UniCredit unveils €16bn in shareholders returns

Italy’s second-largest bank UniCredit has unveiled ambitious profit targets and said it is planning to distribute more than €16bn to shareholders by 2024.

The bank’s new three-year strategy, under chief executive Andrea Orcel, will target 10 per cent annual net profit growth, driven mainly by higher fee income, to reach more than €4.5bn a year by the end of the period.

Talking to reporters Orcel, who promised to increase profitability when he took charge in April, said it was time “to unlock the potential of UniCredit” adding there would be a “substantial uplift in shareholder return”. The bank plans to distribute at least €16bn to investors, or 100 per cent of its underlying profits, through dividends and a share buyback programme.

Some €3.7bn will be distributed as soon as 2022 with around 70 per cent of underlying profit to be distributed through share buybacks.

UniCredit shares rose by 9 per cent after the plan was made public.

Jefferies analyst Benjie Creelan-Sandford said the targeted capital return “is comfortably ahead of our €10bn base case and is equivalent to 60 per cent of market [capitalisation]”.

Former chief executive Jean Pierre Mustier’s capital distribution plans had been thwarted by the pandemic and restrictions imposed by the European Central Bank. UniCredit shares are still well below pre-Covid levels and trade at a discount to peers.

ECB restrictions have now been lifted and the new plan would in effect double shareholder returns.

At the end of October, UniCredit reported a 55 per cent rise in profits compared with a year earlier. Its €1.1bn of pre-tax profits for the third quarter were 21 per cent ahead of analysts’ forecasts, while its €4.4bn of revenues also beat expectations.

The lender also raised its outlook for underlying net profit for the year from €3bn to €3.7bn on rising revenues.

The new strategy envisages 1,500 new hires, 900 of them in Italy but UniCredit also said on Thursday that it was planning to cut €1.5bn in costs including by reducing headcount in certain departments and by bringing some work back in-house.

Two months ago, UniCredit pulled out of a deal with the government to privatise ailing rival Monte dei Paschi di Siena. Orcel said on Thursday “we are 110 per cent focused on delivering the plan” and while he did not rule out deals in future, none were currently planned.

The new strategy would “generate a substantial amount of organic value”. Orcel said. Mergers and acquisitions would be considered only if they contributed “to accelerate our results and our return on tangible equity target”.

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