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MILAN, Feb 6 (Reuters) - Banco BPM stuck to a pledge on Thursday to pay its first dividend after swinging to a fourth-quarter profit thanks to lower writedowns on sour loans and strong trading income.
Italy’s third-biggest bank, created in 2017 from the merger of two mid-sized cooperative lenders, had previously promised to pay a dividend at the end of its first business plan.
Net profit for the three months to December came in at 95.8 million euros ($105.1 million), from a loss of 584 million euros a year earlier, the bank said in a statement, beating an analyst consensus of 90 million euros.
Full-year profit stood at 797 million euros from a loss of 59 million the previous year, allowing the lender to pay shareholders a dividend of 0.08 euros per share.
Banco BPM, which has spent billions to clean up its balance sheet since its creation, said the share of gross impaired loans to total lending fell to 9.1%, well below the 2019 target of 17.5% set in the merger plan.
“If we see an opportunity to sell UTP loans we will look into it but we don’t want to pay the prices we paid in recent years to reduce bad loans,” the bank’s CEO Giuseppe Castagna told analysts.
Castagna said he did not want to eat into the bank’s capital buffers to get rid of the unlikely to pay (UTP) loans.
Banco BPM’s Common Equity Tier 1 ratio, a measure of financial strength, stood at 12.8% on a fully loaded basis at the end of December from 12.1% at the end of September.
The bank is due to unveil its new three year business plan at the beginning of March which is expected to be based on a stand-alone strategy.
The banking group is seen playing a prominent role in a new round of M&A between second-tier lenders grappling with negative interest rates, a stagnating economy and a digital revolution in the industry. ($1 = 0.9114 euros) (Reporting by Andrea Mandalà; editing by Grant McCool)