* Intesa Q3 pretax 962 mln eur vs f'cast just above 800 mln
* UniCredit net 335 million euros vs f'cast 135 million
* Intesa Core Tier 1 ratio 10.5 percent
* UniCredit Core Tier 1 9.3 percent
By Silvia Aloisi
MILAN, Nov 13 Italy's two biggest banks, Intesa
Sanpaolo and UniCredit, delivered higher than
expected profits and strengthened their capital bases even as
they both set aside billions of euros against risky loans.
An easing of the euro zone debt crisis since the summer
boosted trading gains for both banks, which are cutting
thousands of jobs and closing hundreds of branches to cut costs
and revive sluggish earnings.
Intesa said its pretax profit came in at 962 million euros
($1.2 billion) in the third quarter, beating a Thomson Reuters
analyst consensus of just above 800 million.
UniCredit's net profit reached 335 million euros over the
period, compared with 135 million in an analyst consensus
distributed by the bank.
"All in all, these are good numbers, above expectations"
said a Milan-based trader on Tuesday.
Both lenders improved their capital position and posted a
rise in customers' deposits. Intesa's Core Tier 1 ratio, a key
measure of financial strength, stood at 10.5 percent under Basel
III requirements, while UniCredit's was 9.3 percent - higher
than the end-2012 previous target of 9.1 percent.
However, a deep recession in Italy forced both banks to set
aside a combined 8.4 billion euros in the first nine months of
the year in the face of rising bad loans.
Intesa earns 80 percent of its revenue in Italy, compared
with less than 50 percent for UniCredit.
Analysts said the bad loans picture is unlikely to improve
until 2014, as Italy's economy is expected to keep shrinking
The above-forecast profits and strong capital ratios could
go some way towards quelling recent press speculation that
Intesa and UniCredit may need to merge in a defensive move
against the possibility of a foreign takeover.
Executives at both banks have denied the speculation, but
sources close to the matter have told Reuters the banks'
foundation shareholders are worried about the lenders' low
Intesa and UniCredit have a market capitalisation of around
19 billion euros each. By contrast, Spain's top two banks -
Santander and BBVA - have a value of 56
billion euros and 33 billion respectively.
Italian banks have been spared the real estate bubble that
hurt their Spanish peers, but they too have been hit hard by the
euro zone debt crisis because of their vast holdings of domestic
Sovereign pressures have eased since the end of July,
following a pledge by European Central Bank president Mario
Draghi to do whatever it takes to save the euro.
However, analysts say a grim macroeconomic picture in Italy,
lower loan volumes and low interest rates continue to weigh on
lenders' underlying profitability.