May 6, 2020 / 7:45 PM / 19 days ago

Italy's BPER posts sharp profit drop on more virus provisions

MILANO (Reuters) - Italy’s sixth-largest lender BPER Banca (EMII.MI) posted an 87% drop in first-quarter profit on Wednesday after further loan writedowns to offset the early impact of the COVID-19 pandemic.

The bank wrote down problem loans to the tune of 139.6 million euros ($150.9 million), including 50 million euros of additional provisions to tackle risks relating to the health emergency.

The coronavirus outbreak in Italy has been one of the deadliest worldwide and is set to plunge the already fragile Italian economy into its worst recession in 75 years.

Chief Executive Alessandro Vandelli told analysts that “at this stage”, given the unprecedented health emergency, it was hard to predict the macroeconomic scenario and how the bank’s economic and capital situation would evolve this year.

“We’ll probably have a better view in the second half of the year as GDP forecasts will be more stable than they are today”, he said.

The European Union said on Wednesday that Italy’s gross domestic product will drop by 9.5% this year.

Vandelli said it would also be necessary to have a complete view of government measures to support companies hit by the coronavirus.

However the bank said that in this situation of “high uncertainty” it was still fully committed to buying 400 to 500 branches from UBI (UBI.MI) if Intesa Sanpaolo’s (ISP.MI) takeover bid for its smaller rival is successful.

He said preparatory work for the deal was in line with the expected timeline.

In a surprise all-share bid for UBI, Italy’s biggest retail bank Intesa Sanpaolo in February offered 1.7 new shares for each UBI share tendered, to create the euro zone’s seventh largest banking group.

To win antitrust approval for the planned merger, Intesa signed a binding accord with BPER to sell branches of the combined entity and 20 billion euros in loans.

To fund a deal BPER needs a cash call of some 500 million euros. The bank expects to launch the share issue after the summer.

In the first quarter BPER reported a net profit of 6.1 million euros compared with 48 million euros a year earlier and a net loss of 143.3 million euro in the fourth quarter of last year which was impacted by one-off charges.

The bank’s first-quarter revenues came in at 596.6 million euros, up 20.4% from a year earlier, but down some 5.6% from the previous quarter, hurt by a sharp drop in trading income amid market turmoil.

BPER said its core capital ratio remained stable at 12%.

Reporting by Andrea Mandalà; editing by Jonathan Oatis

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