UniCredit SpA, Italyâ€™s biggest bank, expects an 11.8 billion-euro ($12.6 billion) net loss for 2016 after setting aside more money for bad loans and booking one-time charges related to its turnaround plan.
UniCredit took an additional charge of 1 billion euros, on top of the 12.2 billion euros announced December 13, as it booked a higher writedown of its investment in the Atlante Funds, took losses on some of its shareholdings and made extraordinary contributions to the National Resolution Fund.
â€œAt first sight, this is disappointing, as it compares to our â€˜clean estimateâ€™ of 400 million euros,â€ Jean-Francois Neuez, an analyst at Goldman Sachs Group Inc. with a conviction buy recommendation on the stock, wrote in a note on Tuesday. â€œSuch a large deviation is unlikely to be solely driven by operational headwinds and may partly be down to the high level of accounting noise that is likely to accompany the results.â€
Chief Executive Officer Jean Pierre Mustier, 56, in December outlined a turnaround plan that includes a 13 billion-euro share sale, asset disposals and cost-cutting to reshape the bankâ€™s finances and clean up the balance sheet. The lenderâ€™s stock has been dragged down by a mounting pile of bad loans, record-low interest rates and Italyâ€™s longest recession since World War II.
â€œWhile the higher-than-expected losses in 4Q16 (including and excluding one-off items) comes as bad news, it is partially mitigated by the confirmation of the 2019 CET1 target,â€ said Manuela Meroni, an analyst at Banca IMI with a hold rating on the shares, in a report on Tuesday. â€œWe believe that the equity story remains
The ECB is ramping up pressure on lenders to offload bad assets, especially in Italy where Banca Monte dei Paschi di Siena SpA resorted to a government bailout in December after failing to raise capital to cover loan losses. The central bank has asked UniCredit to present a â€œstrategy for deteriorated loans, supported by an operational plan,â€ the bank said in a filing Monday. UniCredit is among a number of ECB-supervised banks having to submit plans for dealing with nonperforming loans by the end of next month.
UniCreditâ€™s stock offer may start early as Feb. 6, as the board will meet Wednesday to decide terms, Il Sole 24 Ore wrote on Sunday. UniCredit was expected to begin the rights issue after fourth-quarter earnings are released.