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UniCredit in stunning $21B loss, plans turnaround

March 11, 2014

MILAN (AP) — UniCredit, Italy’s largest bank, on Tuesday posted a record 15 billion-euro ($21 billion) loss in the fourth quarter as it cleaned up its balance sheet with write-downs and provisions, part of an attempt to turn the page on its troubled past.

The loss compares with a 553 million-euro shortfall in the fourth quarter a year earlier, and exceeded the bank’s previous record loss of 10.6 billion euros posted for the third quarter of 2011 on bad Greek debt and other write-downs.

The balance sheet cleanup, which includes more than doubling provisions for bad loans to 9.3 billion euros, comes as the European Central Bank starts a big review of the region’s banks. The review will identify weak spots in banks’ finances and, if needed, ask them to fix them.

Despite the stunning loss, markets reacted favorably to UniCredit’s aggressive balance sheet cleanup, sending shares up 7 percent to 6.48 euros.

The bank said its strategic plan through 2018 would foresee a net profit of 2 billion euros this year, tripling to 6.6 billion in 2018. It includes cutting 8,500 jobs, 5,700 of those in Italy, leading to savings of 700 million euros by 2018.

It also plans to publicly list its on-line bank Fineco, and look at selling its collections platform in Italy to a specialist in the field.

CEO Federico Ghizzoni called 2013 “a turning point,” and said the bank was posed to increase lending “and support the real economy in Italy and in Europe.”

Unicredit said that its underlying financials were improving. In the fourth quarter, it reported higher net interest income and improved fees and commissions, helping to boost revenues by 5.2 percent to 6 billion euros.

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