* Posts 14 bln-euro loss on goodwill and bad loans
* Says won't need capital increase, to cut 8,500 jobs
* Bank says to list Fineco unit, to issue additional Tier 1
* Shares up 6 percent on balance sheet clean-up
(Adds job cuts, internal bad bank, bonds, CEO's comments, 2014
By Silvia Aloisi and Gianluca Semeraro
MILAN, March 11 UniCredit posted a
record 14 billion-euro ($19 billion) loss on Tuesday due to huge
writedowns on bad loans and past acquisitions as it moved to
clean up its balance sheet ahead of an industry-wide health
check by European regulators.
Italy's biggest bank by assets said full-year provisions
against losses from loans totalled 13.7 billion euros in 2013,
with 9.3 billion euros in the fourth quarter alone.
"This is a jaw-dropping clean-up," said one banking analyst,
who declined to be named. "The company is taking 9.3 billion
euros of loan losses. We had (forecast) 4.5 billion euros and
thought we were high."
Yet UniCredit shares rallied after an initial drop, as the
bank said it did not need to carry out a capital increase and
felt it had done more than will be required to get a clean bill
of health by regulators when the European Central Bank conducts
its asset quality review of the euro zone's 128 biggest banks.
UniCredit's share price was up 7 percent at 6.46 euros by
1604 GMT, its highest level since October 2011 and extending
gains this year to 20.3 percent, compared with a 4 percent rise
in the Stoxx Europe 600 banking sector index.
"I believe the group has turned the page. We could have
staggered the losses over several years. We decided to take them
all in one year," Chief Executive Federico Ghizzoni told
In addition to the bad loan provisions the bank also booked
in goodwill impairments totalling 9.3 billion euros as it
effectively wrote down the entire value of its acquisitions
That year UniCredit became a major force in Europe through
the purchase of Germany's HypoVereinsbank and its extensive
operations in Central and Eastern Europe.
The massive net loss, one of the worst suffered by a
European bank since the beginning of the financial crisis, was
partly mitigated by a 1.2 billion-euro net capital gain recorded
for the revaluation of UniCredit's stake in the Bank of Italy,
whose accounting treatment is still under discussion.
Analysts had on average expected the bank to report a net
profit of 916.5 million euros in 2013, up from the net profit of
865 million euros reported for 2012, according to Thomson
Reuters I/B/E/S Estimates.
The bank also launched a restructuring plan on Tuesday which
aims for 8,500 job cuts by 2018 - nearly 6 percent of its
workforce - for which it took a 700 million-euro charge in the
In addition it will create an internal "bad bank" to manage
87 billion euros of bad and risky loans. These will be reduced
to 33 billion euros in the next five years, Ghizzoni said.
The bank will also list a minority stake in its online unit
Fineco, issue so-called additional Tier 1 bonds and will propose
a scrip dividend of 0.10 euros a share for 2013, payable in
shares, to further boost its capital.
"Investors are looking favourably at the kitchen sinking,
and how they cleaned up the balance sheet through large loan
loss charges, because it allows them to draw a line and move
on," said Alberto Gallo, credit analyst at Royal Bank of
UniCredit, which unveiled its 2013-2018 business plan along
with the results, said it was targeting a net profit of around 2
billion euros for 2014 and an ambitious return on tangible
equity (ROTE) of 13 percent in 2018.
Ghizzoni said his hopes for a quick turnaround were based on
signs that economic activity in UniCredit's Italian home base
was picking up after two and half years of recession.
"For the first time in January we saw a decline in the stock
(of bad debts) for corporates," he said, adding that the bank's
targets were based on prudent economic forecasts for Italy,
where UniCredit makes 40 percent of its revenues.
The bank said that after the clean-up, its impaired loan
coverage ratio of 52 percent was the highest in Italy and one of
the best in Europe.
UniCredit also said its fully-loaded Basel III Common Equity
Tier 1 capital adequacy ratio, a closely-watched measure of a
bank's financial strength, stood at 9.4 percent of risk-weighted
assets at the end of 2013.
That will rise by 0.3 percentage points once the Fineco
listing and other capital boosting moves are completed, the bank
said, putting it well above an 8 percent minimum requirement set
by the ECB, despite the heavy writedowns.
(Additional reporting by Stephen Jewkes and Francesca Landini;
Writing by Lisa Jucca and Silvia Aloisi; Editing by Mark Potter
and Greg Mahlich)