Thursday 9 February 2017 2:31 pm

Italian bank UniCredit just confirmed it is €11.8bn in the red for 2016

UniCredit confirmed today it racked up losses worth billions of euros during a difficult 2016.

The figures

Italy's largest bank reported a net loss of €11.8bn (£10bn) for its 2016 full year, a significant drop from the €1.7bn net profit it reported for 2015. Meanwhile, losses in the fourth quarter plummeted to €13.6bn, down from a profit of €153m the year before.

However, UniCredit is currently undergoing a massive turnaround project and the vast majority of its losses can be attributed to one-off costs. The bank also revealed, without these expenses, it would have turned a profit of €1.3bn for its full year and a loss of just €352m during its fourth quarter.

The lender also revealed a dent in its revenues, reporting €18.8bn for the full year, down 0.3 per cent from €18.9bn, and €4.2bn for its fourth quarter, down 10.6 per cent compared with €4.7bn the year before. 

Meanwhile, the bank's fully loaded common equity tier 1 (CET1) capital ratio stood at 7.5 per cent at the end of 2016.

Shares in the bank are trading up 0.2 per cent at €12.42 at time of writing.

Why it's important

Investors should not be shocked at the losses announced today, as the bank trailed the figure late last month

UniCredit's recent bid to overhaul its business model is by no means a small one. At the start of this week, the bank pressed go on a €13bn rights issue, Italy's biggest ever, which is due to be settled before 10 March. The rights issues should help the bank boost its fully loaded CET1 capital ratio to a much healthier 11.2 per cent. 

The Italian lender also recently got the sign off from unions for 14,000 job cuts, which will take place by 2019. It also closed 273 Western European branches during the course of 2016.

What UniCredit said

"2016 was a pivotal year for UniCredit," said the bank's relatively new chief executive Jean Pierre Mustier. "We took a number of decisive actions regarding legacy and operational issues to ensure the future success of the group… The underlying business held up well in 2016, supported by active cost savings measures and positive inflows, which underlines the strength of the UniCredit brand."

In short

UniCredit's grand turnaround plan certainly comes with a hefty price tag in the short term.