UBI Second-Quarter Profit Drops on Provisions, Lower Revenue

Unione di Banche Italiane SCPA, Italy’s fourth-largest bank by assets, said second-quarter profit halved after interest income declined and it set aside more money for bad loans.

Net income dropped to 26.5 million euros ($35.4 million) from 54.2 million euros a year earlier, the Bergamo, Italy-based bank said in a statement today. Earnings beat the 17.3 million-euro average estimate of six analysts surveyed by Bloomberg.

Chief Executive Officer Victor Massiah is cutting staff and selling assets to strengthen finances and boost profitability as Italy’s longest recession in 20 years hurts lending and asset quality and low interest rates squeeze margins.

“A further slight improvement is expected in net interest income in coming quarters,” the company said in the statement, adding that it expects lower loan-loss provisions and operating expenses this year.

Revenue fell 1 percent to 852.4 million euros as interest income dropped 12 percent to 428.2 million euros. Trading income rose to 67.4 million euros from 11.4 million euros a year earlier.

UBI’s core Tier 1 capital ratio, a measure of financial strength, rose to 12.1 percent at the end of June from 11.5 percent on March 31, it said. The lender boosted its capital ratios last month after the Bank of Italy approved an internal model for calculating credit risk.

Loan-loss provisions increased to 226.2 million euros in the quarter from 203.2 million euros.

To contact the reporter on this story: Sonia Sirletti in Milan at ssirletti@bloomberg.net

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

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