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Creval to zero in on profitability as H1 profit rises YOY

Italy's Credito Valtellinese SpA said it will focus on developing its commercial activity to boost profits as it booked a reclassified consolidated profit of €23.5 million for the first half, up from €824,000 earned a year earlier.

Net interest income came in at €178.6 million, compared to the year-ago €178.9 million, while net fee and commission income fell 11.2% to €123.8 million. Net trading, hedging income and profit from sales and repurchases rose on a yearly basis to €22.8 million from €16.5 million.

Impairment and modification losses reached €101.9 million, compared to impairment reversals and modification gains of €22.2 million a year earlier. Net gains on sales of investments and valuation differences on property and equipment at fair value amounted to €5.2 million, compared to year-ago net losses of €19,000.

Net nonperforming loans stood at 4.0% of loans and receivables with customers as of June-end, compared to 4.1% at the end of 2018. The NPL coverage ratio was 58.9% at the end of June, compared to 55.9% at 2018-end.

Creval's fully loaded common equity Tier 1 capital ratio stood at 14.0% as of June 30, compared to 13.5% at the end of 2018, which the bank said is above its supervisory review and evaluation process capital requirement of 8.25% as set by the Bank of Italy.

In June, the Italian lender unveiled its new five-year business plan under which it aims to achieve a net income of €93 million and €138 million by 2021 and 2023, respectively. CEO Luigi Lovaglio said the implementation of Creval's new strategy is in "full swing" and that the bank has paved the way to NPL disposal.

"[N]ow we can really zero in on profitability with the development of our commercial activity, which in [the first half] has already shown positive signs, in particular with regard to deposits that grew at a double-digit rate since the beginning of the year," Lovaglio said.

In addition, Creval signed a binding agreement to sell its pledge loan business line to Custodia Valore Credito su Pegno SpA, a company belonging to the Vienna-based Group Dorotheum, as part of its new business plan.

Creval said the transaction, which is valued to date at €38 million, will generate an estimated gross capital gain of roughly €33 million and will have an estimated positive effect on its fully loaded CET1 capital ratio of about 20 basis points. The deal is expected to close by year-end.