Italy's biggest bank UniCredit has today posted a €2.7 billion loss in the first quarter after writing down loans in anticipation of the damage caused by the Covid-19 pandemic.
Analysts had on average looked for a €1.53 billion loss in a consensus compiled by the bank, on revenues of €4.48 billion.
UniCredit, which also has operations in Germany and Austria, said revenues came in at €4.38 billion, down 8% from a year earlier, hurt by a sharp drop in trading income amid market turmoil despite higher fees.
The bank said it booked €1.26 billion in net loan writedowns in the period, it said.
It also took a €1.3 billion hit in the quarter to pave the way for 5,200 voluntary layoffs it agreed with unions in April as envisaged by a business plan unveiled in December.
UniCredit booked a €1.7 billion charge in the period due to the disposal of part of its stake in Turkish lender Yapi Kredi, the last step in a string of asset sales in recent years.
Italy began on Monday to gradually unwind a near two-month lockdown which has ravaged its economy, leading authorities to expect the worst recession since World War II and a raft of bankruptcies.
UniCredit warned last month it would book €900m in additional loan loss provisions in the first quarter to take into account an expected 13% contraction in the euro zone's 2020 gross domestic product.
When the pandemic hit, UniCredit was just emerging from a successful restructuring which allowed it to reduce impaired loans to 5% of total lending from 16% when French investment banker Jean Pierre Mustier took over as CEO in mid-2016.
After cutting costs and boosting UniCredit's capital buffers through a cash call and asset sales, Mustier had been focusing on lifting returns for investors but had to put dividend payments and a share buyback plan on hold earlier this year to comply with regulatory demands in the current crisis.
Rival heavyweight Intesa Sanpaolo yesterday posted a surprise 10% rise in first-quarter net profit, helped by strong trading gains and low loan loss provisions.
It said it would use a capital gain from a recent disposal to cover the bulk of €1.5 billion in loan loss provisions that the economic slump could drive in the course of the year.