MILAN (Reuters) - Italy's third-largest lender Banco BPM
The bank, which was one of the weakest performers in last week's Europe-wide stress tests of the sector, said net profit for July-September came in at 172 million euros (149.87 million pounds), ahead of an average estimate of 160 million euros in a Reuters survey.
In September BPM sold its depositary bank business to French rival BNP Paribas
The sale also helped it to offset the hit on core capital from rising Italian bond yields.
Italy's populist government has locked horns with the European Commission over an expansionary 2019 draft budget, sparking a sell-off of Italian assets which drove up Italian bond yields.
Banco BPM's core capital ratio stood at 11.2 percent of assets on a fully loaded basis at the end of September compared with 10.8 percent at the end of June.
The bank had seen its core capital badly hit in the second quarter due to the falling value of the Italian government bonds it holds.
To preserve its capital, BPM said it had also reclassified some of the government bonds on its balance sheet, reducing the hit from rising risk premiums on Italian bonds.
Banco BPM lags bigger rivals Intesa SanPaolo
Banco BPM said it would evaluate bids due by mid-November to sell up to 8.6 billion euros in bad loans.
Banks normally offload bad debts at a loss and shrinking capital buffers reduce their room for manoeuvre.
(Reporting by Valentina Za; Editing by Susan Fenton)