UBI Quarterly Net Beats Estimates on Higher Trading Income

Unione di Banche Italiane SCPA, Italy’s fourth-largest bank by assets, reported profit for the third quarter that fell less than analysts estimated as income from trading increased 38 percent.

Net income slid to 49 million euros ($66 million) from 63.2 million euros a year earlier, the Bergamo, Italy-based bank said in a statement today. Earnings beat the 28.4 million-euro average estimate of five analysts surveyed by Bloomberg.

Chief Executive Officer Victor Massiah is cutting costs and selling assets to strengthen finances and boost profitability as Italy’s recession hurts lending and asset quality and low interest rates squeeze margins. UBI advanced as much as 3.8 percent in Milan trading, the biggest intraday gain in two weeks.

“The recent market trends may lead to a positive trend for trading income in the fourth quarter that may offset a higher cost of credit,” the company said in the statement, reiterating that it expects lower operating expenses this year.

The shares rose 3.7 percent to 5.17 euros by 9:49 a.m. in Milan, giving the company a market value of about 4.7 billion euros. The stock is up 47 percent this year, exceeding the 16 percent increase in the Bloomberg Europe Banks and Financial Services Index, which tracks 44 companies.

The results were better than expected “thanks to a stronger operating performance,” Luigi Tramontana, a Milan-based analyst at Banca Akros, wrote in a note to clients today.

Revenue declined 0.8 percent to 834.1 million euros as trading income rose to 59.1 million euros from a year earlier. Loan-loss provisions increased to 192.7 million euros in the quarter from 160.3 million euros. UBI is among lenders in the country that will be reviewed by the European Central Bank in its assessment of balance sheets next year.

UBI already meets fully applied Basel III capital rules, with an estimated common equity Tier 1 ratio of more than 10 percent, the bank said in the statement.

Before it's here, it's on the Bloomberg Terminal.