November 8, 2017 / 7:46 PM / a year ago

UPDATE 1-Italy's BPER boosts capital and rules out cash call

(Recasts with CEO comments after conference call)

MILAN, Nov 8 (Reuters) - Italy’s BPER Banca said on Wednesday it increased its best quality capital in the third quarter and didn’t need to tap investors for cash.

BPER’s best-quality capital stood at 13.81 percent of risk-weighted assets at the end of September, up from 13.17 percent three months earlier as the European Central Bank allowed it to drop some risk-weights it had temporarily imposed on the bank.

Shares in Italy’s sixth-largest lender closed down 4.4 percent on Wednesday as investors fretted it may need to follow in the footsteps of rival Creval, which plans to raise 700 million euros in a share issue.

Creval will use the money to rebuild capital as it writes down impaired debts and sells them off, with a view to lowering their share of total loans to around 10 percent.

BPER CEO Alessandro Vandelli said it had room to achieve a similar soured debt ratio without needing to raise fresh cash.

“We’re absolutely convinced the bank does not need any capital injection,” he told analysts after BPER reported a 47 increase in nine-month net profit thanks to a one-off gain.

BPER said it would keep its core capital ratio, a key measure of a bank’s financial strength, above 12 percent in 2020 even as it works to reduce impaired debts that now account for 20.8 percent of total loans.

Under a reduction plan approved on Wednesday, BPER plans to sell 3 billion euros in bad debts in 2018-2020 to lower their weight to 13.5 percent of total loans.

In response to analysts’ concerns that such a level was above Creval’s 10 percent - which is coming to be regarded as a benchmark for the sector - Vandelli said BPER had room to step up bad loans sales without having to raise capital.

The bank has announced it will take advantage of a new IFRS9 accounting principle early next year to book 1 billion euros in loan writedowns which will not impact its income statement.

$1 = 0.8626 euros Reporting by Valentina Za; Editing by Elaine Hardcastle

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