March 28, 2014 / 7:25 AM / in 4 years

UPDATE 2-Intesa posts $6 bln loss in balance sheet clean-up

* Bank posts 4.55 bln euro loss in 2013

* Joins rival UniCredit in cleaning up balance sheet ahead of EU review

* Targets strong profit growth, generous dividends in 2014-2017 plan (Adds share price reaction, comment by analysts, business plan details)

By Silvia Aloisi

MILAN, March 28 (Reuters) - Intesa Sanpaolo, Italy’s biggest retail bank, posted a surprise net loss of 4.55 billion euros ($6.25 billion) on Friday due to heavy writedowns on bad loans and impairments on some units, but said it was now on course to rebuild profits.

The full-year loss would have been bigger had the bank not booked a pre-tax capital gain of 2.56 billion euros from the revaluation of the Bank of Italy’s share capital, which is owned by the country’s banks.

Analysts had on average expected Intesa to make a net profit of 1.09 billion euros, according to Thomson Reuters data. Instead the bank chose to book in a wholesale clean-up of its balance sheet ahead of the health checks which are due to be conducted on the euro zone’s banks before the European Central Bank takes over as their regulator at the end of the year.

It also unveiled a new business plan which it expects to produce strong profit growth and dividend payouts over the next four years thanks to cost cutting, a sharper focus on its private banking and asset management units and the sale of non-core assets such as stakes in other companies.

Among the cost cutting moves the bank said it aims to close some 800 branches to reduce its retail network to 3,300 in 2017 and redeploy an “excess capacity” of 4,500 staff. A spokesman said no job cuts were planned.

Intesa’s share price was up 4.5 percent at 2.43 euros by 1012 GMT, taking the gains this year to 36 percent compared with 2.8 percent rise in the Stoxx Europe 600 banking sector index .

“The main point is the release of the business plan with very interesting targets and above all a very generous dividend policy,” analysts at Natixis said in a note.

Earlier this month UniCredit, the country’s biggest bank by assets, similarly posted a surprise net loss, of 14 billion euros, due to a sharp increase in provisions for bad loans and writing down the value of intangible assets.

Like UniCredit, Intesa also said on Friday it had set up a separate ‘bad bank’ unit, in Intesa’s case to manage 46 billion euros of problematic loans which it aims to halve by 2017.

In its provisioning it has set aside 7.1 billion euros to cover for bad loans, which have become the number one problem for Italian lenders due to the deep recession in the euro zone’s third largest economy.

On top of this, the bank booked 6.8 billion euros of pre-tax impairments on the goodwill value in its Italian divisions.

Despite the big loss, Intesa managed to further boost its core capital. It said its Common Equity Tier 1 solvency ratio stood at 12.3 percent of risk-adjusted assets, one of the highest for retail banks in Europe.

The bank forecast a net profit of 4.5 billion euros in 2017, with a return on equity of 10 percent, and said it would pay 10 billion euros in dividends over the four years of the business plan.

The bank also said it would sell all its non-core equity investments - worth around 1.9 billion euros - by 2017. ($1=0.7278 euros) (Editing by Lisa Jucca and Greg Mahlich)

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