UniCredit raises shareholder payouts by 40% after record profit

UniCredit intends to return €5.25bn to shareholders this year after record profits in 2022 accelerated chief executive Andrea Orcel’s payout plans.

The Milan-based bank said on Tuesday it would boost capital distribution this year by 40 per cent, compared with last year, as part of its goal to return €16bn by 2024.

Orcel’s ambitious payout plans are core to the lender’s strategy to increase the bank’s share price, which has long lagged behind peers.

The increase comes after UniCredit recorded net profits of €2.46bn in the three months to December, more than double analysts’ forecasts and twice what the bank made in the same period last year. The figure includes deferred tax credits of €850mn.

Annual profits rose to €5.2bn in 2022, an increase of almost 48 per cent from the previous year.

“2022 was our best year ever,” Orcel told a conference call on Tuesday.

Shares in UniCredit rose as much as 8.5 per cent to €17.30 in morning trading.

The European Central Bank will have to approve the proposed share buyback, which makes up €3.34bn of the new payout target.

The Financial Times reported in November the ECB had objected to UniCredit’s plans, saying it ran contrary to official guidance that “banks should not set their dividend policies in terms of absolute amounts”.

After the record quarterly profit, Orcel said on Tuesday that he was confident the ECB would grant its authorisation for the payouts.

UniCredit said its common equity tier one, a closely watched measure of balance sheet strength, rose to 16 per cent of risk-weighted assets as higher profitability and lower costs outweighed strong inflationary pressures.

The bank’s quarterly revenues jumped 20 per cent to €5.4bn, as tighter monetary policy drove a 38 per cent increase in revenue from its loan book in the quarter. The figure rises to more than €5.7bn when revenues from UniCredit’s Russian business are included.

While the Russian unit’s profits were negative for 2022, due to loan loss provisioning and a gradual downsizing of the business, revenue in the fourth quarter was €354mn, up 88.2 per cent on the previous year driven by exceptionally high interest rates in the country and a strong local currency.

The bank estimates this year’s net profit will be in line with 2022, despite the fact that Italy and Germany — its largest markets — are expected to take a further hit from the energy crisis and rising interest rates.

The 2023 guidance includes UniCredit’s Russian activities. The impact of Russia on the group’s business had been excluded from profit targets last year due to the uncertain impact of the war in Ukraine on the lender’s activity.

“We no longer see Russia as a source of substantial volatility,” Orcel said.

The lender said it reduced its exposure to Russia by €4bn in 2022. However, unlike most of its European peers, it has so far opted to maintain its ownership of a local lender, raising further concerns with the regulator.

The exposure is “well managed and highly provisioned”, UniCredit said.


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