MILAN UBI Banca (UBI.MI) said on Thursday it was aiming for an annual net profit of 1.12 billion euros ($1.2 billion) and a core capital adequacy ratio of above 13 percent of assets by 2020 after buying three small rivals rescued by Italy's government in late 2015.
The common equity Tier 1 capital ratio forecast includes the 400 million-euro share issue which Italy's fifth-largest bank is due to undertake in the coming months. Its CET1 ratio, excluding the three small banks, stood at 11.29 percent of risk-adjusted assets at the end of March.
The net profit forecast is slightly below a 1.2 billion-euro projection UBI gave for the merged entity in January, but a broker said the market had doubts about that figure anyway.
UBI paid a token 1 euro for Banca Marche, Banca Etruria and CariChieti, which along with another small lender have proved a major problem for the government.
"An extremely rapid merger plan for the three bridge banks is planned, with the first migration by the end of October," the company said in a statement.
The deal also included the sale of 2.2 billion euros of the small banks' problem loans repackaged as bonds to Italian banking industry rescue fund Atlante concluded on Wednesday.
Shares in UBI Banca were up 0.2 percent at 3.92 euros by 1127 GMT (7.27 a.m. ET) on Thursday, helped by a better than expected 59 percent jump in first-quarter net profits.
"Positive earnings beat, driven by better trading income and loan loss provisions. Asset quality and capital improving," KBW analysts said in a note. "We are not worried by the 3 percent (net interest income) miss because it was fully offset by the fees beat and the loan growth was better than expected."
(Reporting by Agnieszka Flak; Editing by Greg Mahlich)