Credit Strategy Highlights current 1D 1W 1M YTD€¦ · 30 April 2010 Credit Research Daily Credit Briefing UniCredit Research page 1 See last pages for disclaimer. Credit Strategy

30 April 2010 Credit Research

Daily Credit Briefing

UniCredit Research page 1 See last pages for disclaimer.

Credit Strategy Highlights ■ After a series of sovereign downgrades in eurozone periphery, which put

markets under massive pressure earlier this week, optimism appears to have returned yesterday, with most risky assets booking respectable gains. The Main closed 8bp tighter at 90bp, and the XO was 25bp tighter at 431bp, thus erasing the risk premia surge earlier in the week. Firmer oil prices and strong Asian equities (losses in Chinese stocks are the big exception) this morning point towards a continuation of the risk appetite rebound at the opening. Key driver appears to be better-than-expected macroeconomic (April German labor report showing unemployment rate decline to 7.8%, EU economic confidence survey surging, with broad-based gains across sectors including consumer and retail, but a very weak Greek survey) and earnings data (Siemens, MAN) as well as reports of the possibility of a bigger-than-previously announced bailout package for Greece. Moreover, primary market activity appears to be picking up again, with Rhodia placing EUR 500mn of May18 paper at 418bp yesterday. However, setback risk remains high, with Moody's warning of a multi-notch downgrade of Greece, and the latter's negotiations with IMF and EU still continuing. (See the next page)

■ iTraxx opening: Main 88.5/89 (-0.25)bp, XO 425/427 (-3)bp, Sen 115/117 (-3)bp, Sub 174/178 (-5)bp; SovX 124.33/118.33(+2.99)bp

Relative Value Trading Idea Compression trade with RBS senior bonds (see details inside).

Top Credit Stories ■ Consumers: Procter & Gamble: lower share buybacks prompted debt

reduction; Coca Cola Hellenic: Greek business accounts for only 8% of sales; METRO with 1Q10 results; AstraZeneca with sound 1Q10 figures but weak outlook ___________________________________________ 3

■ Energy: Vattenfall (1Q10 results), Gazprom (FY09 numbers); EWE with weaker FY09 figures _______________________________________ 5

■ Industrials: Finmeccanica (Unspectacular 1Q figures) _____________ 9

■ EEMEA: MDM Bank is back in the black ________________________ 9

■ Banks: Bank of Greece reports deposits data; Barclays, LBBW, Nord/LB, Erste Bank, Santander, CAM and Banco Pastor with 1Q10 results __________________________________________________ 10

■ Corporate Snapshots: Areva (Solid 1Q sales figures), Rentokil (Further success in profit improvement in 1Q), BMS (Solid 1Q10 results but reduced FY10 guidance), Telecom Italia (CEO reiterates the plan to sell Telecom Argentina), Piaggio (1Q10 results), Stora (Stable outlook from Moody's), Fresenius (S&P with positive outlook), Rhodia (bond tender), Unitymedia GmbH (expected downgrade to B+) __________________18

Market Overview iTraxx Page; Primary Market; Rating Actions ______________________ 19

Recent Credit Research Publications ____________________________ 20

Credit drivers current 1D 1W 1M YTDEuroStoxx 2,828 40 -69 -103 -137DAX 6,145 61 -24 -9 187VDAX [%] 20.8 0.3 1.8 3.9 0.0S&P 1,207 15 -2 37 92VIX [%] 18.4 -2.6 2.0 0.9 -3.2DJUBS Index 133.5 -0.4 -1.9 1.4 -5.7Crude Oil Ft 85.4 0.2 0.3 1.6 6.0EUR-USD 1.324 .001 -.014 -.027 -.108

Source: BloombergiTraxx Europe (Series 13), Thursday closing 5Y chg* 10Y chg*Europe Benchmark 89 11 102 8Financials Sen 118 27 124 23Financials Sub 180 33 186 29Crossover 430 3 446 2SovX WE 118 39 115 30

Source: Bloomberg; *1m changeASW spreads by quality/sector current 1d 1w MTD YTDiBoxx ALL 87.2 -0.9 4.0 0.0 -4.7iBoxx AAA 34.7 -1.6 1.6 -0.3 -1.6 AA 43.2 -0.7 0.6 -4.3 -6.9 A 67.4 -0.8 3.1 -0.2 -4.9 BBB 128.9 -1.0 6.5 0.5 -6.4iBoxx FIN 176.7 -1.9 19.0 10.6 -19.4 ATO 79.3 0.6 1.1 -5.9 -18.4 TEL 103.4 -1.4 7.5 5.9 11.3 UTI 80.4 -1.4 5.9 4.0 5.6 IGS 100.4 -0.9 2.3 -3.9 -15.8 PHG 70.4 0.1 -0.1 -6.8 -17.9 TAL 136.1 -0.6 0.9 -2.3 -129.4 OIG 84.4 -2.1 7.7 5.0 -2.1Hybrids 291.9 0.6 16.8 -1.1 -66.4

Source: UniCredit Research, iBoxxYields in % current 1d 1w 1m YTD2Y Bund 0.798 0.6 -6.7 -18.2 -53.35Y Bund 2.012 1.9 -5.6 -16.3 -41.110Y Bund 3.062 2.5 1.0 -7.0 -32.52Y TSY 0.992 -0.8 -7.4 -6.3 -14.35Y TSY 2.487 1.0 -10.2 -11.4 -19.210Y TSY 3.732 0.8 -7.7 -12.5 -10.5

Source: Bloomberg; changes in bpSwap spreads current 1d 1w 1m YTD5Y EUR 30.53 0.33 1.03 4.94 -20.2410Y EUR 14.49 1.30 -3.13 -4.52 -5.32

Source: Bloomberg

Bloomberg UCCR Internet www.research.unicreditgroup.eu

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Credit Strategy Highlights<BOOKMARK> Focus remains on Greece The near-term focus remains on the negotiations between Greece and the IMF and EU on the

bailout package, which are likely to last a few days. Having to assume the largest financialcontribution and facing a major regional election on May 9, German politicians are becomingindispensable for the deal. Yesterday, they surprised a bit demanding financial involvement ofprivate sector participants in the bailout. This demand was raised by the CDU/CSU fractionsparliamentary finance spokesman Dautzenberg and received support also from a number ofopposition members. The initiative – obviously driven by political motives related to the election campaign in North Rhine Westphalia – foresees banks making a major contribution to bailout funds. It is not surprising that in the current environment a poll at the N24 TV channelrevealed 62% support for such a proposal from respondents. However, the market impact ofsuch a step would be negative, as it would mean an increase of the systemic risk in a sectorwhich already represents a major portion of systemic risk. Meanwhile, PM Papandreou metwith the country's powerful unions yesterday. So far, no details of the results of the meetingwere released; however, reports suggest that union representatives consider the proposedausterity measures – which may include measures such as a three-year freeze in wages and cuts of 13th and 14th salaries - as very harsh. So far, street protests were very limited, but thiscould change soon as measures start to be implemented. Moreover, latest deposit data fromthe Bank of Greece showed a slowdown in deposit outflows, which does not support fears of a run on deposits. In regard to the latter, please see the comment inside.

Investors are discounting further downgrades across eurozone's periphery

Obviously, sovereign risk remains a key factor. Moody's warned that Greece is vulnerable to a "multi-notch" downgrade (currently rated at A3) if required measures are not implemented.Moreover, spreads in other eurozone periphery sovereign CDS are also pricing in furtherdowngrades: the Spanish (Aaa/AA/AAA) 5Y CDS at 172bp, which is the level of Turkey(Ba2/BB/BB+), Portuguese (Aa2/A-/AA-) 5Y CDS at 297bp are some 70bp above Romania (Baa3/BB+/BB+), while Greece (A3/BB+/BB-) 5Y CDS are trading some 70bp above Ukraine (B2/B-/B-).

Upcoming data Besides the negotiations between Greece and the IMF/EU and German statements, focus willbe on macro data, where we have 1Q GDP, Chicago PMI and University of MichiganConfidence index out of US, CPI data out of the eurozone, unemployment figures from Spain,IP from Portugal and retail sales from Greece.

Dr. Stefan Kolek (UniCredit Bank) +49 89 378-12495 [email protected]

Trade of the day<BOOKMARK>

Switch from RBS (former AAB) into RBS (senior)

Switch from RBS 4.75% 1/14 (120bp ASW) and/or RBS 4.25% 5/16 (140bp) into RBS 5.75% 5/14 (170bp) and generate a pick-up of up to 50bp. Following legal separation of ABN Amro's Dutch part, all senior bonds remained with RBS' part, as reflected in the issuingentity's name change to Royal Bank of Scotland NV. This is not reflected in spreads, in our view, and we hence confirm our respective compression trade idea. For details, please referto the latest Bank & Insurance Watch.

Alexander Plenk, CFA (HVB) +49 89 378-12429 [email protected]

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Consumers<BOOKMARK> Event Procter & Gamble (PG; Aa3n/AA-s/--) published solid 9M09/10 results (ending March)

with EPS slightly above consensus, improving margins and lower net debt. 9M09/10 sales were up 2.4% yoy to USD 60.0bn thanks to an outstanding January-March quarter, driven by higher volumes and a strong performance in Developing markets. EBIT improved9% to USD 13.1bn, with the margin being up to 21.8% (9M08/09: 20.5%). Virtually alldivisions contributed to the profitability improvement. Cash-flow generation benefited from a strong reduction in working capital and from lower cash-outs for share buybacks (USD 2.9bn vs. USD 5.8bn a year ago). Consequently, debt declined an impressive USD 7bn to USD25.1bn vs. FYE 2008/09 (USD 32.2bn). PG confirmed its target for FY09/10 organic sales growth of 3-5%, while core EPS guidance was raised to USD 3.62-3.68 (previously USD 3.53-USD 3.63), recognizing an improvement in the underlying business.

Impact Improved credit ratios cement the ratings and we especially like the perspective of higher profitability. We calculate 9M09/10 (vs. FY 2008/09) adj. net debt to EBITDA of 1.5x (2.0x)and adj. FFO to net debt of 45.7% (38.0%), which is well in line with the requirements for therating level. However, the pace of credit profile improvements is limited going forward after P&G resumed the share buyback program in 2Q and plans to repurchase shares of a totalvalue of USD 5bn in FY 09/10. S&P expects PG to reach FFO/net debt above 40% (Sept.2009 LTM: 41.2%) and net total debt to EBITDA of 2x or less (Sept. 2009 LTM: 1.95x). Moody's requires PG to achieve retained cash flow/net debt of above 30% (Sept. 2009 LTM:28.3%) and debt/EBITDA of below 2.0x (Sept. 2009 LTM: 2.1x). We assume that PGmanaged to deliver on Moody's requirements with the publication of 9M09/10 results.

