Italy's UniCredit posted a sharp rise in quarterly profit on Wednesday despite lower revenues, a day after it withdrew its offer for smaller rival Banco BPM due to government interference.
Late Tuesday, UniCredit said it was withdrawing its bid for Italy's third-largest bank Banco BPM, blaming restrictions on the deal imposed by the Italian government while calling it a "missed opportunity" for shareholders.
The country's second-largest bank posted net profit of 3.3 billion euros ($3.9 billion) versus 2.68 billion euros in last year's second quarter, a nearly 25 percent rise.
Excluding one-off items, UniCredit said its net profit stood at 2.9 billion euros, up eight percent, above analysts' average estimates of 2.5 billion euros.
Shares of UniCredit rose by 2.5 percent to 59.54 euros just after the opening of the Milan stock exchange, while those of Banco BPM fell 4.27 percent to 9.88 euros.
Revenues fell, however, by 3.3 percent to 6.13 billion from 6.3 billion euros in the quarter, hit by hedging costs associated with UniCredit's Commerzbank stake.
Looking ahead, UniCredit said it was boosting its net income outlook for 2025 to 10.5 billion euros, above its earlier expectation of 9.3 billion euros.
The results demonstrated how "a transitional year" turned into the bank's "best year ever", UniCredit said in a statement.
UniCredit said one-off items impacted its second quarter, including the equity consolidation of its 9.9 percent Commerzbank stake and acquisition of life insurance joint ventures.
"As we look ahead to 2026 and beyond, we anticipate boosting revenue and net profit through the internalisation of life insurance and the equity consolidation of Alpha Bank10 and Commerzbank," it said.
UniCredit also said it would begin a 3.6 billion euros share buy-back "as soon as practicable".
The surprise announcement of UniCredit's withdrawal brought to an end a protracted tug-of-war since November, pitting UniCredit against BPM and the Italian government, which opposed the potential deal originally valued at 10.1 billion euros ($11.9 billion).
While Banco BPM considered the move hostile and the offer insufficient, Italy's government under Prime Minister Giorgia Meloni similarly opposed it, as it would have thwarted its plans to create a third banking group in Italy, comprising Banco BPM and Monte dei Paschi di Siena (MPS).
The point of contention for UniCredit was the government's so-called "golden power" provision, which it exercised in April and which cited national security concerns due to UniCredit's operations in Russia.
The provision allows the government to set certain restrictive conditions on takeovers in strategic sectors, such as banking.
Those included an obligation for UniCredit to maintain the level of loans granted in Italy for a certain period of time, and to cease all activity in Russia.
Earlier in July, the European Commission warned Italy that the provision was in potential violation of EU law, and UniCredit on Tuesday cited the "continued uncertainty" caused by the provision as the reason for it dropping its bid.
