MILAN, Nov 7 (Reuters) - Italy's biggest bank UniCredit on Thursday stuck to its targets for the year after posting a 26% rise in adjusted net profit in the third quarter, thanks to trading gains and steady fees which offset a shrinking interest income.
The bank said net profit in July-September totalled 1.1 billion euros ($1.2 billion), both in reported terms and when adjusted for one-off items including the sale of its remaining stake in online bank Fineco in the period.
Lower-than-expected provisions against loan losses in the quarter also boosted earnings.
Analysts had looked on average for net profit of 1.01 billion euros on revenue of 4.57 billion euros, based on a consensus compiled by the bank.
UniCredit's third-quarter results last year were hit by an impairment of its Turkish assets and the settlement of an Iran sanctions case with Washington.
In keeping with a strategy of shedding non-core assets under Chief Executive Jean Pierre Mustier, UniCredit late on Wednesday said it had sold its entire 8.4% stake in the illustrious Milanese merchant bank Mediobanca, where it had been the group's biggest shareholder.
The sale distances UniCredit from an investor feud at Mediobanca, where billionaire Leonardo Del Vecchio recently built a 7.5% stake and challenged the top management's strategy.
UniCredit said revenue totalled 4.7 billion euros in July-September, boosted by its trading business. Fees improved from a year earlier while income from the traditional lending activity shrank 5%.
The bank boosted its core capital to 12.6% of assets in the quarter helped by the sale of the Fineco stake.
It also lowered the share of problem loans on total lending to 5.7%, the best level among leading Italian banks.
Mustier, a French investment banker who started as CEO at UniCredit in mid-2016, has been selling assets and raising cash to clean up the bank's balance sheet from impaired debt.
He is now working to reduce the bank's exposure to Italy, a strategy which is set to help UniCredit improve its funding conditions. The bank will present a new business plan on Dec. 3 which Mustier said would be called 'Team 2023'.
UniCredit said it had cut its holdings of Italian government bonds by 3.6 billion euros in the quarter. (Reporting by Valentina Za, editing by Silvia Aloisi and Emelia Sithole-Matarise)