Recommendation We are marketweight on the name for the outstanding issues for pure relative value reasons.On PG's current credit curve, we prefer the PG 27 bond. We would be buyers of any new PGissue, and we deem the likelihood of some new supply this year as high. From a fundamentalstandpoint, we very much like the company, which has an impressive track record of pursuingexternal growth, high shareholder returns while at the same time its credit ratios remainbroadly stable, as demonstrated by PG's rating history (stable ratings since 2001).

Carmen Hummel (UniCredit Bank) +49 89 378-12252 [email protected]

Event Coca-Cola Hellenic's (A3s/An/---) 1Q10 results were above consensus in terms of sales and profitability. Sales of EUR 1.4bn (+0.2% yoy) were primarily affected by a 5% decline involumes in Established markets, above all in Greece, where volumes fell by "mid-teen percentage points" as a reaction to the economic crisis, which prompted a massive loss ofconsumer confidence and spending. Italy and Ireland also suffered (volume declines in themid-single digit percentage points). However, while the situation in Italy and Ireland isanticipated to improve in the course of the year, Greece should remain highly challenging in 2010 with the deteriorating economic situation posing concerns. From a positive standpoint,we note the operations in Greece represent only a minor portion of Coca Cola Hellenic'sbusiness (ca. 8% of sales). 1Q10 EBITDA improved 11% to EUR 145mn, with profitability benefited from cost cutting and favorable currency exchange rates. Net debt of EUR 2.2bnwas broadly flat compared to FYE09. Coca Cola Hellenic remains cautious for FY10, due tolower purchasing power of consumers, while on the other hand the initiated cost cutting measures should offset the negatives.

Expected development of credit profile/rating

We calculate 1Q10 LTM (vs. FYE09) adj. net debt to EBITDA of 2.4.x (2.2x) and adj. FFO tonet debt of 39.0% (39.1%), at the lower end of rating requirements. Coca Cola Hellenic's ratings are relatively inflexible, given their dependency on the ratings for the Coke System.

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S&P's benchmarks for the Coke System's include total debt to EBITDA in the 1.5x–2.0x range, EBITDA to interest coverage of at least 10x, and FFO to debt in the 45%-50% range.Moody's affirmed its ratings for Coca-Cola Hellenic following the company's announcement last year that it would return EUR 548mn to shareholders, a.o. taking into consideration that inturn, Coca Cola Hellenic stopped the ongoing share buyback program. Moody's expects theannounced shareholder return to be financed through internal cash resources and a "newdebt instrument, to be issued prior to the cash payment". Although the transaction weighed on credit protection ratios, Moody's believes the company will still be adequately positioned in itsrating category, as long as it will refrain from bigger debt-financed acquisitions. Moody'sestimates the debt-to-EBITDA ratio to be 2.8x and retained cash flow (RCF)-to-net debt ratio to be 27.1% in the last 12 months to 3 July 2009.

Name recommendation We have a marketweight recommendation on the name.


Event METRO's 1Q10 (Baa2n/BBBs/BBBs) results were above consensus in terms of profitability, having benefited from the economic recovery in Asia and Eastern Europe. We note that 1Q is the least meaningful period of the year, in which METRO typically buildsup its working capital (and debt position) versus year-end and where only a minor portion (if any) of EBIT is generated. Coming back to the earnings announcement, positive effects wereprovided by the fact that this time Easter occurred in 1Q (last year: 2Q). Overall 1Q10 sales totaled EUR 15.5bn (2.3% yoy), with a good development seen at Kaufhof department stores and the Real hypermarket division. From a regional perspective, international sales were4.4% above the year-ago level, while Western European sales fell 1.6%. METRO stated that the SHAPE 2012 program is gaining further momentum and thus EBIT before special itemsimproved 56% to EUR 136mn. Cash-flow generation was marked by the 1Q typical working capital build-up (EUR 2.8bn), but net debt of EUR 7.1bn was lower yoy by EUR 731mn. For FY10, METRO anticipates sales to be above the FY09 level, however, the increase shouldnot reach the group's medium-term target of 6% growth, primarily due to lower-than-planned store openings. FY10 EBIT should be "tangibly" higher than in FY09, while in the medium term, EBIT should improve 10% yoy. At our editorial deadline, METRO is holding its analystconference call.


We calculate FYE09 (FYE08) adj. net debt/EBITDA of 2.7x (2.6x) and adj. FFO/net debt of 22.5% (19.7%), which should suffice for rating requirements, although Moody's might keepthe negative outlook, reflecting the current transitional period. Several new bond issues during the last 18 months helped Metro to improve its debt maturity profile which historically has been somewhat frontloaded.

Name recommendation While we have a marketweight recommendation for the bonds, we consider the METFNL 03/15 bond as offering the most value.


Event AstraZeneca's (A1s/AA-s/AA-) 1Q10 results beat market expectations in terms of saleand operating profit. Despite the large exposure to the US (43% of sales) and first impact ofthe health care reform on the pharma industry, the company was able to increase its sales by7% yoy to USD 8.6bn (at constant FX rates), which was above the sector growth rate. Withinregions, emerging markets outside Europe and Japan were the strongest market, showing

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growth rates of 19% and 14%, respectively. In the US, sales were up by 2% yoy. Operatingprofit was supported by relatively lower R&D and marketing expenses and surged by 10% atconstant FX rates to USD 3.6bn (EBIT margin: 42.5% vs. 41.1% in 1Q09). Operating cashflow declined from USD 2.3bn to USD 1.8bn, reflecting the higher sale volumes and thereforeincreased trade receivables. During 1Q10, the company resumed repurchasing its shares.Together with capex and dividend payments, these payouts exceeded operating cash flow, resulting in a higher net debt of USD 3.0bn (FYE09: USD 1.2). Regarding FY10 results,AstraZeneca raised its forecast by 23% (in terms of EPS). However, more interesting is thatthe company affirmed its guidance that top-line will decline at up to a mid-single digit rate in FY10 as FY09 results were positively affected by the strong performance of Toprol XL(cardiovascular) and the H1N1 vaccines sales. Furthermore, the patent expiration of Arimidex(oncology, FY09 sales: USD 1.9bn) will weigh on the company's top-line in FY10.

Impact The credit profile on a total debt basis continued to improve during 1Q10. We calculate adj.total debt to EBITDA of 0.9x (FY09:1.0x) and adj. FFO to total debt of 81% (72%). Based onthe fact that more than 50% of its FY09 sales (USD 17bn; e.g.; top-selling product Seroquel generated USD 4.9bn in FY09 and will lose patent protection in 2011) volume is exposed topatent expiration or to drugs which already lost patent protection, AstraZeneca is one of thepharma companies under extreme pressure to seek further external growth opportunities.Although the company made good progress in deleveraging its balance sheet following theacquisition of MedImmune for almost USD 15bn in 2007, headroom under current ratingswould be up to ca. USD 8-10bn, depending on the cash-flow generation at the acquiredtarget. At current multiples (EV/sales) of 2.5x to 3.0x, the company might only acquire a salesvolume of ca. USD 4bn.

Recommendation We keep our underweight recommendation on the name given the tight spread levels and the elevated event risk. 5Y CDS trade at +45/50bp (BBG).

Rocco Schilling (UniCredit Bank) +49 89 378-15449 [email protected]

Energy<BOOKMARK>RK>B

Event Vattenfall (A2s/An/An) released improved 1Q10 figures on a like-for-like basis. The figures were influenced by the consolidation of Dutch utility Nuon from 1 July 2009, as well asimpairments on the sale of the German transmission business. Net sales increased by 35%yoy to SEK 70.7bn, whereas reported EBIT was SEK 10.1bn, 21% lower yoy. However, this isprimarily related to one-off effects. The most prominent of these was an impairment of SEK5.3bn, which was obviously booked as other operating expenses, and related to the sale of theGerman transmission grid to a consortium of Belgian Elia (60%) and Australian fund IFM(49%). Positive effects from higher electricity prices (SEK 1.8bn) and from the consolidation of Nuon (SEK 2.3bn) partially offset this development. Excluding the one-off items, clean EBIT rose by 19.6% yoy to SEK 15.4bn.

Overall, cash-flow generation in 1Q was weak, with FFO falling by 48% yoy to SEK 9.8bn, primarily related to huge swings in the tax position. In 1Q09, the group had a cash inflow fromtaxes of SEK 1.2bn, whereas it paid taxes of SEK 6.2bn in 1Q10. The latter had been affectedby a one-off payment of SEK 3.5bn (Swedish withholding tax). Net debt increased in thequarter, and stood at SEK 162.6bn, versus SEK 151.4bn at YE09 (treating the Vattenfall hybridas 50% debt). Net debt includes the purchase commitments of SEK 54bn for the remainingstakes in Nuon. Vattenfall initially bought just 49% in Nuon, and will acquire the remaining 51%over the next six years in three tranches. Due to the weak FFO, credit ratios have deteriorated versus YE09. The ratio of FFO/net debt adj. at the end of 1Q10 was 13.8% (15.5% if corrected

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by one-off tax payment) versus 19.5% at YE09.

Additional take-aways from the conference call:

■ The impairment on the German transmission assets (50Hertz Transmission GmbH) is linked the low purchase price for the equity of just EUR 465mn (EV was EUR 810mn). We assumethat the relatively high book value of 50Hertz is linked to re-valuations following its acquisition by Vattenfall in 2001, as well as the high capex level in the 1990s on grid upgrades (the grid is located in eastern Germany).

■ Electricity demand was low in 1Q10 and negatively affected EBIT by SEK 0.5bn. Thecompany affirmed its negative demand outlook for the Nordics (It will take until 2020 for electricity demand to reach 2008 levels again).

■ Management is not satisfied with the current profitability, especially with the current RoE ofjust 6.6% in 1Q10 (12.5% excl. one-off affects) versus a target of 15%. Appropriate measures are to be announced soon.


The company is still sticking to its disposal program of EUR 1.5bn (SEK 15.5bn), of which EUR1.1bn has been realized, but management provided little information about the remaining assets to be sold. Given the extraordinary tax effect on cash flow in the first quarter, we nowexpect FFO to net debt to just reach around 16%-17% by YE10, which is below S&P's threshold for the current rating of 20% for FFO/net debt. However, we do not see the current rating as being in danger (despite the negative outlook).

Recommendation We are not very satisfied with the weak FFO, but we keep our marketweight recommendation for the name, and recommend buying the hybrid bond trading at cash prices around 100/100.5. FFO interest coverage is still well above the trigger ratio for mandatory deferral of hybridinterest payments of 2.5x (although it has deteriorated to 4.8x in FY09 from 5.4x in FY08 dueto higher debt following the Nuon takeover).

