Newspaper article International New York Times

UniCredit Swings Back to Profit as Bad Loans Fall ; Italian Bank's Chief Says He Sees Signs of Recovery in the Broader Economy

Newspaper article International New York Times

UniCredit Swings Back to Profit as Bad Loans Fall ; Italian Bank's Chief Says He Sees Signs of Recovery in the Broader Economy

Article excerpt

Italy's biggest bank said it returned to profit in the first quarter, as its backlog of problem loans shrank for the first time since the start of the financial crisis.

UniCredit, Italy's biggest bank and a bellwether of the economy, said Monday that it had returned to profit in the first quarter as its backlog of problem loans declined for the first time since the beginning of the financial crisis.

Lending in Italy also showed signs of recovery, UniCredit said, raising hope that a credit crunch that has crippled the Italian economy, the third largest in the euro zone, could finally be easing.

The bank said its net profit in the quarter was 712 million euros, or roughly $980 million, a 59 percent increase from a year earlier. That was a marked contrast to the EUR 15 billion loss that the bank reported for the fourth quarter of 2013 as it revalued some of its holdings and set aside more money for loans in or near default.

The bank's stock rose 1.4 percent on Monday in Milan, helping lift Italy's main index, which led Europe's broader indexes to new six-year highs.

If the rebound in the bank's fortunes and in Italian lending proves to be resilient, it could mark a turning point for one of the euro zone's most troubled countries.

While Spain, Portugal and Ireland have shown clear signs of recovering from crisis -- even if lending to small and midsize businesses has barely budged -- Italy remains mired in political instability and resistant to changes that economists say are necessary to rekindle growth.

"The origination of new loans finally turned positive," Federico Ghizzoni, the chief executive of UniCredit, said during a conference call with analysts. "It's true we start from a low level but it seems that some recovery is coming."

Loans to businesses and individuals in Italy rose 14 percent from the previous quarter to EUR 2.7 billion, which was a 63 percent increase from a year earlier. The new lending was spread evenly among larger companies, small enterprises and consumers and home buyers, UniCredit said. …

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