U.S. Markets closed

Unicredit Q4 profits drop 64 percent

Colleen Barry, AP Business Writer

MILAN (AP) -- Unicredit, Italy's largest bank by assets, on Tuesday reported that fourth quarter profits dropped by 64 percent due to losses caused by the European sovereign debt crisis and weak economic activity.

Unicredit SpA's net income was €114 million ($151.35 million), down from €321 million a year earlier. It booked a loss of €70 million on Greek bonds and of €63 million on severance costs.

For the year, the bank posted a loss of €9.2 billion, due largely to losses on investments recorded in the third quarter.

The bank said its Tier 1 capital ratio, a key measure of a bank's health where capital is measured against the sum of riskier assets, has reached 9.97 percent — thanks to a €7.5 billion rights offer in January — to meet capital targets set by European authorities. It was 8.4 percent at the end of last year.

Overall, investors appeared pleased with the figures, sending shares in the bank up 2.3 percent to €4.05 in Milan.

CEO Federico Ghizzoni told analysts that Unicredit planned to go to the markets again in the next couple of months but does "not feel particularly pressured." The bank tapped the markets for €42 billion last year and expects to seek €31 billion in 2012.

It took €26 billion in low-cost loans from the European Central Bank, but Ghizzoni said it was not planning to use them to buy Italian debt. Instead, the bank is looking to loan to customers where the CEO believes they can achieve "margins even better than Treasury bonds."

Unicredit, which said it won't pay a dividend for 2011, is cutting staff and refocusing its operations in eastern Europe as part of a strategic plan outlined in November.

Unicredit ended the year with €926.8 billion is the assets, down from €929.5 billion at the end of 2010.