Markets News

UPDATE 1-Banco BPM profit rises despite higher loan provisions

(Add details)

ROME, Nov 5 (Reuters) - Italy’s Banco BPM posted a 60% year-on-year rise in third quarter net profit on Thursday as higher revenue and lower costs helped soften increased provisioning against loan losses due to the health emergency.

Italy’s third largest lender said net profit for the three months through September was 157.3 million euros, compared with 98.2 million euros a year earlier and a net loss of 46.4 million euros in the second quarter.

Fees and a jump in trading income drove quarterly revenue up 14% as commercial activity picked up.

The bank’s fully phased Common Equity Tier 1 ratio, measuring the highest-quality capital, rose to 14.1% of assets at the end of September, from 13.3% at the end of June.

Banco BPM has been tipped as a potential merger candidate after Intesa Sanpaolo’s merger with UBI - Italy’s biggest bank deal in years - saw Intesa strengthen its position in the wealthy north of the country, Banco BPM’s home market. The bank has agreed to share confidential information with the local arm of Credit Agricole to explore a potential tie-up, a source familiar with the matter said last month.

Banco BPM wrote down problem loans totalling 324.3 million euros in the third quarter, 23% more than in the second.

The bank has drastically reduced the amount of defaulted debt on its balance sheet, and is now tackling ‘unlikely to pay’ (UTP) loans, which are not yet in default but are unlikely to be repaid in full.

Banco BPM said on Thursday it has received bids from Italian state-owned bad loan manager AMCO and rival Credito Fondiario for UTP loans worth around 1 billion euros.

This transaction, and other small deals in pipeline, would cut the gross NPE (non-performing exposure) ratio to 7.7% from 8.6%. (Reporting by Andrea Mandalà; editing by Giulia Segreti, Kirsten Donovan)