August 7, 2019 / 5:49 AM / 16 days ago

UniCredit lowers 2019 revenue forecast, sticks to profit goal

MILAN (Reuters) - Italy’s biggest bank by assets UniCredit (CRDI.MI) on Wednesday cut its revenue target for 2019, citing expectations that interest rates will remain low for some time due to an economic slowdown in Europe.

FILE PHOTO: The headquarters of UniCredit bank is seen in downtown Milan, Italy, February 8, 2016. REUTERS/Stefano Rellandini/File Photo

UniCredit reported net profit of 1.9 billion euros ($2.1 billion) in the second quarter of the year, thanks to a capital gain from the sale of its stake in online broker Fineco, which it executed in two stages in May and July.

But the figure missed the average analyst forecast of 2.1 billion euros, due mainly to lower fees and higher loan loss charges. Shares fell 3.2% by 1034 GMT.

The revenue target for the year was lowered to 18.7 billion euros from 19 billion euros due to the “prevailing environment with rates expected to be lower for much longer,” Chief Executive Jean Pierre Mustier said.

The comparison figure of 19 billion euros was restated from 19.8 billion euros previously to take into account the sale of Fineco.

Mustier confirmed a full-year net profit goal of 4.7 billion euros, saying that while the second half of the year was expected to be in line with the first six months, the bank would benefit from a lower tax rate.

Highlighting the challenges banks like UniCredit face to grow revenues, UniCredit said net interest income — a measure of how much money a retail bank makes from its core business — fell 2.1% in the second quarter to 2.6 billion euros. Fees were down 3%.

Germany’s Commerzbank also gave a cautious outlook for the year, saying on Wednesday that its own target for a slight increase in full-year net profit had become “significantly more ambitious.”

To prop up earnings, UniCredit is focusing on cutting costs and bolstering its balance sheet - together with the Fineco sale, the bank announced in May it would cut its Italian government bond portfolio and accelerate bad loan disposals.

Having cut 14,000 jobs since he took over three years ago, Mustier is expected to announce as many as 10,000 job cuts when he unveils his new plan in December, according to sources close to the matter. The bank has said any reduction in the work force would be made through early retirements.

Mustier is also looking to reduce the group’s exposure to Italy. Sources have said he is working to ring-fence its foreign operations - which include units in Germany, Austria, eastern Europe, Turkey and Russia - from its home market by pooling them in a German holding to improve the group’s cost of funding.

Asked about the plan, Mustier told reporters on a post-results conference call: “We can work on the group structure in order to have a strong balance sheet to finance our clients, corporate and retail, in a very effective way and we can take action in order to limit the impact of any potential macro economic shock on the cost of funding.”

He added UniCredit would remain headquartered and listed in Italy.

editing by Silvia Aloisi, Alexandra Hudson and Deepa Babington

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