MILANO (Reuters) – The sixth largest lender in Italy BPER Banca (EMII.MI) posted an 87% decline in first-quarter profit on Wednesday after a further credit decline to offset the initial impact of the COVID-19 pandemic.
The bank wrote a problem loan with a value of 139.6 million euros ($ 150.9 million), including an additional 50 million euros in provisions to address risks related to health emergencies.
The coronavirus outbreak in Italy has become one of the deadliest in the whole world and is set to plunge the already fragile Italian economy into the worst recession in 75 years.
Chief Executive Alessandro Vandelli told analysts that “at this stage”, given the unprecedented health emergencies, it is difficult to predict macroeconomic scenarios and how the economic situation and bank capital will develop this year.
“We will probably have a better view in the second half of this year because the GDP forecast will be more stable than now,” he said.
The European Union said on Wednesday that Italy’s gross domestic product will drop 9.5% this year.
Vandelli said it also needed to have a complete view of government steps to support companies affected by the corona virus.
But the bank said that in this “high uncertainty” situation it was still fully committed to buying 400 to 500 branches from UBI (UBI.MI) if Intesa Sanpaolo’s (ISP.MI) the takeover bid for his little rival was successful.
He said preparatory work for the agreement was in line with the expected schedule.
In a surprise offer of all shares for UBI, Italy’s biggest retail bank Intesa Sanpaolo in February offered 1.7 new shares for each tendered UBI share, to create the euro zone’s seventh largest banking group.
To win the antitrust agreement for the planned merger, Intesa signed a binding agreement with BPER to sell the joint entity branches and 20 billion euros in loans.
To fund the agreement, BPER requires a cash call of around 500 million euros. The bank expects to launch stock issues after the summer.
In the first quarter, BPER reported a net profit of 6.1 million euros compared to 48 million euros a year earlier and a net loss of 143.3 million euros in the fourth quarter of last year which was affected by one-time costs.
The bank’s first-quarter revenue came in at 596.6 million euros, up 20.4% from a year earlier, but down about 5.6% from the previous quarter, pressured by a sharp drop in trading income amid market turmoil.
BPER said the core capital ratio remained stable at 12%.
Reporting by Andrea Mandala; editing by Jonathan Oatis