Mediobanca's Profit Rises; Bad Loan Provisions Fall

MILAN—Mediobanca SpA said net profit in its fiscal fourth quarter rose by nearly a third, helped by higher trading income and lower provisions for bad loans.

The bank said Friday it has proposed a dividend payment of €0.27 a share, up 8% from the amount it paid for the previous fiscal year.

Net profit for the quarter totaled €162 million ($180 million), up from €124 million in the same period a year earlier. Revenue was little changed at €528 million. Net profit for the fiscal year increased 3% to €605 million.

In June, the bank completed a strategic plan launched three years ago aimed at boosting its profitability by selling its vast portfolio of stakes in pre-eminent Italian companies, and investing the proceeds in its corporate and investment banking divisions and retail and wealth-management units.

To this end, the bank agreed last year to buy a 51% stake in London-based asset manager Cairn Capital from Royal Bank of Scotland and other institutional investors, and it acquired Barclays PLC's Italian retail business.

It has sold stakes in companies worth €1.5 billion, generating €500 million in gains. The bank aims to launch a new plan in the fall of this year, likely in November.

"We'll continue with our [investment] disposal policy in the next years," said Chief Executive Alberto Nagel.

The results of the bank come at a time of heightened concerns about the solidity of the Italian banking system and market turbulence.

Investors have been dumping Italian banks' shares since the beginning of the year, fretting about their high levels of bad loans and low profitability. The country's lenders have lost more than half of their market value since the beginning of the year. Mediobanca shares have fallen about 36%.

This week, tensions on local banks intensified after a health check of banks carried out by the European Banking Authority showed that Banca Monte dei Paschi di Siena SpA—Italy's third largest bank by assets—was the least resilient to economic downturns. At the same time, the country's largest bank UniCredit SpA fared the worst among banks considered systemically important.

On Friday, Monte dei Paschi unveiled a plan aimed at solving once and for all its bad loan problems, which have dogged the lender for years. It said it would sell €27.7 billion in gross bad loans, or its entire portfolio of most toxic problematic loans, to a government orchestrated fund called Atlante and other investors. In parallel, it plans to launch a sale of fresh shares worth up to €5 billion.

Mediobanca will be a global coordinator in Monte dei Paschi's share sale. Mr. Nagel said Mediobanca is also willing to invest together with other players in Atlante, which has roughly just €1.7 billion of firepower at the moment, after rescuing two small Italian banks.

"The [Monte dei Paschi] transaction is courageous," said Mr. Nagel. "It is the first time a large bank tackles radically the problem of nonperforming loans."

He added that Italian banks are trading at very low prices and that banks undergoing a restructuring, like Monte dei Paschi, can be an interesting investment.

The bank said net interest income for its fourth fiscal quarter stood at €301 million, from €303 million in the same period a year earlier. Its trading income for the period grew 40% to €36 million, while provisions for losses on bad loans dropped 18% to €100 million.

Mr. Nagel said he is positive about the outlook for the rest of the year.

"Despite market turbulence there are opportunities," said Mr. Nagel. "We see it from the good pipeline we have in our advisory and equity capital markets businesses."

Write to Giovanni Legorano at [e-mail]

(END) Dow Jones Newswires

August 05, 2016 04:35 ET (08:35 GMT)

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