Christian Kleindienst (UniCredit Bank) [email protected] + 49 89 378-12650

Event Repsol (Baa1n/BBBs/BBB+s) released sound 1Q09 results above market expectationson the back of higher oil prices, and also showed a stable trend versus the fourthquarter of 2009. Sales increased by 20% yoy (+ 1.7% qoq) to EUR 13.6bn, whereas reportedEBITDA surged by 63% to EUR 2,397mn. On a quarterly basis, EBITDA also increased by31%. EBITDA rose across all segments. Not surprisingly, it increased in the E&P business by EUR 356mn (+114%) yoy to EUR 666mn, on the back of higher oil prices. Total production inthe quarter was 350,000 boe/d (barrels of oil equivalent per day), which was 10.4% higherthan in 1Q09 (and flat versus 4Q09), despite weaker gas production in Venezuela and Algeria. Production benefited from the start-up of the Shenzi field in the US, and an increased quota in Libya. A strong impact also stems from the higher oil price, which was USD 76 perbarrel Brent in 1Q10 (versus USD 45 a year earlier). YPF, the Argentinean subsidiary, also reported an increase in EBITDA of +53% yoy to EUR 810mn, primarily due to higher domesticprices for crude. EBITDA was also strong in the volatile R&M division with EUR 498mn (+10% yoy). However, on the basis of current cost of supply (CCS), which excludes valuation gains in the refinery inventory, operating income in the segment fell by 44% yoy in 1Q10 toEUR 186mn, due to lower international margins. Nevertheless, this was still highly above the4Q10 figure of just EUR 95mn.

FFO in FY09 rose by 62% yoy to EUR 1.8bn. Net debt reported (including preferred sharesand finance leases) increased from EUR 18.0bn at FYE09 to EUR 18.2bn, affected by

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negative working capital movements (EUR 0.8bn) and exchange effects (EUR 0.4bn). Due to the higher cash-flow generation, the ratio of FFO to net debt (adj.) stands at 27% versus 24%at FYE09. If adjusted for approximately EUR 5.5bn in non-recourse debt at the Gas Natural level, this ratio is around 37%. This should be in line with the rating requirement.

Expected development of credit profile/rating We expect the company's cash-flow generation to remain at current levels in the next quarter

due to stabilizing oil prices. The upstream business will remain the key driver for the group performance. We are positively surprised by the positive swing in the downstream segment, but we expect the business to remain volatile, especially due to the impact of internationalrefining margins. Repsol's refining margin in 1Q10 was just a poor USD 2.1 per barrel, but this was already a strong improvement versus 4Q09 when the margin was flat. In its downstreambusiness, Repsol has no competitive advantage from land-locked refineries (as its big refineries are close to the sea). Therefore, the company is always exposed to global competition. We tend to exclude the Gas Natural (proportionally consolidated) debt from theratio calculation (as does S&P). In its latest note on Repsol (26 January 2010), S&P confirmed the stable outlook, also providing the group with some additional leeway for the recovery of its financial metrics. S&P requires Repsol to reach a target ratio of FFO to netdebt ratio in the high 30s in 2010, and of 40% by 2011 (excluding GN). We regard thesetargets as achievable.

Recommendation We regard credit spreads of Repsol as still fair for the rating, despite the recent widening due to the sovereign CDS (5Y CDS Spain are currently at around 163/173 bp following the recent downgrade by S&P). Repsol bonds are trading slightly below the CDS curve, which is almost identical with that of Gas Natural. The Repsol 5Y CDS are now at around 145/155bp, alsoreflecting a lower spread versus the sovereign. In the past, Repsol CDS where trading at 40-50bp below Spain's. As we believe in the positive trend in Repsol credit ratios, we keep our marketweight recommendation for the name. We assume that in the current environment, thediscount versus the sovereign CDS might disappear, but Repsol CDS should not exceedthose of Spain. In any case, the company is not that dependent on Spain. In FY09, Repsolgenerated around 52% of its revenues outside Spain.

Christian Kleindienst (HVB) + 49 89 378-12650 christian [email protected]

Event Gazprom (Baa1s/BBBn/BBBs) released sound 4Q09 results slightly above consensus, and with an improvement in credit ratios. Sales in the fourth quarter fell 18% yoy to RUB 589bn, but operating profit was RUB 268bn, a 13% increase yoy. On a FY basis, OP was 32%lower yoy at RUB 857bn (consensus of RUB 855bn). The sales and OP decrease in FY09 waspurely related to lower volumes of gas sold, which dropped by 74bn cbm (-13%) yoy to 483bn cbm, due to weaker demand but also as a result of the dispute with the Ukraine in January2009. More than half of the volume loss is related to the FSU region (Former Soviet Union).However, there was at least a positive trend in the fourth quarter of 2009, as overall gas sales of 140bn cbm matched those of the last quarter of 2008. The average gas price over allcustomers groups in 4Q09 was just RUB 2,638 per 1,000 cbm, which is 35% below the prior-year level, due to a decline in sales to (Western) European customers. However, this wasoffset by higher revenues in Russia, as well as a higher contribution from Gazprom Neft and the electricity business.

Cash-flow generation was still weaker than in the prior year. In FY09, FFO dropped by 16%yoy to RUB 928bn. Additionally, cash flow was charged with RUB 246bn in acquisitions,primarily the purchase of a 20% stake in Gazprom Neft for RUB 138bn (USD 4.1bn) and RUB 53bn for 48% of oil company Sibir Energy. Furthermore, the group spent RUB 47bn on thepurchase of a 51% interest in SeverEnergiya. Net debt increased from RUB 1.0tn at YE08 toRUB 1.3tn, but is already below the peak level reached on 30 September 2009 (RUB 1.4tn).

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Credit ratios have started to improve again and move away from the company's limit (which isnet debt/EBITDA of 1.5x). This ratio stood at 1.4x at YE09 (YE08: 0.8x). FFO to net debt was57% versus 89% at YE08.

The production outlook is positive: CEO Alexei Miller recently said he expects Gazprom toproduce 566bn cm of gas in 2013 compared to a projected 529bn cm this year and 461bn cmin crisis-hit 2009. Nevertheless, Gazprom faces some competition from shale gas production in the US, also forcing it to postpone some key projects. In the conference call, managementdeclined to give any further updates on revised contracts, but we assume that in the medium term 20% of all export volumes will be linked to spot prices. In FY09, proven and probable reserves (SPE) increased 2% yoy to 140.2bn boe (barrels of oil equivalent).


The leverage is in line with our expectations for YE09 (1.3x-1.4x). In the conference call, management indicated that there might be a further moderate deleveraging in 2010 on the magnitude of USD 1-2bn (RUB 30-60bn). Going forward, there should be a positive trend in financial ratios in 2010 due to improved cash-flow generation, but leverage will stay above 1.0x (our expectation is 1.2x for YE10). Given this trend, we regard the rating as quite stable (therating is linked to the sovereign anyway). So far, the group targeted RUB 90bn (USD 3.0bn) innew borrowings for 2010, with a 50/50 split between loans and bonds.

Recommendation We keep our overweight recommendations for the name.

Christian Kleindienst (UniCredit Bank) + 49 89 378-12650 [email protected]

Event German utility EWE (A2s/A-n/-) released FY09 results, which were surprisingly weak given the strong performance in the first half. Sales increased by 9% yoy to EUR 5,798mn, whereas (reported) EBIT fell by 3% yoy to EUR 414mn (includes income from at-equity investments). This was influenced by a weak performance in the ICIT (telecommunication)segment which experienced an EBIT decline by 72% yoy to EUR 19mn, primarily due to the intensified competition on the telecommunications market and (one-off costs) for streamlining measures (mergers of subsidiaries). Earnings also fell in the Energy segment, due to lower gas demand from industrial and municipal customers as a consequence of the recession. EBITin the segment also declined by 23% yoy to EUR 106mn. The newly consolidated swb(Stadtwerke Bremen) also contributed EUR 49mn to EBIT.

Credit metrics slightly improved versus FY 2008, despite high cash outflows for acquisitions, especially for Turkish gas trading company Dogalgaz, which complements EWE's existing Turkish assets (EWE already holds 80% in gas companies Kayserigaz and Bursagaz). Net debt fell to EUR 2.2bn from EUR 2.5bn one year earlier, also influenced by the EUR 1.3bncapital increase from the new shareholder EnBW. Leverage net debt/EBITDA stands at 2.6x,which should be fine for the rating.


Credit ratios in 2H09 benefited from the capital increase subscribed by EnBW. EWE has usedthe proceeds to fund the purchase of a 25.9% stake in swb (in which it already held 49%). It now seems less likely that EWE will also be able to its stake in gas midstream VNG to EnBW. Nevertheless, ratings should be safe without this transaction and despite the weakeroperational performance. In March 2010, S&P had removed the A- rating of EWE from credit watch status where it had been placed with negative implications in April 2009.

Recommendation We keep our marketweight recommendation for EWE, although bonds are trading at tightlevels. EWE's cash curve is steep; our favorite bond is the 10/19 trading at around 49/48 bp

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(ASW).

Christian Kleindienst (UniCredit Bank) [email protected] + 49 89 378-12650

Industrials Event Finmeccanica released unspectacular 1Q10 results in line with UniCredit Equity

Research expectations. Backed by growth in Helicopters and military Aeronautics, revenues advanced by 3% to EUR 4,039mn. Profitability remained stable yoy with an adjusted EBITAmargin of 6.2%. Reflecting the seasonal business pattern and normal 1Q cash burn (EUR1.1bn), net debt trended higher in the quarter from EUR 3.2bn at FYE09 to EUR 4.4bn (EUR 4.5bn at the end of 1Q09).

Credit profile/ Rating development

The company confirmed its forecast for FY10, expecting revenues of between EUR 17.8-18.6bn, an adjusted EBITA of between EUR 1,520mn-EUR 1,600mn as well as a positive free cash flow of EUR 200mn. This should be supported by the strong order backlog of more thanEUR 45bn, that is anticipated to secure production of over 80% in the current FY. Overall, weexpect a rather stable operating performance going forward. Positive headline risk could stem in the near term from any progress made in the planned stake sale/IPO of Ansaldo Energia.

Name recommendation By acknowledging the risk of spread volatility given the current sovereign risk debate,we confirm our overweight recommendation on the name at current spread levels. Wecontinue to like the credit based on our expectation of a stable credit profile trend,which is also supported by the company's defensive business features. We also notethe company's reduced dependency on its home market (share of new orders from Italyonly represents 20%) following the acquisition of US-based DRS.

