UniCredit Accelerates Cleanup as CEO Mustier Prepares for Growth

(Bloomberg) -- UniCredit SpA Chief Executive Officer Jean Pierre Mustier accelerated a long-running cleanup and bore down on costs as the Italian bank prepares to move from a strategy of recovery to growth.

Italy’s biggest bank reduced operating expenses by 4.2 percent in the first quarter from a year earlier and set aside less money for bad loans. That helped the bank beat estimates for net income even as low interest rates and a weakening Italian economy weighed on revenue.

UniCredit is among the European banks seen as a possible suitor for Commerzbank AG after the German lender’s merger talks with Deutsche Bank AG ended without a deal last month. While Mustier has refused to comment on possible deals, he has said that “all options are open” after the company finishes its current business plan at the end of 2019.

First-quarter net income rose about 25 percent to 1.39 billion euros ($1.56 billion), boosted by 258 million euros of gains from real estate disposal and a 320 million-euro release of provisions after the settlement with U.S. over Iran sanctions. Adjusted profit increased 1.5 percent to 1.1 billion euros.

The earnings follow the bank’s sale of a 17 percent stake in FinecoBank SpA, which allowed UniCredit to raise more than 1 billion euros, and the announcement of several steps it expects to make ahead of the new business plan.

The bank’s key common equity Tier 1 ratio rose to 12.25 percent as of March 31 from 12.06 percent at the end of last year on improved asset quality and profit generation. The bank seeks to boost the ratio to 2.5 percentage points above what regulators require by the end of the year.

Other details from the first quarter:

• Fees and commission declined 5.3 percent to 1.66 billion euros
• Net interest income showed resiliency by increasing 0.7 percent to 2.65 billion euros
• Confirmed FY targets, including 19.8 billion euros in revenue

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