Italy’s UniCredit beats profit forecast and drops Russia deal

The UniCredit bank logo is seen in Siena, Italy June 29, 2017. REUTERS/Stefano Rellandini/File Photo

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  • 2021 revenue and underlying profit beat expectations
  • Drops deal with Russia due to geopolitical tensions – CEO
  • Seals insurance contracts with Allianz in Italy, Germany and CEE
  • Stocks outperform Milan index

MILAN, Jan 28 (Reuters) – Italian bank UniCredit (CRDI.MI) reported better-than-expected 2021 results on Friday as new chief executive Andrea Orcel’s efforts to boost revenue began to bear fruit amid costs remained under control despite the increase in wages and a -excluding charges.

UniCredit, the only bank Italian supervisors deem globally systemically important, also confirmed it was no longer exploring a potential bid for Russian lender Otkritie Bank due to ongoing geopolitical tensions with Moscow over Ukraine.

Orcel is betting on bold capital distribution plans to boost UniCredit shares and the bank has announced it will distribute 3.75 billion euros ($4.2 billion) to shareholders, with a dividend of 1 .17 billion euros and a share buyback of 2.58 billion euros.

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UniCredit shares, which are currently trading at a discount to their rivals, rose 2% in early trading, outperforming a flat Milan stock index (.FTMIB).

“Increasingly,” Citi analysts said, adding that the results “already showed evidence of the group’s new strategy and supported improved overtime performance.”

Orcel’s track record in investment banking has fueled expectations that UniCredit will pursue a merger or acquisition despite pulling out of a bailout deal for rival Monte dei Paschi (BMPS.MI) in October after failing to agree on terms.

The former Merrill Lynch banker said UniCredit would continue to review its M&A options, but he ruled out pursuing deals of a size that would undermine UniCredit’s goal of returning capital to shareholders. in the years to come.

“When I make a promise, I keep it,” he told reporters.

Shares of UniCredit had soared 19% on Thursday since it pledged on December 9 to raise more than €16 billion in capital by 2024 and give it to shareholders via dividends and buyouts. .

THE ABANDONED RUSSIAN AFFAIR

Earlier this month, reports that UniCredit was considering a bid for Russian bank Otkritie hurt its shares as markets worried about increased geopolitical risks and a threat to the company’s capital return targets. the bank.

UniCredit has now abandoned the deal due to the political situation, Orcel said.

He said, however, this was in line with the bank’s payment targets, as UniCredit would have swapped its existing local business for a majority stake in Otkritie when the Russian central bank listed it.

UniCredit said 2021 revenue was €18 billion, ahead of its forecast by more than €16 billion. He said underlying profit was 3.9 billion euros, again above his forecast of more than 3.7 billion.

“Operational performance was better than expected with total revenue up 4.8% year-on-year,” brokerage Banca Akros said.

Overall costs were also lower than the bank’s forecast, despite the increase in executive variable compensation. UniCredit also announced a Tier 1 capital ratio slightly above expectations.

Restructuring costs and other charges related to the disposal of non-strategic assets under the 2022-2024 plan that Orcel unveiled on December 9 resulted in a loss of 1.44 billion euros in the October quarter to December, above an average forecast of 1.15 billion euros in a business-provided analyst consensus.

UniCredit said it has entered into new insurance agreements with Germany’s Allianz (ALVG.DE) to boost commission income in the coming years. Orcel also said UniCredit would continue to streamline its multiple insurance partners.

Under the new agreement with Allianz, which owns 3.13% of UniCredit, the Italian lender will be able to distribute its own products through the insurer’s digital platform.

The two partners also extended their agreements in Italy, which would have expired this year, until 2027, with an option for UniCredit to leave from 2024, although Orcel said it did not expect this. let it be exercised.

($1 = 0.8987 euros)

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Additional reporting by Gianluca Semeraro; Editing by Agnieszka Flak and David Clarke

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