Jana Arndt, CFA (UniCredit Bank) [email protected] +49 89 378-13211

EEMEA<BOOKMARK>

Event MDM Bank (Ba2n/B+s/BB-wp) reported the second positive quarter in 2009 with netcomprehensive income of RUB 3,847mn in 4Q09 (up from RUB 808mn in 3Q09) and,hence, total comprehensive income was back in the black with RUB 358mn. However, the full-year bottom-line result was mainly supported by RUB 2,583mn in fair value gains onAFS financial assets. The ordinary FY09 net profit adjusted by this accounting impact wasnegative at RUB 1,394mn. Furthermore, we would like to point out that the 4Q09 result wasprimarily driven by unsustainable trading income from gains of RUB 1.2bn. Net interestincome declined by 13% qoq to RUB 6bn. Notably, recoveries of provisions in 4Q09 exceeded the amount of loan-loss provisions, resulting in a positive contribution to the quarterly P&L. Asset quality continued to deteriorate only marginally: NPLs increased by2.1pp qoq to 17.4%, driven by the shrinking loan book (down 6% qoq to RUB 281bn) as theamount of NPLs was up 7% qoq to RUB 49bn). After the peak of costs of risk at 22% in 2Q09, they first plummeted to 660bp in 3Q09 and finally were negative in 4Q09 at -110bp (due to the high recoveries). Loan-loss reserves amounted to RUB 44.1bn, resulting in a NPL coverageof 90%. In addition, the collateral for the loan book amounted to RUB 236.7bn net of impaired. Taking this very positive trend into consideration, we point out that restructured loans, whichotherwise would have become past due or impaired, still amount to 11.7% of total gross loans(while 15.7% of the gross corporate loan book was renegotiated) – these loans still bear a high implicit risk to turn again non-performing. The bank featured a liquidity cushion totaling

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RUB 97.3bn as of 1Q10, which amply covers the RUB 24bn in residual maturities in 2010. Inaddition, MDM has untapped CBR lines of ca. RUB 67bn. MDM's Tier-1 ratio stood at 18.9%, which reflects a high loss absorbing capacity of the balance sheet (according to management,total capital adequacy can absorb loan-loss reserves of up to 28.3% of gross loans without falling below 12%). With regard to the MDM-Ursa merger, all processes seem to be in line with schedules and are nearly completed; remaining tasks are IT platform unification and newbrand implementation.

Management defined some quantitative milestones for 2010, which does not look too ambitious, in our view:

■ net loan-deposit ratio under 100%

■ cost of risk expected to be under 2%

■ comprehensive income of RUB 5-7bn

■ ROE up to 10%

Impact MDM's FY09 results are credit neutral as there were no surprises. Going forward, the bank should continue to successfully manage asset quality deterioration supported by its costefficiency (cost-income ratio of 37% including merger-related costs). We are still comfortable with the bank's liquidity position and also the high loss-absorbing capacity of the balance sheet reduces concerns regarding implicit risk of renegotiated loans. Supported by the FY09 results and given the promising outlook for 2010, we reiterate our hold recommendation onthe name.

Dr. Dietmar Tzschentke (UniCredit Bank) +49 89 378-12960 [email protected]

Banks<BOOKMARK>

Event The Bank of Greece reported domestic deposit data for March 2010. According to the data, the pace of deposit outflows continued to slow down, as total domestic depositsdeclined by EUR 2.1bn or 0.9% mom to EUR 235,613mn in March 2010. This compares withdeposit outflows of 2.1% mom in January and 1.0% mom in February. We would like to pointout that the March outflows were due to household withdrawals amounting to EUR 1,333mn and withdrawals from insurance corporations totaling EUR 904mn. This does not fit thepicture of the previous months, when insurance companies increased domestic deposits andthe main deposit outflows were driven by non-financial corporations, which apparently is a seasonal factor (tax payments). In our view, this reflects that on the one hand, the depositoutflow was so far either seasonally driven (by firms) or was apparently tax driven with respect to private individuals (triggered by the so-called "presumptive" taxation plans of the Greek government). We also note that households increased deposits by EUR 3.5bn inDecember 2009 and that during 2009, particularly household deposits demonstrated highvolatility (see right chart). Hence, even until March 2010, this does not look at all like a deposit run. Nevertheless, according to the banks in our coverage, deposit outflows also continued in April, which is apparently still manageable. Nonetheless, this definitely increases pressure on the already tense funding position of Alpha Bank (A3wn/BBn/BBB-wn), EFG Eurobank (A3wn/BBn/BBB-wn)and Piraeus Bank (Baa1wn/BBn/BBB-wn), while we believe that National Bank of Greece (A3wn/BB+n/BBB-wn) is less impacted, not only due to a better loan-deposit ratio of 105%.

Impact We won't minimize the current dramatic situation of Greek banks, but would like to draw the attention to facts, not to rumors or news headlines. Against this background, one small positive aspect is the less severe funding situation regarding deposit developments,

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in our view – nevertheless, it does not mean at all disappearance of the risk of majorwithdrawals.

GREEK DOMESTIC DEPOSIT DATA

Total domestic deposit base... ...and breakdown of household deposits

0

50

100

150

200

250

300

Mar-01

Sep-01

Mar-02

Sep-02

Mar-03

Sep-03

Mar-04

Sep-04

Mar-05

Sep-05

Mar-06

Sep-06

Mar-07

Sep-07

Mar-08

Sep-08

Mar-09

Sep-09

Mar-10

EU

R b

n

Domestic residentsNon-financial corporationsHouseholds

0

50

100

150

200

250

Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10

EU

R b

n-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%TimeSavingsSight depositsmom change of total household deposits (RS)

Source: Bank of Greece, UniCredit Research


Event Barclays (Bank: Aa3s/AA-n/AA-s) just reported GBP 1.1bn in 1Q10 net attributable profit (+29% yoy). In its interim management statement, the bank cites a 35% drop in loan-loss provisions as the main reason for the performance; however, annualized 1Q10 loan-loss provisions (GBP 9.2bn) are above the FY09 total (GBP 8.1bn). Total revenues were 4% higher, and operating expenses rose by 17%. At the segment level, Global Retail Bankingshowed a 6% decline in pre-tax profits to GBP 403mn, Corporate & Investment Banking andWealth Management generated GBP 1,468mn (+47%), and Absa, the South-African subsidiary, provided GBP 167mn (+114%); central charges were GBP 218mn, GBP 50mnlower yoy. The core Tier-1 ratio stood at 9.8% as of March (December 2009: 10%).Management said that April performance was in line with 1Q10, but there was no FY10 profit outlook.

Impact As is the case for the other investment banking-driven institutions, Barclays continued to benefit from the benign capital market environment, more than offsetting continuedhigh impairments. While the level of loan-loss provisions will remain high (Moody's even predicts a strong increase in FY10 for UK banks overall), FY10 revenues mightdecline from the high FY09 levels.

Alexander Plenk, CFA (UniCredit Bank) +49 89 378-12429 [email protected]

Event LBBW (Aa2n/--/A+s) reported EUR 136mn in 1Q10 net profit (-42%), and also confirmed the EUR 1.5bn net loss for FY09, as reported in March. In 1Q10, LBBW benefitted fromlower expenses for liquidity and funding in net interest income as well as slightly lower costs. However, there was a strong decline in net commission income, as the brokerage businesswas much weaker than one year ago, and there was a EUR 85mn pro-rata charge regarding the risk shield (the State of Baden-Württemberg provides this for certain assets of EUR 12.7bn); the respective FY09 guarantee fee was EUR 160mn. In addition, loan-loss provisions

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were almost 50% higher; while the annualized 1Q10 level (EUR 540mn) is only a third of theFY09 figure (EUR 1.5bn), the bank forecasts EUR 1bn for FY10 overall, implying a strong increase in the coming quarters. No balance sheet and capitalization data are available; weconsider these to be broadly unchanged from year-end (see table). In regard to the outlook, management confirmed the bank's restructuring path, with customer-driven activities in core regions being center-stage. This plan as well as the risk shield and EUR 5bn capital injectionby the state were already approved by the EC, whose impositions do not include a forcedchange in ownership. LBBW will reduce its balance sheet total by 40%, plans annual ROE of10-12%, and expects to pay back the state capital from 2013 onwards. Annual costs will becut by EUR 700mn, also to mitigate expenses for the risk shield and capital (EUR 836mnp.a.). Regarding FY10, management expects a strong improvement compared to FY09;nevertheless, given a challenging environment, no concrete profit outlook was provided.LBBW also published the single-entity accounts according to German GAAP. In FY09, there was a net loss of EUR 2,188mn. As a result of this loss, profit participation certificates (Genussscheine) and silent partner contributions (stille Einlagen) will not receive coupons, and the nominal value of the deep subs will be reduced by 11.3% due to their loss-participation language. In total, Genussscheine absorbed EUR 201.552mn of the loss, andstille Einlagen absorbed EUR 526.658mn.

Impact The 1Q10 profit is credit supportive; nevertheless, coming quarters will be muchweaker, as indicated by the bank. Hence, a write-up of deep subs based on FY10 figures is unlikely, in our view.

LBBW: FINANCIAL HIGHLIGHTS

Figures in EUR million FY08 FY09 yoy 1Q09 1Q10 qoqNet interest income 2,294 2,778 -2.7% 459 555 20.9%Net fees & commissions 549 657 16.8% 234 66 -71.8%Trading revenues -2,108 748 n.m. 187 59 -68.4%Other operating income 361 -217 n.m. 35 44 25.7%Total income 1,096 3,966 -23.4% 915 724 -20.9%Operating expenses -1,789 -1,909 7.1% -453 -442 -2.4%Loan-loss provisions -883 -1,527 14.1% -91 -135 48.4%Operating profit -1,576 530 -64.4% 371 147 -60.4%Pre-tax income -2,583 -1,214 0.0% 360 156 -56.7%Attributable net income -2,057 -1,482 -66.6% 236 136 -42.4%Return on Equity (pre-tax) -42.5% -11.6% 12.8% 5.9%Cost-income ratio 163.2% 48.1% 49.5% 61.0%Figures in EUR billion FY08 FY09 yoy 1Q09 1Q10 qoqTotal assets 447.9 411.7 6.3% n.a. n.a.Risk weighted assets 177.5 153.9 27.5% n.a. n.a.Equity 6.1 10.5 -0.6% n.a. n.a.Tier-1 ratio 6.9% 9.1% n.a. n.a.Total capital ratio 10.1% 12.9% n.a. n.a.

Source: Company data, UniCredit Research


Event Norddeutsche Landesbank (Nord/LB; Aa1s/A-n/As) reported a FY09 net attributable loss of EUR 152mn, compared to EUR 150mn in profits one year ago. The single-entity accounts according to German GAAP, in contrast, showed operating profit of EUR142mn (-31%), and a net profit of EUR 18mn (-82%), which means that all deep sub coupons will be paid. The main reasons for the negative FY10 trend were four times higher

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loan-loss provisions as well as two special charges: First, a EUR 228mn loss generated byDnB NORD, the joint venture with DnB NOR; most likely, the Norwegian bank will take overthe joint venture completely by buying Nord/LB's 49% stake (see yesterday's DCB). Second,EUR 134mn in charges related to a fraud case at Skandifinanz Bank, a Switzerland-based subsidiary. Capitalization ratios were 8.7% (Tier-1) and 9.7% (total capital ratio), which is below the market average. Management's FY10 outlook is cautious, albeit there was apositive performance in 1Q10; while not providing a profit target, profitability itself is set to beachieved despite loan-loss provisions at a continuously high level. A teleconference with management will be conducted this morning at 9am CEST.

