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MILAN — Unicredit Chief Executive Alessandro Profumo acknowledged Monday that Italy's largest bank had underestimated the significant market changes since the collapse of the U.S. investment bank Lehman Brothers, forcing the board to seek a capital increase and cut profit forecasts.
"In the last month there have been significant and difficult changes," Profumo told a conference call Monday, the day after the Unicredit board of directors approved a plan to increase its capital by up to 6.6 billion euros ($9.13 billion). "We made some mistakes in evaluating the market scenario."
Unicredit cut its earnings estimates for 2008 by 25 percent, saying that earnings per share would be 0.39 euros (54 cents) for 2008 without the new capital. The previous target was 0.52 euros (72 cents) per share.
"The gap ... is attributable both to deteriorated financial market conditions ... and to the delay in (the) Unicredit assets disposal plan," the bank said in a statement Sunday.
Unicredit shares dropped 13.4 percent to 2.60 euros ($3.60) on opening Monday.
The bank also raised its capital ratio goal to 6.7 percent by the end of the year, from the previous goal of 6.2 percent. The Core Tier 1 ratio is a sign of health of a financial institution. The bank also will enact cost-cutting measures.
The bank last week said it would sell off real estate assets as part of the effort to improve the capital ratio.
Unicredit's shares have plummeted in the last week as the impact of the financial meltdown has spread.
On Thursday, Unicredit began selling 2.3 billion euros ($3.24 billion) of bonds aimed at individual investors. A bank official said the sale had been planned for weeks.
Unicredit is Italy's biggest bank by assets, with more than 1 euro trillion ($1.43 trillion) in assets. It is among Europe's top five for assets, but the loss in share value puts it only among the top 10 for market capitalization.
