UniCredit to return 50 billion euros to investors over five years

[MILAN] UniCredit plans to return about 50 billion euros (S$75.3 billion) to investors till 2030, as chief executive officer Andrea Orcel vows to further improve its profitability and capital generation over the next five years.

In a statement on Monday (Feb 9), the Milan-based bank said that it will pay out 80 per cent of its profit in a mix of cash dividends and share buybacks as ordinary distribution. It will also evaluate additional returns on a yearly basis, depending on its excess capital.

The bank expects its net revenue to grow at an annual rate of 5 per cent, pushing its profit to about 11 billion euros in 2026, and 13 billion euros in 2028.

Since taking the helm in 2021, Orcel has cut jobs, exited low-performing businesses and reallocated resources to more profitable areas.

The chief executive is counting on the higher income from fees to boost the bank’s revenue as pressure on its lending margins increase, while shifting resources at the bank’s commercial network to gain market share.

UniCredit announced new financial targets as its Q4 profit grew by 10 per cent and beat analysts’ estimates.

The company had fiscal benefits and one-time gains, but these were offset by the more than one billion euros spent in integration costs, and its expenses to hedge its strategic portfolio.

The expenses pushed the bank’s relatively small trading book into the red for the quarter, and weighed on its revenue.

Its capital buffer remained solid, with a Common Equity Tier 1 ratio of 14.7 per cent as at end December, against 14.8 per cent in the previous quarter. 

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The buffer is key to its ability to do deals and/or return money to its shareholders.

Under Orcel, the bank’s profitability and shareholders returns have soared.

The shares of the lender have surged more than 700 per cent since he took over, allowing the former investment banker to go on a shopping spree as the deals across Europe heat up.

However, his moves on Italian Banco BPM and German Commerzbank are currently stalled, after UniCredit ran into government opposition.

While Orcel is focusing on expanding the bank’s existing business for now, his shopping tour has left UniCredit with large stakes in the German bank as well as Alpha Bank in Greece, where the government has been more welcoming to his approach.

“Our ambition is consistently delivering outperformance in profitable, capital generative growth and distributions, and we are confident that we can sustain this trajectory in the coming five years,” he added. BLOOMBERG