Impact Servicing all deep subs is good news, as there were indications last year that thismight be a challenge. Default-triggering instruments continue to offer safe-haven status.

NORD/LB: FINANCIAL HIGHLIGHTS

Figures in EUR million FY08 FY09 yoyNet interest income 1,462 1,366 -6.6%Net fees & commissions 284 277 -2.5%Trading revenues -443 635 n.m.Other operating income -13 -242 n.m.Total income 1,290 2,036 57.8%Operating expenses -898 -986 9.8%Loan-loss provisions/valuation -266 -1,042 291.7%Operating profit 126 8 -93.7%Pre-tax income 22 -92 n.m.Attributable net income 150 -152 n.m.Return on Equity 2.7% -2.6% Cost-income ratio 69.6% 48.4% Figures in EUR billion FY08 FY09 yoyTotal assets 244.3 238.7 -2.3%Risk weighted assets 89.8 92.6 3.1%Shareholders' equity 5.6 5.7 1.9%Tier-1 ratio 8.1% 8.7% Total capital ratio 10.0% 9.7%

Source: Nord/LB, UniCredit Research


Event Erste Group Bank (Aa3n/An/As) just reported EUR 255mn in net attributable profit for 1Q10, above market expectations and higher both qoq and yoy. On a y-o-y comparison, total revenues were 10% higher on net interest income and net commission income growth. Costs were slightly lower. However, loan-loss provisions increased by 44%, mitigating pre-provision income growth. The NPL ratio was 6.9%, higher than in December (6.6%), and theNPL coverage improved to 59% (57.2%); overall, new NPL formation was at the levelsexperienced in 2H09, lower than in 1H09. Capitalization ratios were almost unchangedcompared to December. Apart from mentioning 1Q10 as a sound basis, management did notprovide a FY10 profit outlook.

Impact Despite the good 1Q10 figures, Erste Bank will face a difficult 2010. Annualized 1Q10 loan-loss provisions are above the FY09 figure, and it remains to be seen whether pre-provision income can mitigate this in coming quarters. Nevertheless, the bank is well prepared, and government support would be forthcoming in case of need, providing comfort to

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buy & hold investments in default-triggering instruments.

ERSTE BANK: FINANCIAL HIGHLIGHTS

Figures in EUR million 1Q09 4Q09 1Q10 qoq yoyNet interest income 1,226 1,380 1,324 -4.1% 8.0%Net commission income 445 460 472 2.6% 6.1%Trading income 144 82 141 72.0% -1.8%Other revenues -95 -204 -50 -75.5% -47.4%Total revenues 1,720 1,718 1,886 9.8% 9.7%Operating expenses -976 -927 -953 2.8% -2.3%Loan-loss provisions -370 -607 -531 -12.5% 43.5%Pre-tax income 373 183 402 119.2% 7.7%Attributable net income 232 183 255 39.2% 10.0%Return on Equity (net) 10.4% 5.8% 7.7% Cost-income ratio 56.8% 54.0% 50.5% Figures in EUR billion 1Q09 4Q09 1Q10 qoq yoyTotal assets 199.1 201.7 208.0 3.1% 4.5%Risk weighted assets 106.0 106.4 105.9 -0.4% -0.1%Shareholders’ equity 8.9 12.7 13.3 4.8% 49.7%Tier-1 ratio 7.0% 9.2% 9.4% Total capital ratio 10.4% 12.7% 12.8%

Source: Erste Bank, UniCredit Research


Event Banco Santander (Aa2n/AAn/AAs) reported better-than-expected 1Q10 results. Net profits increased 0.5% qoq and an impressive 5.7% yoy to EUR 2,215mn, comparing favorably with a market consensus of EUR 2.11bn. Santander's profit generation is reallyremarkable as the quarterly bottom line result over each and every phase of the current crisisalways amounted to around EUR 2bn (in the range of EUR 1.9bn in 4Q08 to EUR 2.5bn in2Q08) – beating market expectations every time. The bank's geographical diversificationproved invaluable – the group's favorable bottom line break-down looks as follows: Santander networks & Banesto – 24%; Brazil – 21%; LatAm ex Brazil – 14%; Sovereign – 2%; UK –16%; Global Europe – 12%; SCF & Portugal – 11%. So far, Santander is the only Spanish bank reporting increased net interest income qoq (up 4.4% to an enormous EUR 7.1bn). Fees& commission also increased, pushing total revenues to EUR 10.2bn. Not only did the bank improve top-line revenues, but opex also continued to decline, resulting in furtherimprovement in the cost-income ratio of 41.5%. Pre-provision income was just shy of the EUR 6bn mark, providing huge loss-absorbing capacity – which easily absorbed EUR 2.4bn in loan-loss provisions (LLPs). A smaller impact were EUR 57mn in impairment losses on otherassets. The evolution of asset quality deterioration slowed and the overall NPL ratio of thegroup increased only by 10bp qoq to 3.24%, while the domestic NPL ratio increased by 18bpqoq to 3.59%. The NPL coverage was 74% and 68%, respectively. In the following, we focuson the most important details of Santander's relatively sound asset quality: In Spain,residential mortgages accounted for 26% of the total credit risk and have an average LTV of51% and an affordability rate of 33% (their NPL ratio was 2.6%). Notably, the NPL ratio in theUK reached 1.87% (up 16bp qoq) with a coverage of 40%, reflecting the weight of mortgages in the UK loan portfolio. Of the total mortgages in Spain, those with a LTV > 90% accountedfor only 6%. The potentially problematic exposure to domestic real estate developers andconstruction companies, which also includes acquired and foreclosed assets, amounted to EUR 14.1bn (total exposure to these two sectors amounted to EUR 41.4bn). The NPL ratio ofthe real estate and construction activities was 6.7% and the specific coverage was 41%. Real

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estate on the balance sheet amounted to EUR 4.2bn with an coverage of 33%, which provides an adequate buffer given the bank's information on the net loss of 26%(sales/acquisition price). Foreclosed assets reached ERU 2.4bn and are covered at 28% withspecific provisions, which just covered the loss on sales/gross value of 28%. Furthermore, we would like to point out the bank's conservative approach in asset quality management, whichis demonstrated by the fact that the generic funds still amounted to EUR 6,679mn (only a littlebelow the EUR 6.73bn in FY09 and substantially above the EUR 6.2bn in FY08). The Spanishgeneric fund totaled EUR 2.3bn, down from EUR 2.9bn in FY09, reflecting the demandingdomestic environment. While customer loans increased marginally by 0.1% qoq to EUR701.3bn, customer deposits increased by 6% to EUR 537bn, resulting in a substantiallyimproved loan-deposit ratio of 127% vs. 135% in FY09 (150% in FY08). Core Tier-1 capital was strengthened organically by 18bp, resulting in a very comfortable 8.79% ratio (Tier-1 capital ratio was 10.3%).

Impact Santander's 1Q10 results are highly credit supportive, as they fully reflect thefundamental strength of the bank once more, which should offset the impact ofWednesday's downgrade of the Spanish sovereign credit by S&P. However, we doubt that Santander's credit profile could withstand another downgrade of the sovereign by therating agency. If this were to occur, it might then result in a rating downgrade of the bank'sdebt rating – which would further increase pressure on SANTAN spread levels. Nevertheless, Santander continued its outperformance vs. its direct domestic peer BBVA in every aspect,namely asset quality, capital adequacy, liquidity & funding, and operating performance.

BANCO SANTANDER – KEY FINANCIAL HIGHLIGHTS

Figures in EUR million 1Q09 4Q09 1Q10 qoq yoyNet interest income 6,039 6,821 7,122 4.4% 17.9%Net fees & commissions 2,164 2,251 2,326 3.3% 7.5%Trading income 862 922 724 -21.5% -16.0%Other income 156 15 88 486.7% -43.6%Total income 9,221 10,009 10,260 2.5% 11.3%Operating expenses -3,967 -4,281 -4,263 -0.4% 7.5%Pre-provision income 5,254 5,728 5,997 4.7% 14.1%Loan loss provisions -2,209 -2,284 -2,436 6.7% 10.3%Attributable net income 2,096 2,203 2,215 0.5% 5.7%Cost-income ratio 43.0% 42.8% 41.5% 0 bp 911 bpFigures in EUR billion 1Q09 4Q09 1Q10 qoq YTDTotal assets 1,115.4 1,100.5 1,142.4 3.8% 2.4%NPL ratio 2.49% 3.24% 3.34% 10 bp 85 bpNPL coverage 80.0% 75.3% 74.0% -1 pp -6 ppRisk Weighted Assets 546.1 561.7 567.5 1.0% 3.9%Shareholders’ equity 66.7 70.0 72.0 2.8% 7.9%Core Tier-1 ratio 7.30% 8.60% 8.80% 20 bp 150 bpTier-1 ratio 8.90% 10.10% 10.30% 20 bp 140 bpTier-1 ratio 6.8% 9.3% 9.3% 0 bp 250 bp

Source: Banco Santander, UniCredit Research


Event Caja de Ahorros del Medierráneo (CAM, A3n/--/A-n) reported net profits of EUR 63mn in 1Q10, which was driven by dividend payments and other undefined income. Net

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attributable income declined by 31% yoy to EUR 63mn after a very weak 4Q09 with EUR 4mnin net profits. The bottom-line result is of weak quality as net interest income deterioratedsubstantially (down 22% qoq and 35% yoy to EUR 278mn), probably due to both the continued reduction of the loan book (there is no balance sheet data available for 1Q10) anda further declining net interest margin. In addition, fees & commissions declined by 25% qoq and by 20% yoy to a meager EUR 35mn, which also substantially reduces the caja's earnings power. Total revenues appear relatively sound only due to a huge increase in dividendpayments and other similar income (up 67% yoy to EUR 127mn, which compares with EUR312mn for FY09). This positive impact also supported pre-provision income of EUR 283mn, which was nevertheless not able to absorb the entire costs of risk of EUR 299mn, whichnearly doubled yoy and increased by 13% qoq. Hence, only on the back of EUZR 108mn inother undefined income was the bottom-line result positive. The NPL ratio rose 30bp qoq to 4.83%, which is still below the NPL ratio in 1Q09 of 4.89% (note the peak of 5.76% in 2Q09). The large loan-loss provisions supported the NPL coverage, which increased slightly by 2ppto 73%. The solvency ratio improved, probably only on the back of larger reductions of RWAs:the core Tier-1 ratio was up 40bp to a still weak 6.9% and the Tier-1 ratio stood at 9.6%.

