Mediobanca Surges After Dividend Increases More Than Expected

Mediobanca SpA, Italy’s biggest publicly-traded investment bank, climbed to the highest since July 2008 in Milan trading after announcing a dividend that beat analysts’ expectations.

The shares rose as much as 4 percent and advanced 2.8 percent to 10.03 euros at 10:31 a.m. Mediobanca said on Wednesday it will pay a dividend of 25 cents a share compared with 15 cents a year earlier as it said profit almost doubled in the second quarter.

The dividend beat expectations and the bank’s capital position “remains outstanding,” Luigi Tramontana, a Milan-based analyst at Banca Akros SpA, who has an accumulate recommendation on the stock, said in a note to clients.

Mediobanca is seeking to increase returns for shareholders by reducing costs, including provisions for bad loans, and boosting earnings from investment banking. Chief Executive Officer Alberto Nagel is also selling some non-core businesses, while seeking to expand in asset management and consumer banking. He announced the acquisition of London-based investment manager Cairn Capital on Wednesday.

Net income rose to 124.2 million euros ($135 million) in the three months to June from 69.5 million euros in the year-earlier period. The company was expected to earn 131.5 million euros, according to the average estimate of six analysts surveyed by Bloomberg.

Provisions for non-performing loans more than halved in the second quarter to 122.7 million euros from 275.8 million euros a year earlier.

Revenue fell 4 percent to 529.8 million euros as net fees and commissions declined 26 percent. The earnings were bolstered last year by fees earned from Italian banks’ capital raisings.

Cairn Acquisition

Mediobanca agreed to buy 51 percent of Cairn from institutions including Royal Bank of Scotland Group Plc, which will sell its entire stake. It has an option to buy the remainder after three years.

Assets under management will increase to 35 billion euros from 22 billion euros as a result of the purchase.

“The acquisition is part of the bank’s plan to grow in the alternative and wealth management, a segment absorbing low capital and having high potential,” Nagel said on a conference call, declining to give a price for the transaction. He said he plans to further expand the business by hiring more bankers.

The transaction won’t have a material impact on capital ratios, Mediobanca said. Paul Campbell will continue to be chief executive officer of the company.

The common equity Tier 1 ratio, a key measure of financial strength, rose to 13.2 percent as of June 30 from 12.7 percent at the end of March.

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