UNICREDIT, Italy’s second-biggest bank, reported a major drop in profits in the first quarter today as a result of its exposure to the Russian market, but it upheld its full-year forecasts.

UniCredit said in a statement it has set aside €1.28 billion (RM5.87 billion) in provisions for loan losses, mostly from risks related to Russia, which has been targeted by unprecedented Western sanctions over its invasion of neighbouring Ukraine in February. 

UniCredit booked a net profit of €247 million in the first three months of 2022, down 72% on the same period last year and significantly less than the €413 million expected in the consensus of analysts provided by the bank. 

However, turnover rose by a bigger-than-expected 7.3%, to €5.07 billion, and commissions rose by 7.9% to €1.8 billion. 

Net interest revenue rose by 6% to €2.3 billion amid rising market rates. 

Chief executive Andrea Orcel hailed “another excellent quarter” across the business, and expressed “confidence” about the implementation of a strategic plan for 2022 to 2024. 

“While challenges undoubtedly lie ahead for the global economy due to the war in Ukraine and its broader impact, UniCredit is entering this period with a resilient and profitable model, and prudent capital and existing provisions,” he said in a statement.

UniCredit has been present in Russia since 2005, but in March said it was looking at leaving the market.

Orcel said in a conference call today that exiting Russia is “complicated” and that the bank is evaluating all of its options. 

He confirmed the group’s ambitious goal of returning at least €16 billion to shareholders by 2024. 

And in its forecasts for 2022, UniCredit said it continues to expect more than €3.3 billion in net profit, turnover of €16 billion and a common equity Tier 1 rating – used to assess a bank’s ability to withstand financial stress – of 12.5 to 13%. – AFP, May 5, 2022.