UniCredit hit by US in­quiry and lira cri­sis

The Daily Telegraph - Business - - Business - By Lucy Bur­ton

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.

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