* Mediobanca Q1 net 109 mln euros, beats forecasts
* CEO says aims to reduce earnings volatility
* Not the right moment to sell stake in RCS-CEO
(Recasts with comments from CEO, outlook, details)
By Lisa Jucca and Gianluca Semeraro
MILAN, Oct 27 Italy's leading investment bank
Mediobanca is considering further cutting its equity
holdings to reduce earnings volatility.
Absence of large impairments on its financial and equity
portfolio coupled with lower costs and big trading gains allowed
the bank to report a near doubling of first-quarter net profit
on Saturday, earnings the bank would like to see stabilise.
By contrast, the annual results it presented in July were
hit by 570 million euros ($737.09 million) of writedowns.
"We are rethinking our exposure to equity holdings," Chief
Executive Alberto Nagel told shareholders at an annual general
meeting, which took place after results were published.
Its equity holdings mainly consist of large stakes in top
domestic insurer Assicurazioni Generali, publisher RCS
Mediagoup and the holding company of telecoms group
"We must reduce volatility in our earnings. Without the
writedowns, we would have had solid annual results," Nagel said.
The bank, which began its financial year on July 1, reported
net profit of 109 million euros for the first quarter, above
expectations of 85 million euros, an analyst consensus compiled
by Mediobanca showed.
It posted a loss in the previous quarter, hit by losses on
its equity portfolio.
Net trading income at Mediobanca's key investment banking
division increased more than tenfold to 59 million euros from a
year ago, when Italy faced one of the most difficult phases so
far of the euro zone crisis.
The gains partially offset much lower profits from
Mediobanca's equity holdings, which the bank has cut by 2
billion euros in the past fiscal year.
Investors and management are due to start discussions next
month over a new strategic plan likely to be unveiled in the
spring, insiders have told Reuters.
Key to deciding on a timetable for some of the equity
divestments will be clarification on new Basel III rules on
capital adequacy that may make Mediobanca's 13 percent stake in
Generali very onerous from a capital point of view.
Mediobanca's Core Tier 1 ratio, a measure of financial
strength, was stable at 11.5 percent, one of the highest among
Italian banks. Funding was stable at 55 billion euros.
Provisions against possible losses on loans dropped by a
sharp 21 percent from the previous quarter, even though the top
executive said he expected market conditions for banks in weaker
euro zone members - which had shown some improvement - to turn
choppy once more.
Nagel said Mediobanca had no immediate plans to sell its 14
percent stake in struggling RCS, which may require a capital
hike and is the subject of intense bid speculation.
"I do not see offers that could offer added value
considering the book value of our (RCS) stake. I do not believe
this is the moment to disinvest," Nagel said.
($1 = 0.7733 euros)
(Writing by Lisa Jucca; Additional reporting by Paola Arosio;
Editing by Helen Massy-Beresford)