UPDATE 2-UniCredit risk costs drop for first time in a year

By Ian Simpson MILAN, Nov 11 (Reuters) - Italy's biggest bank UniCredit SpA reported the first quarterly decline in bad debt charges in more than a year despite a big writedown in Kazakhstan, adding to signs banks' risk costs have peaked. Net profit for the quarter to September dropped 20 percent on the quarter to 394 million euros ($590 million), UniCredit said on Wednesday, beating forecasts, as revenue declined from an exceptional second quarter and despite the group's cost and job-cutting. But risk costs declined by 11 percent to 2.16 billion euros on the quarter including in key countries in central and eastern Europe, the region where UniCredit is the biggest lender and where its bad debt charges have risen sharply. While risk costs were still twice as high as a year ago showing the deep economic malaise the former Communist region is mired in, the quarterly decline was the first since the second quarter of 2008 and came despite a huge charge in Kazakhstan. "There are signs that impaired loans growth is decreasing," Chief Executive Alessandro Profumo told analysts on a conference call. Britain's top two banks, HSBC and Barclays , on Tuesday signalled bad debts may be past their peak, with HSBC declaring the first improvement for three years in losses on U.S. consumer credit. UniCredit has forecast risk costs in emerging Europe to peak this year, even though bad debt levels will continue to rise into next year and a full recovery is not on the cards until 2011. The stabilisation of bad debt charges in emerging Europe mirrors results of other banks exposed to the region, including Swedbank and Erste Group Bank. Ten analysts contributing to Thomson Reuters I/B/E/S had forecast net profit on average of 353.6 million euros. Trading, hedging and gains in the fair value of assets hit a profit of 715 million euros, 30 percent lower than in the second quarter but reversing a loss of 524 million euros in the same period last year. Core Tier 1 capital, a measure of financial strength, was 7.55 percent at the end of September. The bank, which is planning a 4 billion euro rights issue next year, has said its goal was between 7 percent and 7.5 percent. UniCredit has a price/earnings ratio of 22.75 on 2009 results, above the European sector average. UniCredit shares were up 0.6 percent at 0845 GMT, while the DJ Stoxx banks index was up 0.9 pct. (Reporting by Ian Simpson, writing by Boris Groendahl; editing by Will Waterman and Hans Peters) ($1=.6676 Euro) Keywords: UNICREDIT RESULTS/ Keywords: UNICREDIT RESULTS/ ([e-mail]; [phone]; Reuters Messaging: [e-mail]@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved.

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