Rising demand for loans pushes UniCredit profits up 55%

UniCredit reported a 55 per cent rise in profits compared with a year earlier, as the Italian bank set out its first quarterly results after walking away from a deal to buy state-owned rival Monte dei Paschi di Siena last week.

The bank’s €1.1bn of pre-tax profits for the third quarter were 26 per cent ahead of analyst forecasts, while its €4.4bn of revenues were also higher.

UniCredit said it had increased lending across its regional divisions, with the exception of eastern Europe, as the economic recovery had led to a rise in demand for credit.

Andrea Orcel, who has been chief executive of UniCredit for six months, said: “I am pleased to report a robust set of results for the third quarter, reflecting the strength of our franchise, supportive market conditions, increased client activity across all business lines and a powerful economic recovery, which is expected to moderate.”

The bank also said that Orcel would unveil his new strategic plan for the group, which would focus on simplification and digitisation, at an investor day on December 9.

Talks between UniCredit and the Italian Treasury over the acquisition of MPS, the world’s oldest bank, collapsed over the weekend after the two sides could not agree on the size of a costly recapitalisation.

Negotiations over the deal have occupied half of Orcel’s time in charge of UniCredit and he had hoped to announce an agreement at the bank’s third-quarter results.

UniCredit had been pushing for a capital injection into MPS of up to €7bn, but the Treasury indicated that it was unwilling to provide much more than its initial projection of €2bn to €2.5bn.

The Treasury is now expected to pursue a standalone plan for MPS, which is likely to include a further capital increase.

Analysts have speculated whether Orcel will now look for another domestic acquisition or concentrate on growing UniCredit organically.

Orcel has already reorganised UniCredit’s management team, simplified its structure and reduced duplicate roles. The executive committee has been cut from 27 to 15, while the bank’s geographical structure has been redesigned to improve efficiency and reduce complexity.

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