UniCredit pledged on Tuesday to return 5.25 billion euros ($5.69 billion) to investors based on 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 the necessary green light from European Central Bank supervisors. Lenders needs 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. Net profit came in at 2.46 billion euros in the three months through December, more than twice an average forecast of 1.10 billion euros ($1.2 bln) from 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. UniCredit said income from its core lending activity 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.
That Drove Overall Quarterly Revenues To 5.72 Billion Euros, Above a 5.12 Billion Euro Average Forecast.
Orcel, former investment banking chief at UBS, has bet on shareholder remuneration to boost the appeal of his bank’s shares, which traditionally traded at a discount to the sector. Keeping tight control of costs, he has focused on generating capital to return to shareholders, who 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%.