UniCredit Profit Will Be Hurt by Eastern Europe, Barclays Says

UniCredit SpA (UCG)’s plans to increase profit will be hit by the economic slowdown in central and eastern Europe because the region contributes more than half of pretax profits, according to Barclays Plc. (BARC)

“We see slowing economic growth in the region combined with interest rate movements as headwinds to the net interest margin, volume growth and credit quality,” Antonio Rizzo and Rohith Chandra-Rajan, analysts at Barclays in London, wrote in an e-mailed report today. They lowered their earnings estimates for the bank by 8 percent this year and 4 percent in 2014.

UniCredit is reviewing strategies in central and eastern Europe to strengthen its finances as Italy’s longest recession is hurting earnings in its main market. Chief Executive Officer Federico Ghizzoni said in March that the bank will reduce its financial projections because of the recession in Italy and the rest of Europe.

Barclays expects UniCredit to report weaker net interest income this year, a third of which is generated in emerging market economies in Europe. UniCredit’s unit in Turkey will be affected by higher funding costs in the period, while the Polish division will probably see deposit-led margin contraction and limited volume growth, the analysts said.

UniCredit, which posted net income of 449 million euros ($592 million) in the first quarter, will report second-quarter earnings on Aug. 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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