UBI Plunges on Weaker Capital, Worse-Than-Expected Quarter Loss

  • Fully loaded CET1 ratio fell to 11.6 percent as of Dec. 31
  • Bank posted net loss of 45.2 million euros in fourth quarter

Unione di Banche Italiane SpA plunged the most ever after Italy’s fifth-largest bank stunned investors with weaker capital buffers and a worse-than-expected fourth-quarter loss.

After UBI’s conversion into A joint-stock company in October, the bank updated its capital buffer to factor in withdrawal rights. It said its fully loaded common equity Tier 1 ratio, a measure of financial strength, fell to 11.6 percent from 12.6 percent at the end of the third quarter.

While that was disappointing, “underlying earnings also missed due to higher costs and taxes,” Hugo Cruz and Jonas Floriani, analysts at Keefe, Bruyette & Woods Inc., wrote to clients on Thursday. “Management has some explaining to do.”

The shares fell as much as 17 percent, the most ever in Milan trading, and were down 15 percent to 2.9 euros as of 10:40 a.m. The bank posted a net loss of 45.2 million euros ($51 million), missing the 17.7 million-euro average of seven analyst estimates compiled by Bloomberg.

Chief Executive Officer Victor Massiah is cutting costs and looking to expand UBI’s product range to offset lower margins from lending. UBI is considering combinations with other cooperative banks, the largest of which are also converting to joint-stock firms to comply with a new law. The bank proposed increasing its full-year dividend to 11 cents a share.

UBI booked 98.7 million euros in one-time charges, including its share of costs for rescuing four regional banks, a contribution to a deposit-guarantee program and 95 million euros related to job losses. The charges were partially offset by a 75.3 million-euro gain from the sale of its stake in the Italian banking-services provider Istituto Centrale delle Banche Popolari SpA.

For 2016, UBI expects a lower cost of credit and higher interest margins.

Revenue rose 6 percent from a year earlier to 903.8 million euros, while provisions for bad loans fell 19 percent to 245 million euros.

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