MILAN (AP) ― Italian bank UniCredit SpA on Friday said second-quarter profits dropped 67 percent as it reinforced its capital buffers by nearly 2 billion euros.
The net profit of 169 million euros ($207 million) compared with 511 million euros in the same period of 2011 and was below analyst forecasts for 269 million euros, according to a survey by Factset. The earnings were net of 477 million euros spent to buy back bonds in the first quarter.
UniCredit shares nevertheless rose 7.5 percent to 2.76 euros as the wider Milan stock index vaulted 6 percent higher.
The bank, Italy’s largest by assets, raised provisions for bad loans by 60 percent to 1.9 billion euros “reflecting the deteriorating credit environment that unfortunately we see in Italy,” CEO Federico Ghizzoni told analaysts.
Tourists stand outside a UniCredit SpA branch in Rome. (Bloomberg)
The bank’s liquidity buffer stood at 116 billion euros, which UniCredit said would cover all wholesale funding maturing in the next 12 months.
The bank held 90 billion euros in sovereign debt at the end of the period, 41 billion euros from the Italian Treasury. Ghizzoni said the bank had decided to limit exposure to Italian debt with high yields.
Revenues in the quarter were down 3.2 percent to 6.2 billion euros, with net interest income dropping 5.4 percent to 3.69 billion euros.
The bank’s Core Tier 1 ratio, a key measure of a bank’s health, stands at 10.4 percent, above European regulatory requirements.
Ghizzoni said the higher capital ratios, liquidity position and access to capital markets put the bank in a solid position “to face any potential future challenge arising from this very difficult, unprecedented, global economic turmoil.”
