UniCredit hit by US inquiry and lira crisis
PROFITS at troubled Italian bank UniCredit have nosedived 99pc on last year after it put aside cash to cover a settlement for alleged US sanctions violations and took an €846m (£736m) hit on its Turkish arm.
The Milan-based bank, which has been the subject of a US investigation into a potential breach of sanctions against Iran since 2012, said it had put aside €741m “mainly due to increased provisions for US sanctions”, which it said was nearing settlement. The bank insisted the outcome of the investigation, expected in the first quarter of 2019, is unlikely have “any material impact” on its future operations.
Turkey’s financial crisis also knocked the business as it revealed it had taken an impairment of almost €1bn on its stake in Turkish lender Yapi Kredi, of which it owns 41pc, over the third quarter. The falling Turkish lira meant Yapi’s contribution to trading income shrank more than 71pc. The one-off costs meant net profit fell 99pc on last year to €29m for the three months to September. Shares fell by nearly 4pc yesterday.
However, Jean Pierre Mustier, the chief executive, said he was proud of the results given the “increasingly challenging macroeconomic environment”. Stripping out the one-offs, adjusted net profit was up almost 5pc at €875m.
Speculation that UniCredit is in merger talks with French rival Societe Generale heated up following reports talks had begun between the two sides. A combination would create a business with assets of about £2 trillion, pitting it against the likes of HSBC. A UniCredit spokesman declined to comment.
Pressure on European banks has increased since the financial crisis, particularly in investment banking where US rivals have snapped up market share. Regulators are also demanding banks have stronger safeguards against money laundering as they look to crack down on dirty money. The European Commission said yesterday that it needs to close any “weak point in the EU that criminals could exploit”, adding that recent scandals proves member states should “treat this as a matter of urgency”.
The Commission has sent Estonia and Denmark so-called letters of formal notice after claiming the countries have not fully applied EU anti-money-laundering rules. If it remains unsatisfied it could take court action. It has already referred Luxembourg to the Court of Justice for flouting the same directives. Denmark’s Danske Bank was involved in €200bn money laundering scandal, involving its Estonian arm, that lead to the departure of its chief executive this summer.
In a separate announcement, Brussels said Malta must change the way its anti-money-laundering regulator operates following an investigation by Europe’s banking watchdog. The demand came days after Pilatus Bank’s licence was removed following accusations of corrupt payments.