MILAN: Italy's biggest bank by assets, UniCredit, returned to profit in the first quarter of 2013 thanks to lower loan-loss provisions and strong trading income.
UniCredit, the first Italian retail bank to release its results for the quarter, said on Friday its net profit came in at 449 million euros ($587.97 million) after a loss of 553 million euros in the last three months of 2012.
The figure easily beat an analyst consensus distributed by the bank, which had forecast a 156 million euros profit.
In the fourth quarter of last year UniCredit had posted a 553 million euro loss.
Like other Italian banks, UniCredit has been struggling to keep a lid on mounting bad debts as the euro zone's third biggest economy struggles with its longest recession in 20 years.
After setting aside nearly 10 billion euros for souring loans in 2012, it benefited from lower loan-loss provisions in the first three months of the year.
Those charges stood at 1.2 billion euros in the period, down 73 percent from the fourth quarter of 2012 and 9 percent on an annual basis.
Analysts say loan-loss charges are seasonally lower in the first quarter and most expect overall bad loans at Italian lenders to grow throughout 2013.
But UniCredit said that for the second consecutive quarter, inflows of new bad loans had decreased in its Italian home market which could signal some light at the end of the tunnel if the trend was confirmed.
"The results are good and the loan losses are low," said Alberto Gallo, credit strategist at Royal Bank of Scotland.
"What we are seeing is a two-tier banking system in Italy and Spain, where the top two banks are doing well while the smaller ones are stuck with a lot of non-performing loans," he said.
The bank said its Core Tier 1 ratio a key measure of financial strength stood at 9.46 percent at the end of March, and 9.64 percent when a series of recent disposals is taken into account. The ratio stood at 9.2 percent at the end of 2012.
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