Impact The 1Q10 results of CAM are credit negative as the positive bottom-line result was driven by extraordinary items, which are not qualified in detail. The bank's earnings power deteriorated substantially and huge costs of risk entirely offset the operating profit. Asset quality is still very intransparent and, although the reported NPL ratio increased by 30bp to 4.83%, which appears to be better than the sector average of 5.34% of all Spanish cajas inFebruary 2010, we consider CAM's asset quality as a major concern. In our view, it is aquestion of time as to how long the caja can prop-up its performance by extraordinary items (like the disposal of its silverware).

CAM – KEY FINANCIAL HIGHLIGHTS

Figures in EUR million 1Q09 4Q09 1Q10 qoq yoyNet interest income 425 357 278 -22.1% -34.6%Net fees & commissions 43 46 35 -24.7% -20.0%Other income 76 -62 167 n.m. 121.3%Total income 544 341 480 40.6% -11.8%Operating expenses -183 -220 -197 -10.5% 7.4%Pre-provision income 361 121 283 133.5% -21.6%Loan loss provisions -155 -264 -299 13.0% 93.3%Attributable net income 91 4 63 n.m. -30.5%Cost-income ratio 33.7% 64.5% 41.1% -23 pp 7 ppFigures in EUR billion 1Q09 4Q09 1Q10 YTD yoyTotal assets n.a. 75.5 n.a. n.m. n.m.NPL ratio 4.89% 4.53% 4.83% 30 bp -6 bpNPL coverage 41.9% 71.0% 73.0% 200 bp 3112 bpRisk Weighted Assets n.a. n.a. n.a. n.m. n.m.Total equity n.a. 3.8 n.a. n.m. n.m.Core Tier-1 ratio 6.7% 6.5% 6.9% 40 bp 20 bpTier-1 ratio 7.7% 9.1% 9.6% 50 bp 190 bp

Source: CAM, UniCredit Research


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Event Banco Pastor (A3n/--/--) reported better-than-expected 1Q10 results. Net attributable profits declined by 24% yoy to EUR 34mn, but compares with a net loss of EUR 19mn in 4Q09. Notably, net interest income increased by 4.4% qoq and even by 0.5% yoy to EUR137mn. A boost in trading gains supported the top-line result. In addition, opex declined qoq, boosting pre-provision income up by 48% qoq and even 7% yoy to EUR 139mn. Therefore, the bank was able to absorb another huge package of costs of risk, which only declined by8% qoq from the peak in 4Q09. Currently important, customer deposits increased, if also onlyslightly by 2.2% qoq to EUR 14.7bn, resulting in a small decline in the loan-deposit ratio. The NPL ratio only increased by 6bp to 4.94% and the NPL coverage improved by 280bp to 56%,which only appears to be in line with the sector average (but we note that the adjusted NPLratio was 7.15%, taking the NPLs only in relation to total gross loans – not including restructured loans and real estate assets on the balance sheet). The solvency ratios were flatat a core Tier-1 ratio of 8.3%, which is per se relatively comfortable, but against thebackground of the weak asset quality only adequate.

Impact Given the headline risk due to the sovereign weakness, the 1Q10 results are creditneutral. We note the positive developments in net interest income, but are still concernedabout the bank's asset quality and we expect the continuance of high costs of risk at leastduring the entire 2010. Nevertheless, default triggering bonds benefit from implicit statesupport. But clearly, Pastor is the weakest credit profile among the second Tier domesticbanks.

BANCO PASTOR – KEY FINANCIAL HIGHLIGHTS

Figures in EUR million 1Q09 4Q09 1Q10 qoq yoyNet interest income 136 131 137 4.4% 0.5%Net fees & commissions 41 36 35 -2.3% -14.9%Trading income 24 25 56 120.2% 133.1%Other income 17 1 2 95.7% -85.7%Total income 218 194 230 18.8% 5.5%Operating expenses -89 -100 -91 -8.5% 3.0%Pre-provision income 130 94 139 47.8% 7.2%Loan loss provisions and other impairments -28 -98 -90 -8.1% 224.9%Attributable net income 45 -19 34 n.m. -23.6%Cost-income ratio 40.7% 51.5% 51.5% 0 bp 1087 bpFigures in EUR billion 1Q09 4Q09 1Q10 qoq yoyTotal assets n.a. n.a. n.a. n.m. n.m.Loan-deposit ratio 143% 146.92% 145.39% -153 bp 251 bpNPL ratio (reported) 4.18% 4.9% 4.9% 6 bp 76 bpNPL coverage (reported) 38.9% 53.3% 56.1% 280 bp 1720 bpRisk Weighted Assets 19.3 18.7 18.9 0.9% -2.3%Core Tier-1 ratio 6.9% 8.30% 8.30% 0 bp 140 bpTier-1 ratio 8.1% 10.6% 10.5% -10 bp 240 bp

Source: Banco Pastor, UniCredit Research


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Corporate Snapshots<BOOKMARK>Company (Analyst)

Comment

CEIFP (JA)

Areva released solid 1Q sales figures with revenues increasing by 6.5% (8.4% on a like-for-like basis) to EUR 1.9bn. Growth was mainly driven by the Reactors & Services Business Group (+18% lfl) and export revenues. The order backlog remained stable compared to FYE09 at EUR 43.6bn, providing a solid basis for FY10. The company confirmed its FY10 expectations of significant backlog and revenue growth, rising operating income and a strong increase in net income. The credit profile should benefit further from the disposal of its T&D business and related cash inflows. In addition, a capital increase - of EUR 3bn as currently rumored - would further strengthen the company's stretched financial profile and could also reduce the current rating pressure. We keep our marketweight recommendation on the name.

RENTKL (JA)

Rentokil released 1Q10 results that revealed further progress in the company's efforts to improve its operating performance. Continuously challenging market conditions in most of its divisions weighed on sales that declined by 3.7% yoy (at constant exchange rates, CER), with only Pest Control reporting higher sales (+2%) yoy. Operating profit rebounded by 44.9% yoy at CER, mirroring further improvements in the company's struggling businesses, in particular UK Pest, and cost savings. Cash generation, although lower yoy (operating cash flow down by 51.5% to GBP 29mn), remained ahead of plan. For FY10, Rentokil expects the revenue momentum to improve and continued profit enhancement. On the back of the successful restructurings, rating pressure should have eased at S&P. We keep our marketweight recommendation on the name.

BMY (RS)

Bristol-Myers Squibb (A2s/A+s/A+s) reported solid 1Q10 results with strong top-line performance but the company lowered, however, its guidance for FY10. 1Q10 sales were up by 8% yoy to USD 4.8bn (at constant FX rates), showing one of the best growth momentums within the pharma sector during the 1Q earnings season. Having a look at BMS' top-10 products, sales volumes of each product improved, a very rare picture in the pharma sector in times of maturing product portfolios. Operating profit was USD 1.3bn, which compares to USD 1.1bn in 1Q09. Operating cash flow of USD 464mn was only slightly above that of 1Q09 and was fully consumed by capex and dividend payments. For FY10, the company expects to increase sales in the mid-single digit area. However, due to the Obama healthcare reform and higher R&D and rationalization costs, guidance for net profit was lowered by ca. USD 170mn to a range of between USD 3.3bn to USD 3.5bn (FY09: USD 3.2bn after minorities). The credit profile did not change during 1Q10. We calculate adj. total debt to EBITDA of 1.2x (FY09: 1.3x). On a reported basis, BMS had a net cash position of USD 0.5bn, making the company an attractive unleveraged target for larger competitors. At the same time, bolt-on acquisitions should arise in the near future given the huge cash position at the company (cash position: USD 10bn!). We keep our underweight recommendation on the name.

Telecom Italia (TITIM) (SH)

According to the press, Telecom Italia's CEO, Franco Bernabe, reiterated the plan to sell TI's stake in Telecom Argentina. We assume that TI's stake could be worth roughly EUR 500mn. While we would view such a transaction as positive, the impact on TI's leverage would not be significant. However, in combination with the disposal of Hansenet in February 2010, it could help the company to reduce its leverage to a reported net debt/EBITDA ratio of around/slightly below 2.9x from around 3.0x at YE09. We keep our overweight recommendation for TITIM bonds for the time being.

Company (Analyst)

Comment

PIAGIM (SK)

Piaggio (Ba2n/BBn) reported 1Q10 results with net sales up by 11.2% to EUR 340.6mn and consolidated EBITDA increased by 51.4% to EUR 31.8mn. Net debt was EUR 422.6mn vs. EUR 352mn due to the seasonal nature of the 2-wheel business, which absorbs cash in 1H of the year and generates cash in 2H. On a like-for-like basis, compared with 1Q09, net debt was down EUR 24.1mn from EUR 446.7mn. For 2010, Piaggio stated the following strategic key drivers: actions to boost sales of 3/4-wheel commercial vehicles in India and Europe, growth of its motorcycle brands in Europe, consolidation of its leadership position in the scooter sector in Europe and America, and marketing of Vespa scooters in Vietnam (launched officially at the end of 1H09), in part through the expansion of the product offer, focus on new investments, including the industrialization of the new diesel and turbo diesel engines with the start-up of the production facility in India. We continue to have a hold recommendation on the PIAGIM 7% 12/16 bond, which trades a price of 105/105.5 and at a swap spread of around 350bp. This appears still rather rich versus RENAUL17, but more in line with Fiat's bond levels.

STORA (JA)

Reflecting the turnaround in Stora's operating performance and cash-flow generation since 2H09, Moody's changed its outlook for the company's Ba2 rating from negative to stable. The agency expects the positive momentum to continue on the back of higher demand, better pricing and the positive effects from restructuring measures, which should push credit metrics more in line with the rating requirements. We keep our hold recommendation on the notes.

FREGR (JS)

S&P changed the outlook on the Fresenius BB rating to positive from stable. The revision reflects improved credit protection ratios following good cost control and improvements in operating efficiency on the back of healthy organic growth. Fresenius SE is expected to achieve a net debt to EBITDA of 2.5x or 3.0x, which together with a FFO to net adj. debt of about 25%, if sustained, would warrant a one-notch upgrade, according to the agency. We maintain our hold recommendation on the name, given tight spread levels and the lingering event risk. To this end, we note that Fresenius has a track record of pursuing larger acquisitions following a period of deleveraging.

RHAFP (JS)

Yesterday, Rhodia placed EUR 500mn of 2018 bonds with a coupon of 7%. Issue proceeds will be used to tender EUR 500mn of its existing EUR 1,035mn FRN at par. On Wednesday, the company announced that shareholders can opt for a script dividend. Instead of receiving the EUR 0.25 per share dividend, shareholders may receive new Rhodia shares which will be priced at EUR 14.5. We maintain our buy recommendation for Rhodia.

