UniCredit shares surged on Monday after the Italian bank announced a higher profit outlook for 2024 and a plan to increase its capital distributions to shareholders. The bank also reported a strong fourth-quarter result, beating analysts’ expectations.
UniCredit Raises 2024 Profit Guidance and Capital Distributions
UniCredit said that it expects to achieve a net profit of EUR8.6 billion in 2024, up from its previous forecast of at least EUR7.25 billion. The bank also said that it plans to distribute EUR10 billion to shareholders in 2024, up from EUR6.5 billion previously. The bank said that the increased guidance and distributions reflect its improved operating performance, lower cost of risk, and higher capital generation.
The bank said that it will distribute EUR8.6 billion to shareholders in 2023, corresponding to its 2022 net profit. This includes dividends and share buybacks, and represents an increase of EUR3.35 billion compared with 2021 distributions. The bank said that it will propose a dividend of EUR0.75 per share for 2021, up from EUR0.63 per share for 2020.
UniCredit said that it aims to achieve a return on tangible equity (ROTE) of more than 10% in 2024, up from its previous target of more than 9%. The bank also said that it targets a common equity tier 1 (CET1) ratio of more than 13% in 2024, up from its previous target of more than 12.5%.
UniCredit Posts Strong Fourth-Quarter Result
UniCredit also reported a strong fourth-quarter result, with a net profit of EUR2.81 billion, up from EUR2.46 billion in the same period a year ago. The result was above the consensus estimate of EUR2.65 billion, according to a poll of analysts by FactSet. The bank said that the result was driven by higher net interest income, lower loan-loss provisions, and a positive tax effect.
The bank’s revenue rose 4.6% year-on-year to EUR5.98 billion, above the consensus estimate of EUR5.77 billion. The bank’s net interest income increased 6.4% to EUR2.77 billion, while its net fee and commission income rose 3.9% to EUR1.86 billion. The bank’s trading income jumped 28.6% to EUR638 million, boosted by favorable market conditions.
The bank’s cost of risk, which measures the amount of money set aside for bad loans, fell 43.5% year-on-year to EUR496 million, reflecting the improved macroeconomic outlook and the lower inflow of impaired loans. The bank’s non-performing loan (NPL) ratio, which measures the proportion of bad loans to total loans, declined to 4.6% at the end of 2023, from 5.1% at the end of 2022.
The bank’s CET1 ratio, a key measure of financial strength, stood at 15.1% at the end of 2023, up from 14.4% at the end of 2022. The bank said that it generated EUR2.3 billion of organic capital in 2023, and that it expects to generate EUR2.5 billion of organic capital in 2024.
UniCredit Shares Rally on Positive News
UniCredit shares rallied on the positive news, as investors welcomed the bank’s improved profitability, capital strength, and shareholder returns. The bank’s shares closed 9.8% higher at EUR29.30 on Monday, outperforming the Stoxx Europe 600 Banks index, which rose 2.4%. The bank’s shares have gained nearly 63% over the past year, compared with a 5.9% rise in the index.
Analysts also reacted positively to the bank’s news, raising their price targets and ratings on the stock. Barclays analysts upgraded the stock to overweight from equal weight, and increased their price target to EUR34 from EUR28. They said that the bank’s guidance and distributions were well above expectations, and that the bank had a clear strategy to deliver sustainable returns. Jefferies analysts also upgraded the stock to buy from hold, and raised their price target to EUR32 from EUR25. They said that the bank’s results and outlook were impressive, and that the bank had a strong capital position and a low risk profile.
UniCredit is one of the largest and most diversified banks in Europe, with operations in 13 countries and more than 80 million customers. The bank offers a range of products and services, such as retail banking, corporate banking, investment banking, asset management, and insurance. The bank is led by CEO Andrea Orcel, who took over in April 2023, and has been implementing a transformation plan to boost the bank’s efficiency, profitability, and growth.