UniCredit 4Q Beat Expectations Despite Swing to Loss on One-Offs
February 06 2020 - 8:52AM
Dow Jones News
By Giovanni Legorano and Pietro Lombardi
UniCredit SpA (UCG.MI), Italy's largest bank, posted
better-than-expected results for the fourth quarter of 2019,
although it swung to a net loss for the period largely due to
one-off costs and provisions.
The bank also said it may return a bigger share of profits to
shareholders in the coming years.
Shares jumped in reaction to the better results and higher
dividend prospects. At midmorning they were trading around 5%
higher.
"We see only positive news from this set of results: better than
expected fourth-quarter results, stronger capital base, and
possible upwards revision of the dividend policy," Banca IMI
analyst Manuela Meroni said.
The results served as a capstone to a strategic plan the bank
launched to tackle a number of issues, including a large pile of
bad loans. Under the strategy, it cut costs and sold soured loans
worth billions of euros.
The deep overhaul included the sale of number of assets
including Polish lender Bank Pekao SA and asset management firm
Pioneer Investments. More recently, it sold its stakes in online
lender FinecoBank SpA and in Mediobanca SpA.
Earlier on Thursday it completed the sale of a 12% stake in Yapi
ve Kredi Bankasi AS (YKBNK.IS) via an accelerated bookbuilding. It
now owns 20% of the Turkish lender and will book a loss on the sale
of 820 million euros ($906.1 million) in the first quarter of this
year.
In December the lender unveiled a new four-year plan under which
it pledged share buybacks and dividend increases, as well as job
and cost cuts.
The margins it makes on lending have also been affected by lower
lending volumes due to sluggish economic growth in key markets such
as Italy.
The bank compensated the declining revenue on loans with higher
fees and commissions and lower costs.
The loss for the fourth quarter was EUR835 million, better than
the EUR1.10 billion loss analysts had forecast, according to a
consensus provided by the bank. This compares with a profit of
EUR1.99 billion a year earlier when an extraordinary tax effect
boosted results.
On an underlying basis, net profit rose almost 69%.
The payout ratio could increase to 50% of underlying earnings
starting this year and extraordinary capital distribution in 2021
or 2022 or both years will also be considered. The plan presented
in December guided for capital distribution of 40% through
2022.
Revenue rose 3.4% to EUR4.85 billion, boosted by fees and
trading income, also topping expectations of EUR4.66 billion.
Fees rose 5.1% while trading income more than doubled. This
offset a 7.3% fall in net interest income--the difference between
what lenders earn from loans and pay for deposits, and which is a
key profit driver for retail banks.
The results for the quarter were hit by a number of one-offs,
including restructuring costs in Germany and Austria, costs related
to the sale of a stake in Turkish bank Yapi Kredi, and provisions
for bad loans.
Write to Giovanni Legorano at Giovanni.Legorano@wsj.com and
Pietro Lombardi at pietro.lombardi@dowjones.com
(END) Dow Jones Newswires
February 06, 2020 08:37 ET (13:37 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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