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Banca Popolare beats profit forecast, CEO says market ‘volatile and nervous’

Profits at Banca Popolare di Milano beat estimates

Banca Popolare di Milano (BPM) posted a small rise in net profits for the first six months of the year, the Italian bank reported on Friday.

First-half net profit reached 158.1 million euros ($176 million), up 2.6 percent on the same period a year before. Second-quarter net profit read 109.8 million euros, versus an estimate of 74 million euros in an analyst poll from the bank, according to Reuters

Shares in the bank jumped Friday morning after the results were out to trade 2.9 percent higher on the day.

Shares of BPM have been on a sharp downward run since mid-2015, knocked by fears regarding the large pile of toxic loans in the Italian bank sector.

However, its results in the European Banking Authority (EBA)'s recent stress tests placed it and Italian rivals Intesa Sanpaolo and UBI Banca somewhere in the middle of peers for perceived resilience to a big economic shock.

"This situation is so nervous and volatile and news is so different coming from different supervisory authorities," BPM CEO Giuseppe Castagna told CNBC on Friday.

Giuseppe Aresu | Bloomberg | Getty Images

Italian Prime Minister Matteo Renzi has been keen to differentiate between the bulk of Italian banks and Banca Monte dei Paschi di Siena (BMPS), which performed poorly in the EBA's tests and is at work on a last-ditch recapitalization plan.

"My view is that Italian banks are good," Renzi told CNBC in Rome on Tuesday.

"There are some problems, yes. The first is Monte dei Paschi, we know," he added.

This was a view Castagna espoused on Friday.

"I think, just maybe, we have one situation that is a bit more delicate than others and that is of course Monte di Paschi," he told CNBC.

Renzi is keen to avoid either bailing-in junior bondholders of Monte dei Paschi or pumping in Italian taxpayers' money. However, the head of the Bank of Italy, Ignazio Visco, said on Friday that state aid for Italian lenders could not be ruled out, according to media reports.

In common with other European bank stocks, shares of Popolare tumbled immediately after the U.K.'s vote to leave the European Union on June 23. Popolare share fell by as much as 30 percent in the two days after the vote before paring some losses.

Italy now faces its own potentially destabilizing referendum on constitutional reforms in October or November, on which Renzi has staked his job.

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