UniCredit reports halved profit on bad loan woes

UniCredit bank, heavily involved in lending in eastern Europe, reported yesterday a halving of net profit for 2009, because of loan payment problems by customers hit by the crisis.

The halving of profits went hand in hand with a doubling of charges for under-performing and devalued loans, but underlying operating profit jumped by 20.3 per cent.

UniCredit, the leading Italian bank with extensive activities in eastern and central Europe, reported a 57.6-per cent drop in net profit, but even so outperformed analysts' expectations. The net outcome was €1.702 billion (Dh8.44bn, $2.3bn). In the fourth quarter, the net figure on a 12-month comparison fell by 26.5 per cent to €371 million.

But that was far better than expected by analysts polled by Dow Jones Newswires who had expected €50m.

The bank booked a total of €8.313bn in provisions and for the reduced value of its loan book for the whole of the year. This was more than double the figure for 2008 of €3.7bn.

However, operating profit rose by 20.3 per cent to €12.248bn.

And net banking income, the difference between the cost of taking money in from depositors and the price of lending it out and a key measure of retail banking performance, rose by 2.6 per cent to €27.572bn.

The bank said that it would resume paying a cash dividend for last year, of €0.03 per share. For 2008, it had paid dividend in the form of shares in order to conserve cash.

At the beginning of last year the bank, which had decided not to accept help from the government, raised capital of €4.0bn to strengthen shareholders' funds. At the end of 2009, the so-called Tier One ratio shareholders' funds to risk rose to 8.47 per cent from 6.58 per cent.

The bank announced in a separate statement yesterday the sale of 2.84 per cent of Italian insurance group Generali in line with requirements laid down by competition authorities.


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