Italy’s largest bank Unicredit says 4th quarter earns fell 27 percent

Unicredit Q4 profit slides 27 percent

MILAN — Unicredit SpA, Italy’s largest bank, on Wednesday reported a 27 percent drop in fourth-quarter net profit due to a decline in interest income and an increase in provisions to cover bad loans.

The net profit of euro371 million ($509 million) was down from euro505 million a year earlier, but still better than analyst expectations.

The bank generated full-year 2009 profit of euro1.7 billion, down 58 percent from the year earlier’s euro4 billion profit. The quarterly trend showed a gradual drop in profit throughout the year.

The bank proposed a dividend of 3 cents a share, after canceling payments in 2008.

Unicredit shares jumped 5 percent to euro2.14 in opening trading on the Milan Stock Exchange.

The bank increased its loan loss provisions in the fourth quarter to euro2.1 billion, up 56 percent from euro1.3 billion in the same quarter a year earlier. Income from interest was down 22 percent to euro4.1 billion.

The bank said it had shored up its Core Tier 1 ratio, a key sign of a bank’s health, to 7.62 percent thanks to a capital increase completed in February.

The bank on Wednesday also said it has sold a 2.84 percent stake in the insurer Assicurazioni Generali SpA for euro796 million, or euro18 a share, booking a loss of euro67 million. The divestiture was sought by antitrust regulators following Unicredit’s 2007 takeover of Capitalia.

Unicredit’s board on Tuesday delayed until April a vote on a reorganization plan, with CEO Alessandro Profumo reportedly threatening to step down if the plan were not approved. It would join five banks controlled by Unicredit: Banca di Roma, Unicredit Banca, Unicredit Private Banking, Unicredit Corporate Banking and Banco did Sicilia.

Profumo said he was “confident” that the plan would go through.

“For me and my team this project is strategic,” Profumo was quoted as saying Wednesday by the business daily il Sole 24 Ore. “We are talking about a cultural change at the bank with the objective of making it closer to the customers and improving the quality of services to those we make loans.”

The newspaper said that one sticking point is a shareholder proposal to appoint a general manager to oversee the bank management, including the CEO.

Since his appointment in 1997, Profumo has led the bank’s expansion from an Italian entity to an international player with over 10,000 branches in 22 countries, reporting assets of euro929 million at the end of the 2009.