with partners supporting us with innovative solutions and products, we will further increase our capital-light revenue stream.

Growing and improving returns across our regions

Our unique pan-European footprint provides us with diversification, client access, multicultural mindset and cross-border operations. All our regions are expected to deliver improved returns through the levers of capital, net revenue and cost, flexed differently per region, with clear initiatives across clients, people and the organisation:

· Italy's business will focus on higher growth and more profitable areas, while optimising capital, reaching the highest ratios among our regions for fees/revenues at c. 55 per cent and net revenues/RWA at c. 6 per cent in 2024, RoAC superior to 12 per cent;

· Germany will lead in efficiency and profitability compared to peers, with returns well above the cost of equity, reaching fees/revenues at c. 30 per cent and net revenues/RWA at c. 5 per cent in 2024, RoAC superior to 10 per cent;

· Central Europe's allocated capital will grow by 5 per cent a year reaching fees/revenues at c. 30 per cent and net revenues/RWA at c. 5 per cent in 2024, RoAC superior to 13 per cent;

· Eastern Europe's allocated capital will grow by 4 per cent per year, post active portfolio management, reaching fees/revenues at c. 20 per cent and net revenues/RWA at c. 6 per cent in 2024, RoAC superior to 16 per cent.

We are investing in the Business by net hiring of 1,500 people across all our regions over the course of the plan, of which 900 in Italy, 300 in CE & EE, 200 in Germany and 100 in Control functions.

BUILD FOR TOMORROW: DIGITAL & DATA

Digitalisation is at the heart of our strategy and our ultimate ambition is to be a truly digital bank, powered by data in all we do. We will fund this with a higher overall spend, €2.8 bn total over 2022-2024, with clear strategic prioritisation. We plan to hire 2,100 people net in Digital & Data, for an overall 3,600 net new hires, including the 1,500 for the Business.

We will embark on four key projects: User Experience, New Digital Offering, Payment value Chain and Cyber Security. At the same time our Digital & Data priorities are:

· Internalised up-skilled workforce and rationalised external organisation & partners, to reclaim core competencies and skillsets, costing less per unit with higher productivity, reducing our reliance on high-cost externals by two thirds out to 2024;

· New way of working with modular and reusable solutions which can be scaled across our Group; global technology, business and data platforms to maximise reusability, scale, cost efficiency and speed;

· Investment model amplified through efficiencies and scale, self-funded through cost reductions from internalisation, targeting better spend;

· Client approach focused on value creation, organisation structured around products and functions working together to deliver quality at speed.

BUILD FOR TOMORROW: SUSTAINABILITY

Sustainability will be embedded in our culture. We will first hold ourselves accountable, striving to reach the same standard we ask of our clients and we will invest in and support the communities within which we operate:

· Reduction of our greenhouse gas emission by 60 per cent since 2008, targeting net zero by 2030[2];

· 79 per cent renewable energy usage in our premises, with no single-use plastic items in our buildings by end 2022;

· More than €40 m contribution to corporate citizenship and philanthropic initiatives[3] and to the education of 100,000 young people, while committing to financial support for categories at risk of financial exclusion;

· A commitment to deliver on our ESG global policies and ensure equal pay for equal work, by investing €100 m.

Navigating the sustainable transition is a key part of empowering communities to progress. In the next three years we target €150 bn new ESG volumes cumulative for 2022-2024. We have established an ESG advisory model for Corporates and Individuals, are financing Innovation for environmental transition and are partnering with key players to enrich and improve ESG offerings across-sectors. Job inclusion and female empowerment are key projects.

FINANCIAL AMBITION: UNICREDIT UNLOCKED

Unlocking the potential of UniCredit allows us to raise the bar on our financial ambition.

There are macroeconomic advantages from our positioning, however we are driving the plan primarily through management actions:

· Over the three years, we assume a conservative interest rate scenario based on a broadly stable Euribor 3 month rate;

· Our distinctive footprint offers us a number of favorable opportunities: the combination of our countries is expected to deliver GDP growth[4] that is 20 basis points above the eurozone average over the course of the plan. This is helped by our Central and Eastern European positioning;

· Central and Eastern Europe loan growth is expected at a multiple of GDP due to the relatively low maturity of the market;

· Recovery and Resilience Fund allocation: our countries have access to approximately 50 per cent of the overall fund disbursement.

Our Macro assumptions[5] exclude unexpected materially adverse developments such as the COVID-19 pandemic, a situation that we are monitoring closely.

Our financial ambition to unlock UniCredit is based on six pillars which will deliver sustainable performance and profitable growth through the cycle:

· Optimise: improving operational and capital efficiency, with €1.5 bn of gross cost savings, of which €0.4 bn from Digital & Data, and 130 bps contribution to CET1 ratio from active portfolio management; expect RWA to decrease over the course of the plan as active portfolio management more than offsets impact of organic growth and expected regulatory headwinds;

· Invest: cash investments for €2.8 bn in Digital & Data⁶, 3,600 net new hires in Business and Digital & Data, targeted growth initiatives including ESG; €1.2 bn gross integration costs impact from: Team23 acceleration, technology benefit and simplification & streamlining (please refer to 2021 One-offs table in Annex);

· Grow: net revenues at 2 per cent CAGR in the period 2021-2024, of which fees at 4 per cent, and net profit at 10 per cent per year, net of all the optimisation we are undertaking, with underlying growth substantially higher;

· Return: RoTE² of circa 10 per cent in 2024;

· Strengthen: CET1 ratio target of 12.5-13 per cent⁵, with 150 bps yearly organic capital generation³ on average; gross NPE ratio[6] to improve to circa 3.5 per cent and net NPE ratio[7] to remain stable at c. 1.8 per cent in 2024;

· Distribute: at least €16 bn total for 2021-2024, consistent with organic capital generation³ from net profit and RWA evolution.

GROUP KEY FINANCIAL 2021 GUIDANCE AND 2024 AMBITIONS