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MILAN – Italian bank UniCredit said Thursday that one-off provisions to cover any settlement for alleged U.S. sanctions violations in Iran and a write-down on its Turkish unit dropped third-quarter profits by 99 percent.
Net profits fell to 29 million euros ($ 33 million), from 2.8 billion euros in the same period last year. It was about 741 million euros mostly to cover any potential settlement with the United States, and recorded an 846 million euro write-down on its Turkish bank, Yapi Kredi.
CEO Jean Pierre Mustier said U.S. settlement talks were still ongoing, but he expected no significant impact beyond the amount provisioned. UniCredit has been under investigation in the United States since 2012 when it comes to dealing with Iranian companies that are in breach of U.S. sanctions.
Excluding the provision and other charges, net operating profit rose 24 percent to 1.5 billion euros, on strong commercial activity. Net interest income rose by 7.2 per cent on higher loan volumes to 2.8 trillion euros while fees and commission earnings rose 2.5 per cent to 1.6 trillion euros. Trading profits were down to 277 million euros as a customer activity was lower amid an unfavorable market environment.
Muster said, "We would have had a blow-out quarter and the best for the last 20 years of the bank. We use it to adjust, and put everything behind us and move forward. "
The bank has a difficult macroeconomic situation, including pressure on Italian government bonds with the European Union over their big spending plans. UniCredit holds 57.9 billion euros in Italian government bonds, about 48 percent of its total sovereign exposure.
Its core Tier-1 ratio, dropped to 12.1 from 13.8 per cent last year. Tier-1 ratio is 11.5 per cent to 12 per cent, from around 12.5 per cent previously. The bank also cut its revenue forecast to 19.7 billion from 20.1 billion euros.
The bank's shares were trading down 2 percent, at 11.55 euros, on the Milan Stock Exchange.
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