BCS Barclays PLC

MILAN—Mediobanca SpA said net profit in its fiscal third quarter dropped by 41%, mainly hit by lower trading income and declining gains on its securities portfolio as market turbulence took its toll.

Net profit for the period fell to €121 million ($137.71 million) from €205 million in the same quarter last year. Revenue was virtually flat at €503 million.

"The quarter was beyond our best expectations," said Chief Executive Alberto Nagel, adding that financial markets were dominated by negative sentiment and low interest rates.

The bank booked gains on its portfolios of securities of €6 million, down from €102 million in the same period of last year, when it sold some stakes in companies. Trading income for the period declined almost by half to €52 million.

In 2013, the bank launched a strategic plan aimed at boosting its profitability by selling its vast portfolio of stakes in pre-eminent Italian companies, investing the proceeds in its corporate and investment banking divisions and retail and wealth-management units.

To this end, Mediobanca agreed last year to buy a 51% stake in London-based credit manager Cairn Capital group Ltd from Royal Bank of Scotland and other institutional investors, and Barclays PLC's Italian retail business.

The bank aims to launch a new plan in the fall of this year, likely in November, Mr. Nagel said.

Italian banks' results have been heavily penalized by the downturn in financial markets, during which investors dumped shares especially in the first two months of the years.

The downturn had a negative impact on both their results and shares prices. Local banks' share prices have lost 36% since the beginning of the year, as investors have fretted over the health of the sector burdened by around €360 billion of impaired loans.

Mediobanca has lost 30% of its share value since January, while European banks have dropped by a fifth.

Against this backdrop, the Italian government orchestrated the creation of a backstop fund for banks, dubbed Atlante, which would buy bad loans from lenders and unsold shares at troubled banks hit by capital increases imposed by regulators.

Mediobanca hasn't invested in the fund, which raised €4.25 billion, but has committed to invest in the equity of banks if it acts as a global coordinator for their share sales and if its investment can help the lender achieve enough free float to list on a stock exchange.

Veneto Banca SpA is set to launch a €1 billion capital increase in June, after regulators found it short of capital. Mediobanca isn't one of the arrangers of the transaction, but Mr. Nagel said that it could consider an investment in Veneto Banca if that helped the bank carry out its initial public offering.

Mediobanca's net interest income for the quarter grew by 3% to €301 million compared with the same period of last year, while fees and commissions rose by 8% to €109 million.

Mr. Nagel said that he expects a positive result for the fiscal year, which ends in June, and that the bank could consider raising its dividend payments to shareholders.

Write to Giovanni Legorano at giovanni.legorano@wsj.com

(END) Dow Jones Newswires

May 11, 2016 04:15 ET (08:15 GMT)

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