UniCredit 2009 net beats forecast, CEO defends revamp

Italy's biggest bank UniCredit SpA beat forecasts for 2009 net profit on Wednesday and returned to a cash dividend as the chief executive defended a revamp plan that has sparked a face-off with shareholders.

The results came two days after Chief Executive Alessandro Profumo threatened to resign in the face of resistance from shareholder foundations over his plan to streamline domestic operations. The bank pushed back the final board vote on the change to April.

UniCredit, Europe's fourth-biggest bank by market value, made a net profit of €1.70bn, down 58 per cent from the year before but topping an average forecast of 1.57bn in a Thomson Reuters I/B/E/S poll.

Profumo, architect of UniCredit's rise from a domestic lender to a major European player, said he was confident of finding a solution over a reorganisation that analysts say could save up to 800 million euros.

"This plan is strategic for me and for my team, because we are talking about a cultural change for the bank that aims to bring it closer to our customers and improve the quality of services," he was quoted as saying in daily Il Sole 24 Ore.

The centralising plan would eliminate boards at UniCredit units, limiting the local influence of politically-connected shareholder foundations that hold about 12 per cent of UniCredit.

The foundations had also wanted the appointment of a general manager, potentially weakening Profumo.

The foundations had borne much of the costs of €10bn in capital-strengthening measures in the last year, including a dividend in shares rather than cash.

The bank is proposing a cash dividend of 0.03 a share on its 2009 results.

UniCredit's core Tier 1 ratio, a standard of capital held against risky assets, rose to 8.47 per cent after a €3bn rights issue from 7.55 per cent at the end of September.

European banks have shown mixed 2009 results as they emerge from the financial crisis.

France's Credit Agricole swung to a net profit but was hit by losses at its Greek unit, and Deutsche Postbank AG dropped to a unexpected fourth-quarter loss as it doubled loan loss provisions.

UniCredit also said it was selling 2.84 per cent of shares in insurer Assicurazioni Generali SpA at €18 a share.

The bank holds 2.98 per cent of Generali, according to the insurer's website, and is under antitrust orders to sell the stake.

UniCredit's bad debt provisions dropped slightly on the quarter, but remained high at around three times the pre-Lehman level, especially in emerging Europe, where UniCredit is the leading lender.

In Kazakhstan, the bad debt-ridden former Soviet republic hit hard by the financial crisis, charges for impaired loans came down from the third quarter but still accounted for 7 per cent of the entire group's bad debt charges.

UniCredit shares trade on a multiple of about 25 times forecast 2010 earnings, well above the European sector average of about 15, according to Thomson Reuters data.