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Monte dei Paschi Q2 net profit sinks YOY as operating expenses worsen

Italy's Banca Monte dei Paschi di Siena SpA reported a second-quarter net profit of €65.2 million, down from €100.9 million in the same period in 2018.

The lender said the year-over-year decrease mainly stems from worsening operating income and expenses related to recognizing the unwinding costs of its servicing agreement with Juliet SpA, a former subsidiary that services nonperforming loans.

The lender noted that it has elected not to restate comparative data on a consistent basis in the year of initial application of IFRS 16. Consequently, 2018 figures are not fully comparable.

The bank's second-quarter net interest income stood at €404.3 million, down from €448.5 million a year ago, mainly due to lower income from product placement and credit facilities. Net fees and commission income came in at €363.7 million compared to €403.0 million in 2018. Net profit from trading and financial assets amounted to €14.9 million versus a €29.5 million loss in the previous year.

Net impairment losses for the period came in at €87.5 million versus €108.8 million in the second quarter of 2018. Operating expenses for the second quarter amounted to €577.3 million, down from €581.4 million in 2018. Net provisions for risks and charges amounted to €6.8 million, down from €51.3 million a year ago.

The world's oldest surviving bank reported a 2% return on tangible equity for the first half, down from 2.9% at the end of December 2018.

Net profit for the first half fell 67.7% year over year to €93.1 million from €288.5 million. First-half EPS was 8.4 cents, down from 26.1 cents a year ago. The bank's cost-to-income ratio increased to 74% at the end of June 30 from 71.5% at the end of December 2018.

As of June 30, the lender's gross nonperforming exposures totaled €15.9 billion, down €300 million from the first quarter and €900 million from 2018-end, while net nonperforming exposures totaled €7.3 billion, down €300 million from March-end and €500 million from Dec. 31, 2018.

The bank's gross nonperforming loans ratio stood at 16.3% at the end of June, down from 17.3% at 2018-end. The pro forma ratio for the first half is 14.6% based on assets worth €2.0 billion that are being off-loaded. The lender said it expects the ratio to improve to 12.7% in the 2019 fiscal year which is ahead of its 2021 NPE reduction targets.

Coverage of bad loans fell to 61.9% in the first half, down from 62.4% at the end of December 2018. Coverage of nonperforming exposures rose to 53.8% during the first half from 53.1% at the end of 2018.

The Italian lender's common equity Tier 1 ratio was 14.0% as of June 30, up from 13.7% at the end of December 2018, while its total capital ratio improved to 15.5% from 15.2%. Its leverage ratio climbed to 5.9% at the end of the first half from 5.5% at 2018-end.

The lender's financial assets designated at fair value were €19.9 billion as of June 30. Its assets under management totaled €57.8 billion, up €1.9 billion from the end of December 2018.