By COLLEEN BARRY, Associated Press
MILAN (AP) — Italian bank UniCredit SpA on Friday said second-quarter profits dropped 67 percent as it reinforced its capital buffers by nearly €2 billion.
The net profit of €169 million ($207 million) compared with €511 million in the same period of 2011 and was below analyst forecasts for €269 million, according to a survey by Factset. The earnings were net of €477 million spent to buy back bonds in the first quarter.
UniCredit shares nevertheless rose 7.5 percent to €2.76 as the wider Milan stock index vaulted 6 percent higher.
The bank, Italy's largest by assets, raised provisions for bad loans by 60 percent to €1.9 billion "reflecting the deteriorating credit environment that unfortunately we see in Italy," CEO Federico Ghizzoni told analaysts.
The bank's liquidity buffer stood at €116 billion, which UniCredit said would cover all wholesale funding maturing in the next 12 months.
The bank held €90 billion in sovereign debt at the end of the period, €41 billion from the Italian Treasury. Ghizzoni said the bank had decided to limit exposure to Italian debt with high yields.
Revenues in the quarter were down 3.2 percent to €6.2 billion, with net interest income dropping 5.4 percent to €3.69 billion.
The bank's Core Tier 1 ratio, a key measure of a bank's health, stands at 10.4 percent, above European regulatory requirements.
Ghizzoni said the higher capital ratios, liquidity position and access to capital markets put the bank in a solid position "to face any potential future challenge arising from this very difficult, unprecedented, global economic turmoil."
Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.