Unitymedia (SH)

Yesterday, S&P affirmed its B+ on Liberty Global Inc. (LGI) and its subsidiaries. At the same time, it lowered the long-term corporate credit rating on Unitymedia GmbH (Unitymedia) and its subsidiaries by one notch to B+ from BB-, in line with previous guidance (equalizing of ratings). The ratings on both LGI and Unitymedia were removed from creditwatch with negative implications, where they were placed on November 13, 2009 after the announced acquisition of Unitymedia by LGI. The outlook for LGI's and related entities' ratings is positive, reflecting the likelihood of raising the ratings if the group is able to establish a track record of moderate financial policy (particularly around the prudent use of the cash from the disposal of the stake in J:COM) and will continue to increase its free operating cash flows, and therefore improving its adjusted leverage metrics. We reiterate our buy recommendation on the Unitymedia bonds, i.e. LBTYA 8.125% 12/2017 and 9.625% 12/2019.

Analysts: JA=Jana Arndt, RS=Rocco Schilling, SH=Stephan Haber, SK=Sven Kreitmair, JA=Jana Arndt, JS=Jochen Schlachter, SH=Stephan Haber Source: UniCredit Research




iTraxx Page

ITRAXX INDEX LEVELS (YESTERDAY'S CLOSING)

Series 13 Europe Indices 5Y Mid Price Daily Change Europe Indices 10Y Mid Price Daily ChangeEurope 89.4 -8.3 Europe 102.1 -8.6HiVol 130.0 -5.7 HiVol 150.7 -5.7X-Over 430.0 -25.0 X-Over 445.7 -22.0

Europe Subsectors 5Y Mid Price Daily Change Europe Subsectors 10Y Mid Price Daily ChangeFIN sen 5Y 118.0 -12.3 FIN sen 10Y 125.3 -10.9FIN sub 5Y 180.7 -16.6 FIN sub 10Y 187.0 -15.5

Europe Indices 3Y Mid Price Daily Change Europe Indices 7Y Mid Price Daily ChangeEurope 3Y 69.3 -7.3 Europe 7Y 95.4 -8.3HiVol 3Y 103.3 -5.7 HiVol 7Y 139.3 -5.7

Source: Bloomberg, UniCredit Research

ITRAXX INTRADAY AS OF APRIL 29, 2010

88

89

90

91

92

93

94

95

96

97

98

7:30 AM 9:30 AM 11:30 AM 1:30 PM 3:30 PM 5:30 PM 7:30 PM124.2

124.3

124.4

124.5

124.6

124.7

124.8iTraxx Europe Series 13 Version 1 5Y Bund Future (RS)

425

430

435

440

445

450

455

7:30 AM 9:30 AM 11:30 AM 1:30 PM 3:30 PM 5:30 PM 7:30 PM

6070

6080

6090

6100

6110

6120

6130

6140

6150

6160

6170

6180

iTraxx Europe Crossover Series 13 Version 1 5Y Dax Future (RS)


Primary Market<BOOKMARK> Priced Rhodia (B1/BB-/-) EUR 500mn, senior notes, due 15 May 2018 (callable 15 May 2014), coupon 7.00%. Price

100, spread Bund 4.25% July 2018 +418bp. Yield 7.00%. Make-whole call at T+50bp prior to call. Settle 10 May 2010. RegS. Denoms 50k+1k. Co-manager CA. Bookrunner: CS BNPP.

Source: Bond Radar, Bloomberg




Rating Actions

SUMMARY OF RECENT RATING ACTIONS

Issuer Agency Action From To E.ON US LLC (not E.On AG) Moody's downgrade A2 A3- FCE Bank PLC Fitch upgrade B+ BB- Ford Motor Co Fitch upgrade, outlook change CC CCC, outlook positive Fresenius SE S&P outlook change positive Hertz Corp Fitch upgrade B+ BB-, outlook stable Unitymedia GmbH S&P downgrade, outlook change BB-, watch negative B+, outlook positive


Recent Credit Research Publications

Date Title Sector/Region Analyst 29/04/10 » Daily Credit Briefing Automobiles & Parts, Banks,

Chemicals, Cyclical Goods & Services, Energy, Health Care, Industrial Goods & Services, Insurance, Non-cyclical Goods & Services, Telecommunications, Tobacco, Utilities

Arndt, Brunne, Ernst, Gisdakis, Haber, Kleindienst, Kreitmair, Maglanoc, Plenk, Schilling, Schlachter, Tzschentke

» Covered Bond & Agency Monitor - English Version Agencies & Subsovereigns, Covered Bonds

Dyckmans, Hillenbrand, Rudolf

» Credit Flash - Spanish agencies downgraded to AA by S&P in line with Spain's downgrade

Agencies & Subsovereigns Dyckmans

» Sector Flash RAS - Transatlantic Cooperation on Financial Reform

Banks, Financials Maglanoc

» Sector Flash RAS - EU to Investigate Big Four Auditors Banks, Financials Maglanoc » Credit Flash (HY) - Clariant AG: 1Q10 earnings review (MW) Chemicals Schlachter » Credit Flash (HG/TMT) - France Telecom (Marketweight) Telecommunications Haber

28/04/10 » Daily Credit Briefing Banks, Energy, Industrial Goods & Services

Arndt, Brunne, Ernst, Gisdakis, Haber, Kleindienst, Kreitmair, Plenk, Schilling, Schlachter, Tzschentke

» Evening Credit Roundup - With a little help from my friends (extended remix)

Brunne, Ernst, Gisdakis, Kolek

» Sector Flash RAS - ECB on Global Governance Banks, Financials Maglanoc » Sector Flash RAS - Update on Insurance Solvency II Banks, Financials Maglanoc » Sector Flash RAS - CEIOPS Update on Insurance Solvency II Banks, Financials Maglanoc » Credit Flash (HG/TMT) - KPN: 1Q10 results (Marketweight) Telecommunications Haber » Credit Flash (HG) - Imperial Tobacco 1H09/10 (Overweight) Tobacco Schilling » Credit Flash (HG) - Iberdrola: 1Q10 results Utilities Kleindienst

Source: UniCredit Research



UniCredit Research page 21

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The UniCredit CAIB Group, consisting of d) UniCredit CAIB AG, Julius-Tandler-Platz 3, 1090 Vienna, Austria Regulatory authority: Finanzmarktaufsichtsbehörde (FMA), Praterstrasse 23, 1020 Vienna, Austria e) UniCredit CAIB Securities UK Ltd., Moor House, 120 London Wall, London EC2Y 5ET, United Kingdom Regulatory authority: Financial Services Authority (FSA), 25 The North Colonnade, Canary Wharf, London E14 5HS, United Kingdom f) UniCredit Securities, Boulevard Ring Office Building, 17/1 Chistoprudni Boulevard, Moscow 101000, Russia Regulatory authority: Federal Service on Financial Markets, 9 Leninsky prospekt, Moscow 119991, Russia g) UniCredit Menkul Değerler A.Ş., Büyükdere Cad. No. 195, Büyükdere Plaza Kat. 5, 34394 Levent, Istanbul, Turkey Regulatory authority: Sermaye Piyasası Kurulu – Capital Markets Board of Turkey, Eskişehir Yolu 8.Km No:156, 06530 Ankara, Turkey h) Zagrebačka banka, Paromlinska 2, HR-10000 Zagreb, Croatia Regulatory authority: Croatian Agency for Supervision of Financial Services, Miramarska 24B, 10000 Zagreb, Croatia i) UniCredit Bulbank, Sveta Nedelya Sq. 7, BG-1000 Sofia, Bulgaria Regulatory authority: Financial Supervision Commission (FSC), 33 Shar Planina str.,1303 Sofia, Bulgaria This report may contain excerpts sourced from UniCredit Bank Russia, UniCredit Tiriac Bank, Bank Pekao or Yapi Kredi all members of the UniCredit group. If so, the pieces and the contents have not been materially altered. POTENTIAL CONFLICTS OF INTERESTS Banco Santander 3; Barclays 2, 3; Erste Bank 2, 3; Finmeccanica SpA 3, 7; LBBW 2, 3; National Bank of Greece 2; Nord/LB 2, 3; Telecom Italia 3; Key 1a: UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit CAIB AG, UniCredit Bank AG Milan Branch, UniCredit CAIB Securities UK Ltd., UniCredit Securities, UniCredit Menkul Değerler A.Ş., Zagrebačka banka and UniCredit Bulbank and/or a company affiliated with it (pursuant to relevant domestic law) owns at least 2 % of the capital stock of the company. Key 1b: The analyzed company owns at least 2% of the capital stock of UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit CAIB AG, UniCredit Bank AG Milan Branch, UniCredit CAIB Securities UK Ltd., UniCredit Securities, UniCredit Menkul Değerler A.Ş., Zagrebačka banka and UniCredit Bulbank and/or a company affiliated with it (pursuant to relevant domestic law). Key 2: UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit CAIB AG, UniCredit Bank AG Milan Branch and UniCredit CAIB Securities UK Ltd., UniCredit Securities, UniCredit Menkul Değerler A.Ş., Zagrebačka banka and UniCredit Bulbank and/or a company affiliated with it (pursuant to relevant domestic law) belonged to a syndicate that has acquired securities or any related derivatives of the analyzed company within the twelve months preceding publication, in connection with any publicly disclosed offer of securities of the analyzed company, or in any related derivatives. Key 3: UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit CAIB AG, UniCredit Bank AG Milan Branch and UniCredit CAIB Securities UK Ltd., UniCredit Securities, UniCredit Menkul Değerler A.Ş., Zagrebačka banka and UniCredit Bulbank and/or a company affiliated (pursuant to relevant domestic law) administers the securities issued by the analyzed company on the stock exchange or on the market by quoting bid and ask prices (i.e. acts as a market maker or liquidity provider in the securities of the analyzed company or in any related derivatives) Key 4: The analyzed company and UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit CAIB AG, UniCredit Bank AG Milan Branch and UniCredit CAIB Securities UK Ltd., UniCredit Securities, UniCredit Menkul Değerler A.Ş., Zagrebačka banka and UniCredit Bulbank and/or a company affiliated (pursuant to relevant domestic law) concluded an agreement on services in connection with investment banking transactions in the last 12 months, in return for which the Bank received a consideration or promise of consideration. Key 5: The analyzed company and UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit CAIB AG, UniCredit Bank AG Milan Branch and UniCredit CAIB Securities UK Ltd., UniCredit Securities, UniCredit Menkul Değerler A.Ş., Zagrebačka banka and UniCredit Bulbank and/or a company affiliated (pursuant to relevant domestic law) have concluded an agreement on the preparation of analyses. Key 6a: Employees of UniCredit Bank AG Milan Branch and/or members of the Board of Directors of UniCredit (pursuant to relevant domestic law) are members of the Board of Directors of the Issuer. Members of the Board of Directors of the Issuer hold office in the Board of Directors of UniCredit (pursuant to relevant domestic law). Key 6b: The analyst is on the supervisory/management board of the company they cover. Key 7: UniCredit Bank AG Milan Branch and/or other Italian banks belonging to the UniCredit Group (pursuant to relevant domestic law) extended significant amounts of credit facilities to the Issuer.




