UBI Second-Quarter Profit Exceeds Estimates on Trading Income

Unione di Banche Italiane SCPA, Italy’s fourth-largest bank, reported second-quarter profit that beat estimates on higher trading income and lower costs.

UBI posted net income of 26.5 million euros ($35.4 million), down from 54.2 million euros a year earlier and above the 17.3 million-euro average estimate of six analysts surveyed by Bloomberg.

Chief Executive Officer Victor Massiah is cutting jobs and selling assets at Bergamo, Italy-based UBI to strengthen finances as Italy’s longest recession in 20 years hurts lending and asset quality and low interest rates squeeze margins.

“The main positive surprises came from trading income, costs and capital ratios,” Anna Maria Benassi, a Milan-based analyst at Kepler Cheuvreux, wrote in a note to clients today.

Trading income rose to 67.4 million euros from 11.4 million euros a year earlier as UBI disposed of available for sale securities and repurchased financial liabilities. Revenue fell 1 percent to 852.4 million euros as interest income dropped 12 percent to 428.2 million euros.

“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.

Capital Level

UBI slid 0.9 percent to 3.42 euros by 10:13 a.m. in Milan trading, outperforming the 2.1 percent decline in the 44-company Bloomberg Banks and Financial Services Index. The bank initially rose as much as 3.1 percent.

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.

“UBI’s capital level beat our forecast,” Marco Sallustio, an analyst at ICBPI, a Milan-based financial services company, wrote in a note to clients. “UBI’s capital is at a safe level, in spite of the difficult economic and market environment.”

Loan-loss provisions increased to 226.2 million euros in the quarter from 203.2 million euros, while operating costs declined 3 percent to 533.6 million euros.

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