Mediobanca's BoD approved the guidelines of the 2023-26 Plan aiming at the growth of profitability and shareholder remuneration.
However, the economic and regulatory context, says a note from the investment bank, is "challenging for the entire financial sector (low economic growth, inflation, stringent regulations, tightening of monetary policies)".
Nigel: Growth will be capital-intensive
“With the “One brand-One culture” plan, Mediobanca intends to achieve substantial growth in capital-light businesses, aiming to achieve the best returns in the sector, associated with a low risk profile and a significant increase in shareholder remuneration ” commented the CEO Albert Nagel. "This exciting journey will be accomplished by remaining anchored to the "school of responsible banking" firmly rooted in the bank's DNA".
Revenue seen up 6%. The biggest weight from the WM
In detail, Mediobanca aims at revenues up to €3,8 billion (+6%) with solid contributions from all business segments. The Wealth Management (WM) will have the highest organic growth rate (+10%) and is expected to exceed €1 billion in revenues, becoming the top contributor to group fees complementing Corporate & Investment Banking (CIB), whose revenue growth is expected to be equal at 11% (7% organic) up to 0,9 billion; Consumer Finance (CF) will maintain its role as engine of interest margin growth (around two-thirds of the total) with overall revenue growth of 5% (to around €1,3bn).
Earnings per share seen up 15%
The investment bank provides a earning per share growing by 15% on average in each year and therefore the EPS should go from around 1,15 euro to 1,8 euro, considering the cancellation of around 80% of the shares deriving from the plan buyback, with the growing contribution of Wealth Management and Corporate & Investment Banking and with a minor but further growth of the Consumer Finance and Insurance segments, which confirm the high levels of profitability.
Management also expects growth in profitability at institutional level (ROTE to 15% from 12%, RORWA to 2,7% from 2,1%) and divisional: Wealth Management is expected to record the largest increase in profitability, rising from 2,9% to 4,0% ; Corporate & Investment Banking is expected to improve to 1,6% (from 1%), Consumer Finance stable at 2,9%, and the Insurance segment to grow to 3,2% (from 2,7%).
Mediobanca expects capital generation to grow (approximately 220 basis points annually from 150 basis points) deriving from increased profitability (ROTE from 12% to 15%) and the absence of material negative regulatory impacts in the coming years. Management has signaled that the increased resources will make it possible to finance organic and inorganic growth and to remunerate shareholders.
Expected growth in shareholder remuneration up to 3,7 billion, with interim dividend
In this regard, Mediobanca said it expects growth in the remuneration of shareholders up to 3,7 billion euros in the three-year period 2024-26 (+70% compared to the previous four-year period) of which 2,7 billion euros in dividends and 1 billion euros through the buyback and cancellation of treasury shares: the dividend will be disbursed on the basis of a 70% pay-out, with the introduction of theinterim dividend
In detail, part of the payment will be paid in advance in May (equal to 70% of the profits produced in the July-December semester) and the remaining part paid in November (equal to 70% of the profits produced in the January-June semester). As a result, the total dividends distributed in the three-year period (2024-2026) will be equal to 2,7 billion euros, 40% more than the 1,9 billion distributed in the previous four-year period (2020-2023).
The purchase of treasury shares for 1 billion
An annual buyback program is also envisaged over the period of the Plan own actions for a total value of 1 billion of Euro. The amounts, says the bank, will be established annually following the organic growth achieved during the year and will see the cancellation of approximately 80% of the shares repurchased over the three-year period. Mediobanca also specified that the distribution policy, subject to ECB monitoring and/or authorization, will be reviewed in the event that CET1 FL falls below 13,5%.
New M&As will be evaluated
Mediobanca reports a continuous assessment of external growth opportunities through acquisitions. As occurred during the previous Plans, targets of interest that can accelerate the growth process in the group's characteristic areas of activity will be considered, with a preference for businesses with low capital absorption and high fee content. According to management, the creation of capital will make it possible to finance organic growth, while the remuneration policy will make it possible to maintain CET1 greater than 14,5% over the period of the plan, based on a CET1 F greater than 14,5% over the period of the plan, based on a minimum CET1 FL of 13,5%, and maintaining a buffer of approximately 100 basis points of capital to be used for potential external growth operations.
