UniCredit’s capital base gives it a boost
ITALY’S largest bank yesterday reported that it is now ahead of European capital requirements in its first results since its €7.5bn (£6bn) capital increase earlier this year.
The lender also reported a 12.8 per cent rise in net profits on last year, bringing in €914m – but nearly half of the gain was due to the bank buying back its own bonds at a lower price than when it sold the debt.
Stripping out the effect of the debt buyback, the bank’s profits actually fell 45 per cent, a decline it blamed on “the continuing deterioration across Europe of the macro-economic environment”.
Its capital base is now well ahead of harsh new rules being phased in this year, however. It reported a core tier one capital ratio of nine per cent under Basel III definitions at the end of March, nine months before Basel III will begin to be phased in at the start of next year.
Although the bank shrank its lending by 0.9 per cent to help it get there, that was significantly less than many of its deleveraging European rivals.
Instead, it raised its capital ratio predominantly through a controversial rights issue at the start of this year that at some points saw its value more than halve before recovering much of the loss.
The lender also said that it has raised 44 per cent of the debt it needs to sell this year, in advance of a possible freeze in interbank markets as the effect of the European Central Bank’s huge cash injection wears off.
It has also now absorbed €77.6m of losses on Greek bond holdings since haircuts were imposed last year.
And the bank said that it has cut costs by 0.5 per cent and laid off 1,000 of the more than 6,000 staff it plans to shed as part of a strategic overhaul. But it admitted that it failed to tell investors the true cost of the lay-offs and restated its fourth-quarter results for last year to include a €63m charge for severance pay.