Unicredit hit but still bullish on East Europe

ITALY&rsquo;S UniCredit, the biggest lender in central and eastern Europe, is more upbeat about the recession-hit region as asset deterioration there slows, the bank said yesterday.<br /><br />Its optimism came in spite of a dramatic drop in first quarter pre-tax profit which fell 58 per cent to &euro;447m on lower fees.<br /><br />And sales were also down 21 per cent across UniCredit&rsquo;s eastern franchise from Russia to Turkey as interest income fell sharply in Poland. A pricing war to attract deposits has driven down interest margins at most banks in Poland.<br /><br />Asset quality is still worsening in the region, but more slowly than at the start of the year, chief executive Alessandro Profumo said.<br /><br />&ldquo;What we have seen from the asset quality is that the pace of deterioration is slowing. We are still cautious but we are less negative than we were,&rdquo; he said yesterday.<br /><br />Provisions for bad loans in the region tripled, driven by hikes in Russia, Ukraine and Kazakhstan and by two large writedowns in the Czech Republic, mirroring similar results at banks exposed to the region. Analysts expect those provisions to rise further. UniCredit is Europe&rsquo;s fourth biggest bank by market value.