(Adds CEO quotes, details on bad loans)
By Silvia Aloisi
MILAN May 10 UniCredit on Friday
reported a bigger than expected net profit in the first quarter
thanks to lower bad debt provisions, a sign there might be light
at the end of the tunnel soon for Italy's biggest bank by
UniCredit's net profit came in at 449 million euros ($587.97
million), down 51 percent from a year ago. But this easily beat
an analyst consensus forecast of 156 million and first quarter
profits in 2012 had been boosted by a one-off gain.
The bank, the first of Italy's retail banks to release
results for the quarter, said inflows of new bad loans had
fallen in its home market for the second quarter in a row.
"We know macroeconomic conditions are still very difficult
but there is some reason to be a bit optimistic," CEO Federico
Ghizzoni told analysts in a conference call.
Like other Italian banks, UniCredit has been struggling to
keep a lid on mounting bad debts that have piled up as a result
of the longest recession in 20 years in Italy, the euro zone's
third biggest economy.
The bank is cutting thousands of jobs to lower costs,
reorganising its Italian network and selling some assets in
central and eastern Europe to strengthen its finances.
After setting aside nearly 10 billion euros for souring
loans in 2012, UniCredit benefited from lower loan-loss
provisions in the first three months of the year.
Those charges stood at 1.2 billion euros in the period, down
73 percent from the fourth quarter of 2012 and 9 percent on an
The bank confirmed an outlook for slightly lower loan-loss
provisions in 2013 compared to last year.
"The results are good and the loan losses are low," said
Alberto Gallo, credit strategist at Royal Bank of Scotland.
"What we are seeing is a two-tier banking system in Italy
and Spain, where the top two banks are doing well while the
smaller ones are stuck with a lot of non-performing loans," he
But some analysts pointed out that the fact the bank was
sticking to its 2013 outlook for loan-loss provisions meant the
decline in the first quarter was not a game-changer.
Overall, analysts expect bad debts at Italian banks to grow
throughout 2013 - UniCredit alone had 45.4 billion euros of
non-performing loans at the end of March, up 2.3 percent from
The bank's results, also helped by strong trading income,
marked a return to profit from the fourth quarter of last year,
when UniCredit posted a 553 million euro loss.
Ghizzoni said markets were still too volatile for the lender
to present new financial targets, which the bank has said will
be lower than previously stated because of the prolonged
The bank said its Core Tier 1 ratio - a key measure of
financial strength - stood at 9.46 percent at the end of March,
and at 9.64 percent taking into account a series of recent
disposals. The ratio stood at 9.2 percent at the end of 2012.
($1 = 0.7637 euros)
(additional reporting by Francesca Landini, editing by Jane