(Adds detail, conference call)
By Andrea Mandala
MILAN, Feb 10 (Reuters) - UBI Banca said on Monday it would step up efforts to reduce its bad loans with an 800 million euro ($873 million) sale this year after reporting fourth-quarter earnings well above market expectations.
Italy’s fifth-biggest bank posted a 72% drop in fourth-quarter net profit to 60 million euros due to the cost of laying off staff but it was significantly above a consensus forecast of 24 million and the lender forecast higher earnings this year.
UBI said the new sale of bad debts due to be completed this year would reduce its gross ratio of bad loans to outstanding loans to 6.9% in 2020 from 7.8% at the end of December.
Italian banks have made massive progress in shedding bad debts since they became the focus of market concerns following a deep recession.
UBI has more than halved its problem loan ratio from a 2015 peak of 15.5% through sales and recoveries. The bank is due to unveil a new three-year business plan on Feb 17.
UBI has been planning to reorganise its insurance operations, valued at 1 billion euros, under the three-year strategy and was looking for a new partner.
But it is now likely to extend existing partnerships with Cattolica and Aviva for a limited time - delaying a bigger overhaul in light of possible consolidation in the sector, sources familiar with the matter have said.
UBI CEO Victor Massiah told analysts that no decision had been taken yet on its “bancassurance” business and that the bank until the end of June to make decisions.
He said the new plan would include the “most conservative option” on bancassurance, a comment which analysts interpreted as indicating the current agreements would probably be extended.
UBI’s fourth-quarter net interest income - a measure of how much money a bank makes from its core lending business - fell 6.6%, hit by the current low interest rate environment.
But revenue got a boost from a strong growth in fees, which were up 14.3% from the same period a year earlier.
“It has been the best year ever for fees”, Massiah said. ($1 = 0.9163 euros) (Reporting by Andrea Mandalà; Editing by Valentina Za and David Clarke)