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Italy's UBI Banca can weather crisis as profit tops forecast

MILANO (Reuters) - Italy’s UBI Banca, the target of an unsolicited takeover bid by rival Intesa Sanpaolo, said on Friday it could weather the coronavirus crisis as it reported better than expected net profit for the first quarter.

Intesa, which plans to launch an exchange offer for UBI in late June to create the euro zone’s seventh-largest banking group focused on wealth management and insurance, has said the virus crisis poses a particular challenge to mid-sized banks such as UBI.

Intesa’s all-paper offer has met resistance from some of UBI’s core shareholders and UBI has said its board would assess possible alternatives.

“Some say size is crucial but in past crises we’ve seen some very large banks fare very poorly and ... some small banks do well,” UBI CEO Victor Massiah said in a statement.

He told analysts he could not comment on Intesa’s bid until the offer’s document became public.

UBI has proven that it manages loan risks well, Massiah said, adding that the current emergency, which has forced staff to work remotely, has shown that UBI has adequate technological capabilities.

“Obviously you need a solid starting point ... but we have very good capital and credit quality ... so I’m very optimistic about UBI’s ability to weather this crisis,” he said.

With Italy’s economy set to slide into its deepest post-war recession, its lenders face a surge in bankruptcies just as they emerged from efforts to tackle the legacy of previous slumps.

UBI put aside 156 billion euros ($169.60 billion) against loan losses in the first quarter, a fifth more than a year ago, after writing down loans which are not yet in default in anticipation of the possible coronavirus-related risks.

UBI said it had received more than 110,000 requests under debt moratoriums enforced by the government, freezing payments on some 17 billion euros in loans.

The bank also accounts for half of all loans worth up to 25,000 euros each granted to small Italian firms under an emergency liquidity package and fully guaranteed by the state.

First-quarter net profit came in at 94 million euros, above the same period of last year which was impacted by restructuring costs, and above an average analyst forecast of 56 million euros in a consensus distributed by the bank.

Revenues also topped forecasts, falling 0.8% year-on-year to 914 million euros, thanks to trading gains and commissions which offset a 9% drop in net interest income.

($1 = 0.9198 euros)

Reporting by Andrea Mandalà; editing by Valentina Za and Louise Heavens

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