UniCredit Shares Fall After 3Q Miss on Turkish Business Hit -- Update

Adds share price, expectations, CEO comment, revised and confirmed targets, analysts' comments.

 
   By Pietro Lombardi 
 

Shares in UniCredit SpA (UCG.MI) trade lower Thursday after the bank's third-quarter net profit missed expectations as it reported an impairment related to its stake in Turkish bank Yapi Kredi and increased provisions ahead of "the upcoming settlement of alleged U.S. sanctions violations."

Net profit for the period was 29 million euros ($33.2 million), down from EUR2.82 billion a year earlier, when the bank reported a EUR2.1 billion capital gain on the sale of its asset-management unit Pioneer Investments.

The bank reported an EUR846 million impairment in the quarter related to its stake in Yapi Kredi.

Analysts had expected the bank to report a net profit of EUR921 million on revenue of EUR4.78 billion, according to a consensus provided by the company.

On an adjusted basis, which excludes one-offs like the unit sale or the Yapi impairment, net profit for the period rose to EUR875 million, compared with EUR835 million a year ago, the bank said.

At 1120 GMT shares in UniCredit traded 4.5% lower.

The bank's performance showed "mixed numbers" for the third quarter, UBS analysts said. Underlying earnings were strong but "capital depletion will take the market by surprise," they added.

The bank delivered strong third-quarter underlying results "in an increasingly challenging macroeconomic environment," Chief Executive Jean Pierre Mustier said in a statement.

Total revenue increased 2% on year, supported by growing net interest income and fees and commissions, while operating costs fell 7.7%.

"During the quarter we took decisive actions related to nonrecurring events," the CEO said, mentioning the "additional provisions relating to the upcoming settlement of alleged U.S. sanctions violations."

"We are also implementing a number of measures to protect our capital position, including specific asset disposals such as real estate, and around 35% reduction in the sensitivity of our CET1 ratio to BTP spreads," he said.

The Italian bank confirmed its 2019 targets for net profit and Return on Tangible Equity, seen at EUR4.7 billion and above 9% respectively. It also confirmed its 2019 outlook for net interest income and fees. However, it cut the revenue outlook, and now expects 2019 revenue of EUR19.8 billion, from a previous expectations of EUR20.6 billion.

UniCredit is improving its cost-reduction targets for 2018 and 2019, seeing 2019 costs below EUR10.6 billion, from a previous target of EUR10.6 billion.

It also said it expects its 2019 core tier 1 ratio at between 12% and 12.5%, from a previous expectations of above 12.5%.

UniCredit's fully loaded common equity Tier 1 ratio, a key measure of capital strength, fell to 12.11% in September, down from 12.51% in June.

"We are being very conservative on the Turkish side and the trading side," the CEO said in a call with journalists, stressing that the bank confirmed its profitability targets and will compensate with lower costs.

Write to Pietro Lombardi at [e-mail]

(END) Dow Jones Newswires

November 08, 2018 06:38 ET (11:38 GMT)

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