UniCredit Starts Final Year of Restructuring With Profit Beat - Update

Date : 05/09/2019 @ 9:17AM
Source : Dow Jones News
Stock : Unicredit (UCG)
Quote : 11.726  0.226 (1.97%) @ 11:22AM
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UniCredit Starts Final Year of Restructuring With Profit Beat - Update

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Adds CEO comments, analysts' comments, earnings details, background

 

--UniCredit's first-quarter net profit rose 25% to 1.39 billion euros, beating analysts' expectations

--Exceptional items, lower costs and declining provisions for bad loans boosted the results for the quarter

--The bank's core tier 1 ratio rose to 12.25%

 
    By Pietro Lombardi 
 

UniCredit SpA (UCG.MI) kicked off the year with a profit beat in what Chief Executive Jean Pierre Mustier deemed the bank's best first quarter in a decade.

The results come as the Italian bank enters the final stretch of its restructuring, under which it has cut costs and reduced bad loans, and gears up for the new plan to be presented in December. The bank has made strong progress on delivering the plan, the CEO said Thursday, confirming the target for the year.

Exceptional items, lower costs and declining provisions for bad loans boosted the results for the quarter and helped the bank beat analysts' expectations despite the low interest-rate environment and a struggling Italian economy.

"This was the best first-quarter results in a decade for the second time in a row, underpinning the success of our current strategic plan, and confirming we are well on track to achieve our Transform 2019 objectives by the end of this year, that are all confirmed," Mr. Mustier said.

Net profit for the period rose 25% to 1.39 billion euros ($1.56 billion), the Italian bank said. Adjusted net profit rose 1.5%.

Revenue decreased 3% to EUR4.95 billion.

Analysts had expected a net profit of EUR1.29 billion for the period on revenue of EUR4.88 billion, according to a consensus forecast provided by the bank.

"UniCredit reported a solid set of numbers," Goldman Sachs said.

The results come during a busy week for the bank, which earned more than EUR1 billion from the sale of a 17% stake in multichannel bank FinecoBank SpA (FBK.MI), which will also boost its capital by about 21 basis points. It also presented a number of financial measures ahead of its new strategic plan. These include "gradually align[ing] over time UniCredit's domestic sovereign bond portfolio with the domestic bond holdings of its Italian and European peers on a relative basis." This will be achieved through portfolio run-off, the CEO said.

However, he confirmed the bank's commitment to Italy.

"Our commitment to Italy has never been stronger," Mr. Mustier said Thursday.

UniCredit has been mentioned in the press as one of the banks interested in Germany's Commerzbank AG (CBK.XE), whose merger talks with Deutsche Bank AG (DBK.XE) collapsed last month. The CEO said on Thursday the bank doesn't comment on rumors and speculation.

Results for the first three months of the year were boosted by one-offs. UniCredit released provisions in the quarter after it reached in April a $1.3 billion settlement with U.S. authorities related to U.S. government-sanctions programs. The positive net impact of this release was EUR320 million. It also posted a gain of EUR258 million from real estate sale.

Operating costs declined 4.2% while provisions for bad loans were down 5.8% on year.

Net interest income--the difference between what lenders earn from loans and pay for deposits, and a key profit driver for retail banks--rose 0.7% on year to EUR2.65 billion. Net fees and commissions fell 5.3%.

UniCredit has already met its target of cutting roughly 14,000 jobs by 2019 and has closed 901 branches in Western Europe, of 944 closures planned by the end of this year.

The bank's core tier 1 ratio, a key measure of capital strength, rose to 12.25% at the end of March from 12.07% in December.

"The market should be relieved by the progress on capital (a concern in following Fineco Bank news), and better level of CET1 trough in 2Q (above 12% now vs 11.7% in 4Q), improving asset quality and commitment to noncore rundown (accelerating 2019 disposals)," Citi said.

 

Write to Pietro Lombardi at pietro.lombardi@dowjones.com

 

(END) Dow Jones Newswires

May 09, 2019 04:02 ET (08:02 GMT)

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