UniCredit Shares Jump on 4Q Results
06 February 2020 - 9:13PM
Dow Jones News
By Pietro Lombardi
Shares in UniCredit SpA (UCG.MI) trade sharply higher on
Thursday after the bank posted better-than-expected results for the
fourth quarter and said it may return a bigger share of profits to
shareholders in the coming years.
The consensus-beating performance closes a strategic plan the
bank launched to tackle a number of issues, including a large pile
of bad loans. Under the strategy, it cut costs and disposed of
soured loans worth billions of euros. After completing a deep
overhaul, which also included selling assets, in December the
lender established a new four-year plan under which it pledged
share buybacks and dividend increases, as well as job and cost
cuts.
The loss for the period was 835 million euros ($920 million),
better than the EUR1.10 billion loss analysts had forecast,
according to a consensus provided by the bank. This compares with a
profit of EUR1.99 billion a year earlier when an extraordinary tax
effect boosted results.
On an underlying basis, net profit rose almost 69%.
The payout ratio could increase to 50% of underlying earnings
starting this year and extraordinary capital distribution in 2021
and/or 2022 will also be considered. The plan presented in December
guided for capital distribution of 40% through 2022.
"We see only positive news from this set of results: better than
expected 4Q19 results, stronger capital base, and possible upwards
revision of the dividend policy," Banca IMI analyst Manuela Meroni
said.
The bank said it would pay a dividend of EUR0.63 a share for
2019 and proposed a share buyback of EUR467 million.
UniCredit significantly strengthened its capital position in the
quarter. The core tier 1 ratio--a key measure of capital
strength--rose to 13.09% at the end of December, including the
buyback, from 12.60% in September.
"We enjoy a solid balance sheet," Chief Executive Jean Pierre
Mustier said.
"We will consider increasing the capital distribution to 50% for
FY2020, paid in 2021, and for the remainder of the plan. As we have
said before, we much prefer share buybacks over M&A. This has
not changed."
Revenue rose 3.4% to EUR4.85 billion, boosted by fees and
trading income, also topping expectations of EUR4.66 billion.
Fees rose 5.1% while trading income more than doubled. This
offset a 7.3% fall in net interest income--the difference between
what lenders earn from loans and pay for deposits--and is a key
profit driver for retail banks.
The results for the quarter were hit by a number of one-offs,
including restructuring costs in Germany and Austria, costs related
to the sale of a stake in Turkish bank Yapi Kredi, and provisions
for bad loans.
At 0940 GMT, UniCredit shares trade 5.8% higher.
Write to Pietro Lombardi at pietro.lombardi@dowjones.com
(END) Dow Jones Newswires
February 06, 2020 04:58 ET (09:58 GMT)
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