MILAN (Reuters) - Italy's biggest bank UniCredit (MI:CRDI) strengthened its closely-watched core capital ratio in the third quarter, selling assets and cutting loans to clients after new chief executive Jean Pierre Mustier took over in early July.
The bank said its best-quality CET1 capital stood at 10.82 percent of assets at the end of September, up from 10.33 percent three months earlier and above many analysts' expectations.
Its shares extended gains after the results and were up 6.7 percent by 1441 GMT, outperforming a 3.7 percent rise in Italy's banking stock index (FTIT8300).
UniCredit hired Mustier with a mandate to boost its capital base, which lags that of several large European rivals. The French banker is conducting a strategic review of all assets and will present a new business plan on Dec. 13.
Decisions taken under the plan over the bank's assets and its loan portfolio could significantly affect fourth-quarter results, UniCredit said in Thursday's financial statement.
Sources have said UniCredit may look to raise as much as 16 billion euros through asset disposals and a planned share sale. The bank is also expected to sell a significant portion of its 51 billion euros (£44.82 billion) in gross bad loans.
On his arrival, Mustier sold stakes of 10 percent in both online business FinecoBank (MI:FBK) and Polish unit Bank Pekao (WA:PEO), which helped boost the bank's third-quarter core capital together with an 8 billion euro drop in client loans.
"The evolution of our core capital is a consequence of the in-depth review launched in July," Chief Financial Officer Mirko Bianchi told analysts. "We have decided to take a pro-active approach."
Mustier said the bank wanted to have a "decent buffer" over minimum regulatory capital requirements and would disclose its target on Dec. 13.
The European Central Bank has set a minimum capital threshold of 10 percent for UniCredit this year, rising by 25 basis points each year to reach 10.75 percent in 2019.
Mustier sold a further 20 percent of Fineco in October and is in talks with Poland's PZU (WA:PZU) over Pekao. A deadline to present binding bids for UniCredit's Pioneer Investment asset manager expires on Thursday.
UniCredit's third-quarter profit fell 12 percent year-on-year to 447 million euros, slightly below analysts' average forecast of 467 million euros in a consensus provided by the bank.