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UPDATE 1-Banco Popolare posts net loss on big loan writedowns
May 13, 2014 / 6:02 PM / 4 years ago

UPDATE 1-Banco Popolare posts net loss on big loan writedowns

* Q1 net loss 19 mln euros vs year-ago 91.9 mln profit

* Writedowns on bad loans up 43 pct at 328 mln (Adds details, CEO quote on bad loans)

By Silvia Aloisi

MILAN, May 13 (Reuters) - Banco Popolare, Italy’s fourth-biggest lender by branches, slumped to a net loss in the first quarter due to a jump in the amount of money it set aside to cover bad loans, it said on Tuesday.

The bank’s net loss of 19 million euros compared with a profit of 91.9 million a year ago, after net writedowns on loans totaled 328 million, up 43 percent from the same period last year.

The surge in loan-loss charges was in contrast to bigger rival UniCredit, which on Monday said its loan writedowns in the first quarter had fallen by 28.5 percent after a massive clean-up of its balance sheet in 2013.

Banco Popolare also said net impaired loans rose 3.1 percent to 14.4 billion euros from 14 billion at the end of December, highlighting the tepid nature of Italy’s economic recovery.

In a conference call, Chief Executive Pier Francesco Saviotti acknowledged bad debts were a problem for the lender, one of 15 Italian banks under scrutiny in a Europe-wide review of assets, but said 85 percent of those loans were guaranteed by collateral such as buildings or land.

“We have no intention of selling off (bad loan portfolios),” he said.

Christian Carrese, a banking analyst with Intermonte Securities, noted on the call that loan writedowns for the bank had totaled around 1.3 billion euros in the past two quarters - almost the equivalent of a 1.5 billion euro capital increase the bank has just successfully completed.

Carrese said the ratio of bad loans as a percentage of total loans was around 17 percent, one of the highest among Italian banks, and said that despite the loan charges, coverage ratios had not improved.

Giving an update on the planned sale of the lender’s “bad bank” unit, Saviotti said four potential buyers had asked for more time to carry out due diligence and he expected to have information for the market in the first 10 days of June.

The bank is selling a majority stake in Release, which owns and manages soured loans and real estate assets with a total gross value of 3.2 billion euros.

On a more positive note, the lender said its Common Equity Tier 1 ratio - a measure of financial strength - stood at 11.2 percent, including the 1.5 billion euro rights issue, well above the minimum threshold set by the European Central Bank. (Editing by Lisa Jucca and David Holmes)

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