UniCredit net profits drop 58%, but beat analysts’ forecasts

UniCredit, Italy’s largest
bank by market capitalisation, posted a net profit of €1.7bn
($2.3bn) for fiscal 2009, a slump of 58% on the year before, but
ahead of analysts’ forecasts.

The group, which has operations in 22 countries
across Europe, also recorded a dip in retail profits, with pre-tax
profit falling 68.8% to €945m in 2009 compared to the year before
(€3.02bn).

The chief executive of the Milan-based bank,
Alessandro Profumo, said a stronger capital 1 ratio and growing
customer demand would position the bank “in a very strong position
to capture market share” as soon as lending activity picks
up. 

Retail loans fell 6.8% from €180.2bn for 2008
to €167.9bn, but Profumo remained upbeat and said this was still a
“significant number” when compared to other European banks.

Retail deposits rose 9.3% to €235.8bn at the
end of 2009.  

Core Tier 1 ratio was strengthened from 7.62%
at the end of 2009 to 8.47% at the end of February following a €4bn
capital increase, after the bank turned down participation in a
government-sponsored capital raising initiative.

The bank also said it expected 2010 to be more
stable and was looking at a possible purchase of
Swedish-headquartered SEB’s German retail network consisting of 170
branches.

A combination of high revenues and
significantly lower costs meant the bank was able to improve its
cost-income ratio by 6.5%age points, to 55.6% at the end of
2009. 

The group’s fourth quarter results beat
expectations with a net profit of €371m, versus €394m in the third
quarter. 

Investment bank Keefe, Bruyette and Woods said
in a note that the results were boosted by higher-quality net
interest income and fees. Although the bank’s exposure to Central
and Eastern Europe, seen as a weakness during the crisis, also hit
the bank with revenue in the region slipping to €908m from €2.02bn
in 2008, it predicts growth in the region in 2010.

The Italian retail division contributed 26% to
total group revenues, and posted pre-tax profits of €848m, down
68.2% year-on-year.

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