Mediobanca Profit Beats Estimates as Bank Offsets Sales Drop

Updated on
  • Revenue declines on lower net commissions, trading income
  • Bank has `more balanced business,' chief executive says

Mediobanca SpA, Italy’s biggest publicly-traded investment bank, reported a first-quarter profit that beat estimates as the proceeds from the sale of a stake in Pirelli & C. SpA more than offset a decline in sales.

Net income climbed to 244.3 million euros ($270 million) in the three months through September from 160 million euros a year earlier, the Milan-based company said in a statement on Wednesday. That beat the average estimate of 232.6 million euros from five analysts in a Bloomberg survey. The earnings included a 88 million-euro gain from the Pirelli deal.

“Mediobanca has a more balanced business that allowed the bank to cope with negative market trends,” Chief Executive Officer Alberto Nagel said during a conference call. “We expect to close the fiscal year with a net income higher than last year, even if the size of increase has still to be determined.”

Nagel is disposing of peripheral assets to focus on the main business of corporate and investment banking, and to expand retail banking and asset management. Nagel expects sees 2016 revenue from banking activities in line with the 2.1 billion euros targeted by next year in the three-year business plan through 2016.

Mediobanca rose as much as 2 percent in Milan trading and was up 1.4 percent at 9.28 euros at 11:06 a.m., giving the company a market value of about 8 billion euros. The stock is up about 35 percent this year.

Lower Revenue

Revenue fell 3.5 percent in the first quarter to 507.1 million euros  as net commissions and trading income declined, reflecting volatility in the market, the lender said. Net interest income rose 13.3 percent to 302.5 million euros as funding costs fell.

“The revenue trends need to be clarified in order to give confidence to the market on the company’s outlook,” Citigroup Inc. analyst Azzurra Guelfi wrote in a note today. Guelfi has a buy recommendation on the stock.

Loan-loss provisions fell to 115.4 million euros in the first quarter from 120.5 million euros a year earlier. The lender said its common equity Tier 1 ratio, a key measure of financial strength, rose to 13.3 percent as of Sept. 30 from 13.2 percent at the end of June.

“We are in line with several targets of our business plan, including revenue and return on equity,” Nagel said. “We see a different mix in revenue than anticipated in business plan as trend in interest rates lower than previously assumed.”

Profit at the corporate and private banking unit dropped 71 percent to 24.5 million euros as market swings affected trading revenue while costs rose, the bank said.

Mediobanca plans further acquisitions in credit alternative asset management after the August purchase of Cairn Capital, a London-based credit investment manager.

“We are still looking at possible deals,” Nagel said. He said that the lender may also consider expansion in equity and real estate alternative asset management.

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