Italy's largest bank by assets, UniCredit, reported Wednesday higher profit and a reduction in exposure to bad loans, but still suffered stock market falls amid lingering concerns about its financial solidity.

Reported net profit was 916 million euros (1.025 billion dollars) in the April-to-June period, more than double the previous quarter's profit, and higher than the 664 million euros analysts were expecting.

The bank's dubious loans portfolio fell 2.4 per cent compared to the previous quarter, to 77.1 billion euros in gross terms. The figures include 51.3 billion euros of loans gone definitively bad, with a coverage ratio of 61.6 per cent.

However, markets were not impressed: by about 4:30 pm (1430 GMT), UniCredit shares on the Milan stock exchange were down by more than 2 per cent, to little more than 1.8 euros.

Shares have slumped by more than 15 per cent since Friday, when European stress tests showed that UniCredit's CET 1 figure - a key index of financial strength that compares the bank's holdings to its debts - would fall to a lowly 7.1 per cent in case of a severe economic downturn.

UniCredit said its CET 1 ratio now stands at 10.53 per cent, counting recent sales of stakes in Polish bank Pekao and Italy's FinecoBank, and would rise to 10.65 per cent after divesting card processing operations in Italy, Germany and Austria.

The Milan-based lender expects to raise 1.5 billion euros from the three deals.

In a conference call to present Wednesday's results, chief executive Jean-Pierre Mustier said UniCredit would "not hesitate to seize [more] capital enhancing opportunities" but deflected questions on further moves to shore up the bank.

Mustier said he was leading a "strategic review" of operations and that the results would be announced "before the end of the year" at an investors' day event in London. "Hurry without haste aptly describes our current modus operandi," he said.

Due to UniCredit's low capital base relative to peers, analysts expect more asset sales or other recapitalization measures in the near future. They estimate that the lender needs to raise 7 billion euros to 8 billion euros.

The CET 1 figure at UniCredit's main competitor in Italy, Intesa Sanpaolo, stands at around 13 per cent.

UniCredit is not the only Italian lender under pressure. Monte dei Paschi di Siena (MPS) was the worst performer in Friday's stress tests, and has presented a plan to get rid of its most dubious loans and embark on a recapitalization bid of up to 5 billion euros.

Mustier, who has been in the job for less than a month, told analysts there was no need for UniCredit to follow MPS' example and sell off bad loans to a third party. "We feel that the coverage on our non-performing loans [...] is adequate," he said.

Bad loans exposure is problem for most Italian lenders. In addition, UniCredit stressed its already shaky finances earlier this year by agreeing to underwrite the 1.5-billion-euro recapitalization of a smaller peer, Banca Popolare di Vicenza.

That burden was passed on to Atlante, a bank rescue fund financed by private banks with some help from state-controlled entities, in April. Atlante is now involved in efforts to relieve MPS of its bad loans portfolio.

Latest news

Syrian opposition rules out future role for President al-Assad

The Syrian opposition said Friday it would not accept any role for President Bashar al-Assad in the future of the war-torn country, reacting to a recent US shift saying that removing al-Assad is no longer a priority for Washington.

Russian Army integrates breakaway forces of Georgian province

Parts of the small fighting forces of the Georgian breakaway province of South Ossetia have been placed under Russian military control, Russian Defence Minister Sergei Shoigu said on Friday.

Czech Republic's Pilsner Urquell beer is now Japanese

Japanese brewing company Asahi completed its takeover of the Czech brewery Pilsner Urquell on Friday, Asahi said in a statement.

Judge approves 25-million-dollar settlement of Trump University case

A US district judge on Friday approved a 25-million-dollar settlement of lawsuits and state fraud allegations against Trump University, the US president's now-defunct business venture.

Former Thai premier Thaksin to junta on reconciliation: 'Cut me out'

Former Thai prime minister Thaksin Shinawatra on Friday announced that he is not interested in the junta-led reconciliation process, three days after the junta handed him a half-a-billion-dollar tax bill for his past business deal.

Dalic: We welcome possible deal between Agrokor and banks

The government welcomes the possibility of an agreement being concluded between the Agrokor food company and creditor banks, and the bill on vitally important companies is not a fallback plan but the result of the government's care for the overall economic and financial stability of Croatia, Deputy Prime Minister and Minister of Economy Martina Dalic told a press conference in Zagreb on Friday.

Croatia, China sign action plan for cooperation in agriculture

The Croatian and Chinese ministries of agriculture on Friday signed an action plan for cooperation in the field of agriculture for the period 2017-2018, the Croatian ministry said in a statement.

ZSE indices up, Agrokor shares in focus of investor interest

The Zagreb Stock Exchange (ZSE) indices on Friday rose by more than 1.8%, with stocks of the Agrokor food and retail concern being in the focus of investor interest again.

Berlin police defend handling of Berlin market attacker

Berlin police defended themselves on Friday against accusations that they stopped surveillance on Berlin Christmas market attacker despite knowing in June 2016 he was dangerous.

Croatia, creditors tailor emergency measures to save tottering giant

Croatia's tottering retail and food giant Agrokor reached an agreement with its creditors, putting its debts standby and allowing it to continue working during emergency restructuring, the Croatian branch of Austria's Erste Bank said Friday.

Agrokor's creditors say standstill agreement to go into force today

A standstill agreement regarding the Agrokor concern's existing financial obligations to banks will take effect on Friday, additional capital will be injected into the concern in the coming days and the concern will be actively restructured, which includes a change of its management, it was said on Friday after a meeting between Agrokor's suppliers and creditor banks.

Palestinians, UN slam Israel's new settlement plan

Palestinians, Israeli activists and the UN lambasted the government of Israeli Prime Minister Benjamin Netanyahu on Friday, a day after it gave the go-ahead for the first new West Bank settlement in a quarter of a century.

South Sudan rebels release three abducted foreign oil workers

South Sudanese rebels have released three foreign engineers they abducted in early March in the oil-rich Upper Nile region, Foreign Affairs Ministry official Mawein Makol Arik said on Friday.

Turkish opposition: Imprisoned party chief has gone on hunger strike

The head of Turkey's pro-Kurdish opposition party has launched a hunger strike from prison.

European leagues threaten Champions League schedule clashes

The European Professional Football Leagues (EPFL) on Friday threatened schedule clashes on Champions League matchdays in an ongoing dispute with the governing body UEFA.

Danish court revokes citizenship of IS volunteer

A Danish appellate court on Friday stripped a man of his Danish citizenship for volunteering to fight for the extremist Islamic State in Syria.

Banks and Agrokor agree on key elements of standstill agreement

Member banks of the coordinating committee of financial creditors and representatives of the Agrokor food company have in principle agreed on key elements of a standstill agreement, which is expected to be signed later today, announcing changes in the company's management team, Erste Bank said in a statement on Friday afternoon.

Syrian man on trial in Sweden; mosque attack labelled terrorism

A Syrian man went on trial Friday in the southern Swedish city of Malmo, charged with terrorism and arson after an attack last year on a building used as an assembly hall by Shiite Muslims.