Mediobanca Cuts Dividend After Quarterly Loss on Writedowns

Mediobanca SpA, Italy’s biggest publicly traded investment bank, cut its dividend 71 percent after reporting a quarterly loss on writedowns of equity holdings and securities. The stock fell the most in a month.

The bank had a net loss of 24 million euros ($31 million) in the fiscal fourth quarter ended June 30, compared with a loss of 50.3 million euros a year earlier, the Milan-based company said in a statement today. That’s wider than the average 680,000-euro loss estimated by five analysts surveyed by Bloomberg. The bank cut its dividend to 5 cents a share from 17 cents a year earlier, and compares with a Bloomberg projection of 10 cents.

Chief Executive Officer Alberto Nagel is cutting costs and diversifying business as impairments on equity stakes and loans hurt profit. The lender may reduce its holdings, including its stake in Assicurazioni Generali SpA, Italy’s biggest insurer, newspaper Il Messaggero reported Aug. 30.

The lower dividend “coupled with worse-than-expected results explains the market’s initial bad reaction,” Aldo Comi, an analyst at Credit Agricole Cheuvreux SA in Milan, wrote in a note. It’s underperform rating remains unchanged, he said.

Extraordinary Losses

Mediobanca fell as much as 4.6 percent in Milan trading after the results, reversing earlier gains of as much as 3.9 percent. Shares closed down 15 cents to 4.08 euros, giving the bank a market value of 3.5 billion euros.

The bank reduced its “risk profile” in the fiscal year as net income declined to 80.9 million euros from 368.6 million euros in the previous year, Mediobanca said. “Exposure to equity was reduced by 2 billion euros, as the government bond portfolio increased with shorter duration,” it said.

The lender posted a 91 million-euro gain from the sale of its 8.5 percent stake in Autostrade Sud America, a toll-road company in Chile.

“We should further decrease our equity exposure, which is too high,” Nagel said during a conference call today. “We will come up with a proposal in months to come when the situation in the euro area is more stable and Basel III rules are approved.”

Extraordinary losses in the quarter included 23 million euros of writedowns for the bank’s stake in publisher RCS Mediagroup SpA and 133 million euros related to UniCredit SpA’s convertible and subordinated hybrid equity-linked securities known as CASHES.

Mediobanca’s loan-loss provisions increased to 141.5 million euros in the quarter from 28.2 million euros a year ago. Total revenue rose 6 percent to 452.2 million euros in the quarter, while operating costs declined 8 percent to about 194 million euros.

The lender’s core Tier 1 capital ratio, a measure of financial strength, rose to 11.5 percent as of June 30 from 11.1 percent at the end of March, confirming Mediobanca as one of the best-capitalized lenders in the country.

Mediobanca decreased its sovereign debt holdings, mainly Italian securities, to 9.2 billion euros at the end of June from 10.3 billion euros in March.

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