MILAN (Reuters) – Italian bank UniCredit said on Thursday that steps to cover any deal for alleged sanctions violations in Iran and a reduction in its Turkish unit slid third quarter profits by 99 percent.
Net profit fell to 29 million euros ($ 33 million) from 2.8 billion euros in the same period last year. It set aside 741 million euros mainly to cover any possible agreement with the United States, and recorded a write-down of 846 million euros at its Turkish bank, Yapi Kredi.
CEO Jean Pierre Mustier said that negotiations under the US are still in progress, but he expects no significant impact beyond the provisioned amount. UniCredit has been under investigation in the United States since 2012 if past operations involving Iranian companies violated US sanctions.
Excluding the provision and other charges, net operating income increased 24% to 1.5 billion euros, due to strong commercial activity. Net interest income rose 7.2% as loans increased to 2.8 billion euros, while fees and commissions increased 2.5% to 1.6 billion euros. Trading profits fell more than a quarter to 277 million euros, as customer activity was lower amid an unfavorable market environment.
Mustier said that without exclusions, "we would have a quarter of a blowout and the best of the last 20 years of the bank. We use it to adjust ourselves and leave everything behind and move on. "
The bank recognized a difficult macroeconomic situation, including pressure on Italian government bonds, while the government clashed with the European Union over its large spending plans. UniCredit holds 57.9 billion euros in Italian government bonds, about 48% of its total sovereign exposure.
Its main level 1 ratio, a key measure of a bank's health, fell to 12.1 from 13.8 percent last year. The bank reduced its Tier-1 ratio forecast to range from 11.5 percent to 12 percent, from about 12.5 percent previously. The bank also reduced its revenue forecast to 19.7 billion euros from 20.1 billion euros.
The bank's shares were trading below 2% at 11.55 euros on the Milan Stock Exchange.