Net earnings came in lower-than-expected at € 140m for 4Q05, down 62.2% q/q and 16.1% y/y, versus our expectation for € 204.6m. This equated to a full-year 2005 net profit of € 964m, up 58.3% y/y. There were no consensus estimates available for the quarter and, at first glance, it should be underlined that the lower-than-expected results are attributable entirely to one off charges of € 143m (pre-tax), including an € 18m charge for structural improvements, € 30m to restructure the Austrian SME business, € 70m of increased provisions (partly to align standards with Unicredito) and a € 25m special charge for re-branding and other costs in connection with the Unicredito re-branding.
The adjusted pre-tax profit presented by the bank of € 333m, up 8.5% q/q, was actually above our estimate of € 283.5m. Therefore, we would a positive trading impact, once the underlying results are examined. We will be reviewing our forecasts in the wake of the results but until there is clarity on the final shape of the group, such analysis offers only a partial picture.
As important as the results themselves, the market will be looking for some further comments today on the new group architecture and the timeline over which changes may be expected to occur. While the consolidation of CEE operations will undoubtedly yield synergy for group shareholders, the extent to which BACA minority shareholders will benefit depends on the future structure of the group and the final pricing of intergroup transactions.