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UniCredit First-Quarter Profit Beats Estimate as Provisions Fall

UniCredit SpA (UCG), Italy’s biggest bank, said first-quarter profit fell less than expected as provisions for bad loans declined and income from trading beat estimates. The shares gained.

Net income dropped to 449 million euros ($583 million) from 914 million euros a year earlier, the Milan-based bank said in a statement today. That beat the 126.2 million-euro average estimate of six analysts surveyed by Bloomberg. Profit last year was boosted by a one-time gain of 477 million euros from buying back bonds.

Chief Executive Officer Federico Ghizzoni is lowering costs, reorganizing UniCredit’s Italian network and reviewing strategies in central and eastern Europe to strengthen finances. The company, which completed the sale of its unprofitable Kazakh unit ATF Bank for about $550 million last week, said in March that it will reduce its financial projections because of the recession in Europe.

“We see short-term potential in UniCredit,” Paola Sabbione, an analyst at Deutsche Bank AG in Milan, said in an e-mailed report before the earnings were published. “Despite its geographical diversification, UniCredit’s performance is more linked to Italy than peers’, due to its need to restructure the Italian operations.”

The bank’s shares rose as much as 2.9 percent to 4.18 euros. They climbed 2.7 percent to 4.17 euros at 2:08 p.m. in Milan, valuing the company at 372 billion euros. The 40-member Bloomberg Europe Banks & Financial Services Index rose 0.2 percent.

Lower Provisions

Loan-loss provisions decreased to 1.23 billion euros in the three months ended March 31 from 1.36 billion euros a year ago. The bank’s core Tier 1 capital ratio, a key gauge of financial strength, rose to 11.03 percent on March 31 from 10.84 percent at the end of December and 10.3 percent a year earlier.

Revenue fell 15 percent to 6.08 billion euros in the quarter. Income from trading dropped 49 percent to 650 million euros from a year earlier, when the bank realized the net gain from buying back 1.9 billion euros of Tier 1 and Tier 2 bonds. Analysts expected income from trading to be 477 million euros, according to a company survey published on May 6.

To contact the reporters on this story: Sonia Sirletti in Milan at ssirletti@bloomberg.net; Francesca Cinelli in Milan at fcinelli@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

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