UniCredit, Italy's biggest bank, said on Wednesday third-quarter net profit rose an underlying 19 percent to 1.122 billion euros ($1.6 billion), although its investment banking profits were hit by the credit markets crisis.

Analysts had expected UniCredit to post a net profit of 995 million euros, according to a consensus published on the bank's own Web site.

The bank said its investment banking division's pre-tax profit fell by 215 million euros to 123 million euros as it was hurt by the 'mark-to-market' valuation of structured credits.

The bank, the most international of all Italian banks, also said that its net trading, hedging and fair value income was a negative 11 million euros in the quarter due to the U.S. subprime mortgage market crisis.

Including extraordinary items Unicredit's net profit would have fallen by 23 percent as the bank had posted a third-quarter profit of 1.462 billion euros in 2006 which benefited from extraordinary capital gains from asset sales.

The bank is one of the largest players in Germany, another market heavily hit by the subprime-led credit crisis, through its purchase of HVB in 2005.

UniCredit, which acquired smaller domestic peer Capitalia in October, said its nine-month pro-forma net profit for the combined bank was 5.3 billion euros.

UniCredit also said its core Tier 1 ratio, which indicates regulatory capital put aside against risk, was 5.98 percent. For the combined group, the pro-forma core Tier 1 ratio at the end of this year's nine months was 6.03 percent.

(Editing by Greg Mahlich)