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UPDATE 2-UniCredit sees improvement in Italy, shrugs off Russia impact
August 5, 2014 / 1:40 PM / in 3 years

UPDATE 2-UniCredit sees improvement in Italy, shrugs off Russia impact

* Impact of sanctions against Russia “marginal” - Ghizzoni

* Bank’s net profit 403 mln euros, above analyst estimates

* Head of investment bank Mustier steps down (Adds estimated impact from sanctions against Russia, details)

By Silvia Aloisi and Gianluca Semeraro

MILAN, Aug 5 (Reuters) - Net profit at UniCredit, Italy’s biggest bank by assets, rose 12 percent in the second quarter thanks to a marked improvement in its home market and a solid contribution from eastern Europe.

The bank said Italy had contributed around 600 million euros (801.72 million US dollar) to its earnings for the quarter, and central and eastern Europe around 400 million euros.

UniCredit, the market leader in central and eastern Europe, said sanctions against Russia would have only a “marginal” impact on its business there, which accounted for around 4 percent of total revenues in the quarter.

“The bank seems strong enough to go through this storm,” UniCredit Chief Executive Federico Ghizzoni said when asked about tighter international sanctions against Moscow due to its support for rebels in eastern Ukraine.

“This is not to say that we are not looking at the situation with concern, but there is no systemic problem,” he said, adding the bank estimated a hit of up to 10-15 million euros in lost revenues.

In Italy, UniCredit said its domestic business had granted new medium and long-term loans for a total of 6 billion euros in the first half, up 52 percent from a year earlier. Net profit was up 28 percent from a year earlier, making Italy the top performing division for the second quarter in a row.

“We see the result in Italy as very encouraging for UniCredit and the overall domestic sector,” UBS analysts said in a note.

The Italian economy is struggling to emerge from its longest recession since World War II. Last month, the Bank of Italy cut its estimate for 2014 growth to just 0.2 percent and warned that there was significant uncertainty about the outlook for the euro zone’s third-largest economy.

UniCredit’s second-quarter net profit of 403 million euros compared with 361 million euros a year ago and 332 million euros in an analyst consensus distributed by the bank.

The results were also helped by lower than expected provisions on loan losses, totalling around 1 billion euros in the first six months of the year.

Ghizzoni said in a statement the bank was now closer to its full-year profit target of 2 billion euros, although he said this was now more challenging because of higher than anticipated tax charges.

The bank’s shares were down 1 percent by 1537 GMT, with the blue-chip FTSE MIB index down 1.6 percent.

INVESTMENT BANK RESHUFFLE

UniCredit like other European banks has cut jobs and shed assets to bolster its financial strength in preparation for a wide-ranging health check of the region’s banks.

Over the past two months, it has listed a 34.5 percent stake in online bank Fineco and sold an 81 percent holding in web broker DAB. It is also in talks to sell its bad loans management unit UCCMB and is looking for possible partners for its asset management firm, Pioneer.

Ghizzoni said Pioneer was a strategic asset for UniCredit and the idea was to keep a “strong stake” in the business.

The bank’s Common Equity Tier 1 ratio, a measure of financial strength, stood at 10.4 percent at the end of June when including the Fineco and DAB operations, up from 9.5 percent three months earlier.

UniCredit also announced that Jean-Pierre Mustier, the head of its investment banking operations, would leave at the end of the year. He will be replaced by Gianni Franco Papa, an Italian national and insider who is currently head of its central and eastern European operations.

Mustier, a veteran investment banker who had joined UniCredit in 2011 after a long career at Societe Generale , will leave the bank to join an asset management boutique, a source close to the matter told Reuters.

Papa, 58, is regarded as close to Ghizzoni, who himself used to head eastern Europe before becoming chief executive in September 2010. (1 US dollar = 0.7484 euro) (Additional reporting by Pamela Barbaglia in London; Editing by Lisa Jucca and Jane Merriman)

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