RECOMMENDATIONS, RATINGS AND EVALUATION METHODOLOGY Company Date Rec. Company Date Rec. Company Date Rec. AZN 29/01/2010 Underweight FREGR 04/11/2009 Hold TITIM 30/04/2010 Marketweight AZN 23/10/2009 Marketweight GAZPRU 04/08/2009 Overweight TITIM 13/04/2010 Overweight BMY 09/12/2009 Underweight PASTOR 30/10/2009 Marketweight TITIM 02/02/2010 Marketweight CEIFP 07/10/2009 Marketweight PIAGIM 01/03/2010 Hold TITIM 02/02/2010 Marketweight FNCIM 04/08/2009 Overweight RENTKL 07/10/2009 Marketweight VATFAL 30/04/2009 Marketweight FNCIM 30/07/2009 Overweight STORA 23/10/2009 Hold Overview of our ratings You will find the history of rating regarding recommendation changes as well as an overview of the breakdown in absolute and relative terms of our investment ratings on our websites www.research.unicreditgroup.eu and http://www.cib-unicredit.com/research-disclaimer under the heading “Disclaimer.” Note on the bases of evaluation for interest-bearing securities: Our investment ratings are in principle judgments relative to an index as a benchmark. Issuer level: Marketweight: We recommend having the same portfolio exposure in the name as the respective reference index (the iBoxx index universe for high-grade names and the ML EUR HY index for sub-investment grade names). Overweight: We recommend having a higher portfolio exposure in the name as the respective reference index (the iBoxx index universe for high-grade names and the ML EUR HY index for sub-investment grade names). Underweight: We recommend having a lower portfolio exposure in the name as the respective reference index (the iBoxx index universe for high-grade names and the ML EUR HY index for sub-investment grade names). Instrument level: Core hold: We recommend holding the respective instrument for investors who already have exposure. Sell: We recommend selling the respective instrument for investors who already have exposure. Buy: We recommend buying the respective instrument for investors who already have exposure. Trading recommendations for fixed-interest securities mostly focus on the credit spread (yield difference between the fixed-interest security and the relevant government bond or swap rate) and on the rating views and methodologies of recognized agencies (S&P, Moody’s, Fitch). Depending on the type of investor, investment ratings may refer to a short period or to a 6 to 9-month horizon. The prices used in the analysis are the closing prices of the appropriate local trading system or the closing prices on the relevant local stock exchanges. In the case of unlisted stocks, the average market prices based on various major broker sources (OTC market) are used. Coverage Policy A list of the companies covered by UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit CAIB AG, UniCredit CAIB Securities UK Ltd., UniCredit Bank AG Milan Branch, UniCredit Securities, UniCredit Menkul Değerler A.Ş., Zagrebačka banka and UniCredit Bulbank is available upon request. Frequency of reports and updates It is intended that each of these companies be covered at least once a year, in the event of key operations and/or changes in the recommendation. Companies for which UniCredit Bank AG Milan Branch acts as Sponsor or Specialist must be covered in accordance with the regulations of the competent market authority.

SIGNIFICANT FINANCIAL INTEREST: UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit CAIB AG, UniCredit Bank AG Milan Branch, UniCredit CAIB Securities UK Ltd., UniCredit Securities, UniCredit Menkul Değerler A.Ş., Zagrebačka banka and UniCredit Bulbank and/or a company affiliated (pursuant to relevant national German, Italian, Austrian, UK and Russian law) with them regularly trade shares of the analyzed company. UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit CAIB AG, UniCredit Bank AG Milan Branch, UniCredit CAIB Securities UK Ltd, UniCredit Securities, UniCredit Menkul Değerler A.Ş., Zagrebačka banka and UniCredit Bulbank may hold significant open derivative positions on the stocks of the company which are not delta-neutral. Analyses may refer to one or several companies and to the securities issued by them. In some cases, the analyzed issuers have actively supplied information for this analysis. ANALYST DECLARATION The author’s remuneration has not been, and will not be, geared to the recommendations or views expressed in this study, neither directly nor indirectly. ORGANIZATIONAL AND ADMINISTRATIVE ARRANGEMENTS TO AVOID AND PREVENT CONFLICTS OF INTEREST To prevent or remedy conflicts of interest, UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit CAIB AG, UniCredit CAIB Securities UK Ltd., UniCredit Bank AG Milan Branch, UniCredit Securities, UniCredit Menkul Değerler A.Ş., Zagrebačka banka and UniCredit Bulbank have established the organizational arrangements required from a legal and supervisory aspect, adherence to which is monitored by its compliance department. Conflicts of interest arising are managed by legal and physical and non-physical barriers (collectively referred to as “Chinese Walls”) designed to restrict the flow of information between one area/department of UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit CAIB AG, UniCredit CAIB Securities UK Ltd., UniCredit Bank AG Milan Branch, UniCredit Securities, UniCredit Menkul Değerler A.Ş., Zagrebačka banka and UniCredit Bulbank and another. In particular, Investment Banking units, including corporate finance, capital market activities, financial advisory and other capital raising activities, are segregated by physical and non-physical boundaries from Markets Units, as well as the research department. In the case of equities execution by UniCredit Bank AG Milan Branch, other than as a matter of client facilitation or delta hedging of OTC and listed derivative positions, there is no proprietary trading. Disclosure of publicly available conflicts of interest and other material interests is made in the research. Analysts are supervised and managed on a day-to-day basis by line managers who do not have responsibility for Investment Banking activities, including corporate finance activities, or other activities other than the sale of securities to clients. ADDITIONAL REQUIRED DISCLOSURES UNDER THE LAWS AND REGULATIONS OF JURISDICTIONS INDICATED Notice to Austrian investors This document does not constitute or form part of any offer for sale or subscription of or solicitation of any offer to buy or subscribe for any securities and neither this document nor any part of it shall form the basis of, or be relied on in connection with or act as an inducement to enter into, any contract or commitment whatsoever. This document is confidential and is being supplied to you solely for your information and may not be reproduced, redistributed or passed on to any other person or published, in whole or part, for any purpose. Notice to Czech investors This report is intended for clients of UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit CAIB AG, UniCredit CAIB Securities UK Ltd., UniCredit Bank AG Milan Branch, UniCredit Securities, UniCredit Menkul Değerler A.Ş., Zagrebačka banka or UniCredit Bulbank in the Czech Republic and may not be used or relied upon by any other person for any purpose. Notice to Italian investors This document is not for distribution to retail clients as defined in article 26, paragraph 1(e) of Regulation n. 16190 approved by CONSOB on October 29, 2007. In the case of a short note, we invite the investors to read the related company report that can be found on UniCredit Research website www.research.unicreditgroup.eu. Notice to Russian investors As far as we are aware, not all of the financial instruments referred to in this analysis have been registered under the federal law of the Russian Federation “On the Securities Market” dated April 22, 1996, as amended, and are not being offered, sold, delivered or advertised in the Russian Federation. Notice to Turkish investors




Investment information, comments and recommendations stated herein are not within the scope of investment advisory activities. Investment advisory services are provided in accordance with a contract of engagement on investment advisory services concluded with brokerage houses, portfolio management companies, non-deposit banks and the clients. Comments and recommendations stated herein rely on the individual opinions of the ones providing these comments and recommendations. These opinions may not suit your financial status, risk and return preferences. For this reason, to make an investment decision by relying solely on the information stated here may not result in consequences that meet your expectations. 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Factors that could cause a company’s actual results and financial condition to differ from expectations include, without limitation: political uncertainty, changes in general economic conditions that adversely affect the level of demand for the company’s products or services, changes in foreign exchange markets, changes in international and domestic financial markets and in the competitive environment, and other factors relating to the foregoing. All forward-looking statements contained in this report are qualified in their entirety by this cautionary statement This document may not be distributed in Canada or Australia.




UniCredit Research* Thorsten Weinelt, CFA Global Head of Research & Chief Strategist +49 89 378-15110 [email protected]

Dr. Ingo Heimig Head of Research Operations +49 89 378-13952 [email protected]

Credit Research

Luis Maglanoc, CFA, Head +49 89 378-12708 [email protected]

Credit Strategy & Structured Credit Research Dr. Philip Gisdakis, Head Credit Strategy +49 89 378-13228 [email protected]

Dr. Tim Brunne, Quantitative Credit Strategy +49 89 378-13521 [email protected]

Markus Ernst, Credit Strategy & Structured Credit +49 89 378-14213 [email protected]

Dr. Stefan Kolek, EEMEA Corporate Credits & Strategy +49 89 378-12495 [email protected]

Corporate Credit Research Stephan Haber, CFA, Co-Head Telecoms, Cable, Technology +49 89 378-15192 [email protected]

Dr. Sven Kreitmair, CFA, Co-Head Automotive, Media +49 89 378-13246 [email protected]

Jana Arndt, CFA Basic Resources, Industrial G&S +49 89 378-13211 [email protected]

Carmen Hummel Consumers, Retail +49 89 378-12252 [email protected]

Christian Kleindienst Utilities, Oil & Gas +49 89 378-12650 [email protected]

Rocco Schilling Healthcare, Tobacco, Tollroads, Utilities +49 89 378-15449 [email protected]

Jochen Schlachter Chemicals, Construction & Materials +49 89 378-13212 [email protected]

Financials Credit Research Franz Rudolf, CEFA, Head Covered Bonds +49 89 378-12449 [email protected]

Alexander Plenk, CFA, Deputy Head Banks +49 89 378-12429 [email protected]

Amey Dyckmans Sub-Sovereigns & Agencies +49 89 378-12004 [email protected]

Florian Hillenbrand, CFA Covered Bonds +49 89 378-12961 [email protected]

Luis Maglanoc, CFA Insurance, Banks, RAS +49 89 378-12708 [email protected]

Natalie Tehrani Monfared Regulatory & Accounting Service +49 89 378-12242 [email protected]

Dr. Dietmar Tzschentke Banks +49 89 378-12960 [email protected]

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*UniCredit Research is the joint research department of UniCredit Bank AG (UniCredit Bank), UniCredit CAIB Group (UniCredit CAIB), UniCredit Securities (UniCredit Securities), UniCredit Menkul Değerler A.Ş. (UniCredit Menkul), Zagrebačka banka and UniCredit Bulbank.

Documents

Credit Strategy Highlights current 1D 1W 1M YTD€¦ · 30 April 2010 Credit Research Daily Credit Briefing UniCredit Research page 1 See last pages for disclaimer. Credit Strategy