Chief executive Jean Pierre Mustier warns the bank will have to revise its business plan

UniCredit, Italy’s largest bank, slumped to first-quarter loss as the coronavirus pandemic ravaged the country’s economy.
Led by chief executive Jean Pierre Mustier, UniCredit reported a net loss of €2.71bn in the first three months of the year when the eruption of the virus forced the government to lockdown the economy. The bank set aside €1.26bn to cover an expected rise in bad loans as businesses fail.
Revenues for the first quarter of 2020 fell to €4.37bn from €4.76bn in the first quarter of 2019, the bank said, despite a strong performance in the first two months of the year with lending and fees income above estimates.
Mr Mustier warned that because of the “highly uncertain environment” the bank will update its business plan in the coming months.
The first-quarter loss compares with a net profit of €1.17bn in the first three months of 2019.
UniCredit is left grappling with the pandemic after Mr Mustier late last year hailed “the best quarter in a decade” and unveiled a four-year strategic plan that included increasing dividends and a €2bn share buyback.
The lender had already put dividend payouts on hold in March after the European Central Bank’s recommendation. In April, the bank said it expects the eurozone’s economy to contract by 13 per cent this year.
On Tuesday, rival Intesa, which reported a surprise 10 per cent increase in first quarter net profits, said it was setting aside €300m for Covid-19 related risks and that it would pay out 75 per cent of the 2020 profit as dividends if regulators allow it.
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Italy has been one of the hardest-hit countries in the world by Covid-19 and was the first European nation to enter a full economic lockdown in March. While the restrictions have begun to ease this week and 4.5m Italians are back at work, rating agency Fitch estimated that the country’s economy will contract by 8 per cent this year and public debt is forecast to rise to around 160 per cent of GDP.
Analysts expect the country’s bad loan pile to increase again this year after sharply declining in the three years from 2017. Italian rating agency Cerved has warned the number of small business defaults could double if the economic restrictions last through 2020.