Unicredit posts biggest loss in over three years

MILAN: Unicredit SPA reported its biggest loss in more than three years as provisions related to the coronavirus added to the pain of one-off costs for job cuts and the writedown of its Turkish unit.

€2.71bil

The net loss totalled (Us$2.94bil),

€1.26bil, as loan-loss provisions climbed to the Milan-based bank said yesterday. About €900mil

was set aside specifically to deal with the impact of the virus. The lender’s main business was resilient in the first quarter, with income from fees and lending beating estimates.

Italy’s economy went into Europe’s longest lockdown a few months after chief executive officer Jean Pierre Mustier set out a new strategy to improve profitability and increase shareholder payouts. Unicredit expects to review its plan by early next year and the CEO said yesterday that the bank isn’t setting new targets for 2020 as uncertainty remains too high.

Unicredit can achieve 75% to 80% of its net income targets for next year if the European Union economy rebounds by 10% as many economists expect, Mustier said on a conference call. The bank will decide in the fourth quarter whether to distribute dividends on 2019 earnings.

Unicredit fell as much as 2% in Milan trading

€6.58 and was down 1.1% at as of 9:10 am. That extends the drop for this year to about 50% compared with 40% decline by the STOXX Europe 600 Banks Index.

The CEO, who announced extra provisions to deal with the virus last month, set aside more money than many of his European competitors including Italian rival Intesa Sanpaolo SPA. The bank booked costs as it started the process of eliminating 5,200 existing jobs in Italy through 2023 and took a charge for the sale of a stake in Turkish business Yapi ve Kredi Bankasi AS.

“Core revenues were better, capital was affected by sizeable non-operating items, and it is broadly in line with adjusted consensus,” Citigroup analyst Azzurra Guelfi wrote in a note. The bank “has provided significant disclosure for cost of risk outlook, to reassure market on the impact of macro deterioration.”

Unicredit was the first big European bank to try to quantify the impact of the coronavirus, setting provisions and predicting a 13% contraction in the eurozone’s economy for the year. Banks across Europe have added billions of euros in provisions and tossed out their earlier forecasts for earnings this year, with many saying they’re unable to provide new estimates. —