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UniCredit’s German HVB Unit 2011 Net Falls 45% on Trading

HVB Group (HVM), UniCredit SpA (UCG)’s German banking unit, said profit declined 45 percent last year because of a lower trading result.

Net income decreased to 931 million euros ($1.24 billion) from 1.7 billion euros a year earlier, the Munich-based lender said in an e-mailed statement today. The trading result fell 75 percent to 190 million euros while loan-loss provisions were reduced to 266 million euros from 632 million euros.

HVB, led by Chief Executive Officer Theodor Weimer, announced plans last year to eliminate more jobs to reduce administrative costs. Milan-based UniCredit, Italy’s biggest bank, said yesterday that fourth-quarter profit dropped 65 percent, a smaller decline than analysts estimated, as it earned less from lending and wrote down Greek bonds.

The decline in the trading result reflects “the effects of the high market volatility in the third and fourth quarters and the resulting restraint on the part of customers in trading activities,” HVB said in the statement.

The lender’s cost-income ratio worsened to 62 percent last year from 52 percent in 2010, a trend Weimer said breaches a desired measure below 60 percent. Administrative costs increased by 5.2 percent to 3.6 billion euros, “partly on account of the bank levies charged in Austria and the U.K.,” HVB said.

Bank Levy

HVB paid a 101 million-euro bank levy in Germany, 48 million euros in Austria and 19 million euros in the U.K., Weimer said. “That makes us the second-biggest payer of the bank levy in Germany,” he added.

The core Tier 1 capital ratio in accordance with Basel II rules declined to 15.6 percent from 15.9 percent in the course of 2011.

UniCredit CEO Federico Ghizzoni is cutting costs, reducing staff and reviewing the bank’s strategy in central and eastern Europe as part of a plan approved in November to boost profitability. The lender raised 7.5 billion euros in a rights offer in January to meet capital targets set by the European Banking Authority.

To contact the reporter on this story: Oliver Suess in Munich Bureau at osuess@bloomberg.net

To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net; Edward Evans at eevans3@bloomberg.net

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