UniCredit returns to full year profit, proposes to resume dividend payment

MILAN – Italian bank UniCredit on Friday reported it returned to profit last year thanks to ambitious cost-cutting measures and said it plans to resume a dividend payment.

Italy’s largest bank by assets posted a net profit of €865 million ($1.1 billion), compared with a loss of €9.2 billion last year that was due largely to the sovereign debt crisis and weak economic activity.

Revenues grew 1 per cent to €25 billion. Operating costs dropped 3 per cent to €15 billion as the bank cut some 4,000 positions to 156,000 and reduced branches by 174, over 100 of those in Italy.

CEO Federico Ghizzoni said that 2012 “was a very difficult year” and that the bank believes the first half of 2013 will be similar, “with a still difficult macro-economic environment, especially in Italy.”

However, he was confident that the bank would be able to take advantage of any improvement in the economy in the second half of 2013. He cited the cost-cutting measures and streamlined business organization that have helped improve liquidity and capital positions. Italy will close another 350 branches by 2015.

The bank’s shares were trading down 0.8 per cent at €3.776 in Milan, in line with the wider market.

UniCredit said it was in the process of selling a 99.75 per cent stake in its Kazakhstan operation, ATF bank, to KazNitrogenGaz, a privately held company. The operation is subject to regulatory approval and should be completed later this month. The unit in Kazakhstan had led to losses in the third quarter of last year.

The bank’s Core Tier 1 ratio — a measure of a lender’s financial health — rose to 10.84 per cent at the end of the year. Ghizzoni said that figure does not reflect the sale of the Kazakh unit or of a stake in Pekao in January, which will bring it to 11.4 per cent.

In the fourth quarter, the bank lost €553 million, compared with a €114 million profit in the same period of 2011. The loss was due primarily to restructuring costs in Germany and Italy and the impact of the Kazakh disposal, which was reclassified as an asset held for sale, Ghizzoni said.

Loan loss provisions were €4.6 billion in the quarter, three times the same period a year earlier due to the ongoing economic crisis, particularly in Italy.

The bank said Friday it would propose a dividend of €0.09 for 2012 after foregoing one the year before.