- Raises capital distribution target by 40%
- Shares jump almost 8% to near 5-year high
- Sees 2023 distribution, profit in line with 2022
MILAN, Jan 31 (Reuters) – UniCredit (CRDI.MI) on Tuesday pledged to return 5.25 billion euros ($5.69 billion) to investors from its 2022 results after posting a record quarterly profit as CEO Andrea Orcel works to meet his ambitious payout plans.
Orcel, who has focused UniCredit on capital light businesses to maximise returns since taking over in April 2021, expressed confidence in receiving approval from European Central Bank supervisors.
His upbeat tone contrasted with the cautious note struck by rival UBS (UBSG.S), Orcel’s former employer, which also reported on Tuesday. Shares in UniCredit soared 7.8% to a near five-year high.
Lenders need ECB approval for share buybacks, which account for almost two thirds of UniCredit’s 2022 capital distribution target in addition to cash dividends.
“We’ve had extensive discussions with the regulators over the distributions and we feel very confident that we will get authorisation to execute them,” Orcel told a media briefing.
European banking supervisors have urged lenders in the bloc to prudently preserve capital while higher rates and energy bills cloud the economic outlook.
However, the receding chances of a recession in the bloc as the energy price squeeze eases have boosted banking shares, with investors less wary of regulators hindering generous capital distribution plans.
“We read the strong top-up in shareholder remuneration very positively for UniCredit and for those banks with solid capital, overlays, increasing profitability and clean asset quality,” Mediobanca Securities said.
Unicredit’s net profit of 2.46 billion euros for the quarter to December 31 was more than twice the 1.10 billion euros expected by analysts polled by the bank.
The figure includes 852 million euros in tax credits stemming from past losses which UniCredit was able to factor back in thanks to its higher profitability.
The tax boost more than offset an increase in generic loan loss provisions against future shocks, known as overlays, to 1.8 billion euros from 1.3 billion.
UniCredit said income from lending jumped 38% from the previous quarter and 43% from a year earlier, as tighter monetary policy widened the gap between rates banks charge on loans and those they pay to raise funds.
Its revenue for the quarter rose to 5.72 billion euros, above a 5.12 billion euro average forecast.
Orcel, UBS’ former investment banking chief, has bet on shareholder remuneration to boost the appeal of his bank’s shares, which have traditionally traded at a discount to the sector.
Shareholders received 3.75 billion euros as dividends and share buybacks from 2021 earnings.
With a goal of paying out more than 16 billion euros in dividends and buybacks by 2024, UniCredit said it aimed for a 2023 profit distribution target in line with 2022.
It also sees its 2023 net profit in line with 2022 including its Russian business, which it had previously excluded from its profit goal after the Ukraine war broke out.
“We no longer see Russia as a source of substantial volatility,” Orcel said.
UniCredit has reduced its cross-border exposure to Russia by 66%, but failed to extricate itself from the country where it owns a top 15 lender.
The bank said its core capital rose to 16% in the fourth quarter, from 15.41% at the end of September.
When taking into account its most recent distribution plans, pro-forma core capital was 14.9%, still well above its target of 12.5-13.0%.
Reporting by Valentina Za; editing by Gavin Jones and Jason Neely