Unicredit, SocGen Rise After Upbeat 1Q; Credit Agricole Hit by War Effects

© Reuters.

By Geoffrey Smith 

Investing.com -- Shares in two of Europe’s biggest banks rose on Thursday, as the post-pandemic recovery outweighed big hits to their bottom lines from Russia’s invasion of Ukraine.

Unicredit (BIT:CRDI) stock rose 5.9% in Milan after the Italian institution reaffirmed plans to complete its EUR 3.75 billion capital return plan, despite a sharp rise in loan loss provisions relating to Russia.

Unicredit said the first EUR 1.6 billion tranche of its stock buyback is set to proceed having received shareholder approval. Executing the remaining EUR 1 billion in buybacks will be “subject to Russia performance,” however.

Unicredit has already paid out EUR 1.2 billion in dividends this year, its first since the European Central Bank put an effective ban on payouts at the start of the pandemic.

The bank said it booked EUR 1.3 billion of credit risk provisions in the first quarter, almost entirely due to Russia. Default risks have risen sharply as EU and U.S. sanctions have not only weakened the underlying Russian economy, but deliberately complicated the process of debt servicing for Russian entities.

Its underlying performance was mixed, with net profit of EUR 1.2 billion in the quarter boosted by trading while underlying net income from its core lending business rose only 2.2%. The bottom line was also helped by the disposal of its investment in Turkey’s Yapi Kredi.

Shares in France’s Societe Generale (EPA:SOGN) (BIT:GLE), meanwhile, rose 2.1% after a strong trading performance in the first quarter cushioned the impact of a 3 billion euro writedown of its Russian business, Rosbank.

SocGen had announced its plans to write off its Rosbank investment last month, and the impairment will only be booked in its second-quarter earnings.

Rival Credit Agricole (BS:ACAp) was less fortunate. Its net profit fell 47% on the year to 552 million euros as it wrote off the entire 189 million euro value of its Ukrainian arm and also booked nearly 400 million euros of provisions related to Russia. In addition, underlying costs rose and its core capital ratio fell.

Credit Agricole stock fell 2.4% by late morning in Paris.