PREVIEW-UniCredit, Intesa SP Q3 net seen sharply lower

By Ian Simpson MILAN, Nov 6 (Reuters) - Italy's two biggest banks, UniCredit SpA and Intesa Sanpaolo SpA, are expected to post sharply lower third-quarter net profit next week, hit by shrinking net interest income and lower margins. Markets will focus on Intesa Sanpaolo's cost-cutting and updates on plans to boost capital ratios, now at the low end among big European banks. Italy's biggest retail bank says it will list or sell 11 billion euros ($16.36 billion) in assets, including asset manager Banca Fideuram, to help bolster ratios. Intesa Sanpaolo is expected to post net income of 461.5 million euros, down from 673 million euros in 2008, according to the average forecast from six analysts contributing to Thomson Reuters I/B/E/S. UniCredit, the biggest lender in central and eastern Europe, is seen with net income of 353.6 million euros, falling from 551 million euros in the same period last year, according to the average I/B/E/S forecast from 10 analysts. Italian banks' top lines have been under pressure from tighter margins.

The squeeze mainly stems from crisis-fighting lower interest rates from the European Central Bank and the cancellation of overdraft fees. UniCredit's net interest income will be weaker than in the first half "due to a combination of lower contribution from investment banking and pressure on retail deposits spreads", UBS said in a research report. UniCredit was the Italian bank hardest hit by the credit crunch because of its greater exposure outside the conservative domestic lending market. It is carrying out a 4 billion euro rights issue, its second capital increase this year, to bolster its capital ratios. UniCredit will hold an extraordinary shareholder meeting Nov. 13-16 to vote on the move. The bank's biggest voting shareholder, the Cariverona foundation, has not ruled out subscribing to the capital hike and is waiting for the terms, Cariverona's chairman said on Friday. Intesa Sanpaolo will report results on Tuesday. UniCredit will post results on Wednesday before the market opens. ($1=.6722 Euro) (Reporting by Ian Simpson; editing by Simon Jessop) ($1=.6722 Euro) Keywords: ITALY BANKS/ ([e-mail]; [phone]; Reuters Messaging: [e-mail]@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved.

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