UniCredit SpA, Italy’s biggest bank, reported third-quarter profit that beat all analysts’ estimates after a record loss a year earlier on writedowns. The shares surged the most in two months.
Net income was 335 million euros ($425 million) compared with a net loss of 10.6 billion euros in the third quarter of last year, when the Milan-based lender booked goodwill impairments of 8.7 billion euros. Profit was more than triple the 99 million-euro average estimate of 13 analysts surveyed by Bloomberg.
Chief Executive Officer Federico Ghizzoni is cutting jobs, reducing costs and reorganizing the bank to increase profit as Europe’s sovereign-debt crisis and Italy’s third recession in a decade weigh on earnings. The lender has targeted 1.5 billion euros in savings by 2015, focused on western Europe, as it seeks to increase profit to 6.5 billion euros.
“We see meaningful positive impacts with lower costs supporting net profit and a significant drop in risk-weighted assets strengthening our capital ratios,” Ghizzoni said in a statement. “Our revenues remain resilient in spite of a continued difficult economic environment.”
The shares surged as much as 4.9 percent, the biggest gain on an intraday basis since Sept. 7. They climbed 4.4 percent to 3.522 euros at the 5:30 p.m. close in Milan, giving the company a market value of 20.4 billion euros.
UniCredit will cut 2,600 positions in Italy by 2015 that may lead to 100 million euros in savings, the CEO said. The bank reached an agreement on job cuts with labor unions a few weeks ago, he said.
Intesa Sanpaolo SpA, Italy’s second-biggest bank, also rose in Milan after reporting a jump in third-quarter operating profit and higher capital levels. Operating earnings rose 45 percent to 2.28 billion euros. Net income declined 21 percent to 414 million euros, in line with the average estimate of analysts surveyed by Bloomberg.
UniCredit, Intesa and Banca Monte dei Paschi di Siena SpA were the three best performers in the 38-member Bloomberg Europe Banks and Financial Services Index, which advanced 1.5 percent.
At UniCredit, trading profit totaled 449 million euros, compared with a loss of 229 million euros a year earlier, boosting operating profit 30 percent to about 2.4 billion euros. The results include a 39.5 million-euro gain from a buyback of asset-backed securities completed at the end of September, 75 million euros from the sale of a stake in Alliance Boots and 76 million euros from the sale of 3.4 percent in the Moscow stock exchange.
“Gross operating income increased above expectations thanks to much higher trading income, higher commissions and lower costs,” Annamaria Benassi, an analyst at Kepler Capital Markets in Milan, wrote in a report to clients. “Unexpected extraordinary income,” helped the results, she said.
UniCredit’s units in eastern Europe increased their third-quarter net operating profit by 5 percent to 664 million euros, driven by Russia and Turkey and more than offsetting a net operating loss in western Europe, according to the bank’s earnings presentation. UniCredit is eastern Europe’s biggest lender.
Loan-loss provisions decreased to 1.81 billion euros in the third quarter from 1.84 billion euros a year earlier, while operating costs declined 3.7 percent to 3.7 billion euros from the year-ago period. The core Tier 1 capital ratio, a measure of financial health, increased to 10.7 percent on Sept. 30 from 10.4 percent at the end of June.
The lender, which requested 26 billion euros in the European Central Bank’s two longer-term refinancing operations, has completed its 31 billion-euro funding needs for 2012, Ghizzoni said. Deposits increased 1 percent from the previous three months.
UniCredit hasn’t taken a decision on dividend distribution, he said, adding that the core tier 1 ratio incorporates an annual dividend of 9.6 cents per share.