UniCredit ups payout as its results cheer

City A.M. Reporter
UNICREDIT, Italy’s largest bank, returned to a cash dividend yesterday as it battles to win round politically-connected shareholders who have been fighting a revamp plan by the lender’s boss.

Shares in the eurozone’s third-largest lender by market value jumped to a seven-week high in early trade in response to the higher than expected payout on yearly earnings, which also topped average analyst expectations.

UniCredit paid its dividend in shares last year but is now proposing €0.03 a share in cash, above forecasts, for a total of nearly €600m (£538m). Bank of Italy governor Mario Draghi had urged banks last week to direct profits to strengthening capital instead of handing out cash to shareholders.

The results came two days after reports, dismissed yesterday by chief executive Alessandro Profumo, that he had threatened to resign in the face of resistance from cash-hungry shareholder foundations over his plan to streamline domestic operations.

UniCredit’s fourth-quarter net profit fell 27 per cent to €371m from €505m a year earlier. The group said net interest income during the quarter fell 22 per cent to €4.11bn, which was more than offset by a sharp rise in non-interest income. The group said writedowns of loans and other provisions climbed 56 per cent from a year earlier to €2.07bn, but were slightly below the third-quarter level.

Profumo, architect of UniCredit’s rise from domestic lender to major European player thanks to the acquisition of Germany’s HVB in 2005, said he was confident of reaching agreement with shareholders over a reorganisation that analysts say could save up to €800m a year.

He said relationships with shareholders were good but more time was needed to finesse the plan: “We want to go into a deeper analysis on how the new organisation should work.”

The plan would eliminate boards at UniCredit units, limiting the local influence of politically-connected shareholder foundations that overall hold about 12 per cent of the bank.