May 9, 2019 / 6:33 AM / 2 months ago

UPDATE 1-UniCredit affirms commitment to Italy despite cutting exposure

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MILAN, May 9 (Reuters) - Italy’s biggest bank by assets UniCredit said it remained committed to the euro zone’s third biggest economy even after announcing it would reduce its exposure to Italy.

UniCredit unveiled this week a series of measures to boost its financial strength, including the sale of a 17 percent stake in Italian online banking unit Finecobank and a plan to decrease its Italian government bond holdings.

Asked whether the bank was reducing its exposure to Italy in preparation for a possible cross-border deal, Chief Executive Jean Pierre Mustier told reporters: “I would like to stress that our commitment to Italy has never been stronger.”

He added that the bank had increased lending to Italian clients by 4.4 percent from last year and was proud to be headquartered and listed in Italy.

Mustier said the bank had 54 billion euros ($60.47 billion)of Italian BTP government bonds at the end of March, more than any other bank, and that it would reduce those holdings through run-off rather than sales.

High domestic bond holdings have eaten into the capital base of Italian banks over the past year due to a high spread between Italian and German government bonds.

Sources have said that UniCredit has expressed an interest in bidding for German rival Commerzbank, whose merger talks with Deutsche Bank collapsed last month. Mustier said on Thursday that the bank does not comment on market rumours.

He was speaking after UniCredit booked a net profit of 1.39 billion euros in the first quarter of the year, up 24.7 percent from a year earlier and above analyst forecasts.

The bank, which will present a new business plan in December, said revenue came in at 4.95 billion euros, declining by 3 percent on an annual basis.

UniCredit said in a statement that the current turnaround plan was “well on track” and said it was sticking to its targets for 2019, including a core capital target of between 12 percent and 12.5 percent for 2019.

$1 = 0.8930 euros Reporting by Gianluca Semeraro; editing by Silvia Aloisi and Emelia Sithole-Matarise

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