UniCredit Starts Final Year of Restructuring With Profit Beat - Update
May 09 2019 - 4:17AM
Dow Jones News
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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