Unicredit closes 2014 with a net profit of 2 billion it's one script dividend 12 cents for members. Both figures are an improvement on 2013 which had recorded a record loss of 13,9 billion euros due to devaluations and adjustments carried out in preparation for the ECB exams (which ended last October) and a dividend of 10 cents.
But the market does not welcome Piazza Cordusio's accounts: the stock drops 4%.
The results arrive on a day of tension for the stock markets awaiting the Eurogroup on Greece with the banking sector moving in contrast. However, the Ftse Mib limits losses overall to -0,71%.
Although the 2014 results are in line with consensus, operators and analysts I don't like the numbers from the last quarter which sees a significant worsening of the bottom line: in the last three months i Profits are down 76,4% with a Rote (return on tangible equity: measures a bank's operating profitability) which fell to a meager 1,6% from 4,9% on an annual basis and from 6,8% recorded in the third quarter.
CAPITAL BETTER THAN THE PLAN
THE SCRIP DIVIDEND AGAIN
“In 2014 we have kept commitmentsthe hires – commented the CEO Federico Ghizzoni – Despite the very difficult economic context. The goal of 2 billion in net profit has been achieved, Italy's turnaround is largely concluded, in all the countries in which we operate we ensure important support for the economy".
As regards the other main balance sheet data, Unicredit archives higher capital ratios to the requests of the ECB. In particular, the Tier 1 ratio is at 11,26%, the Cet1 ratio transitional at 10,41% and the fully loaded at 10,02%.
“We are 65 basis points better than what was envisaged in the plan – explained Ghizzoni in the press conference – in the fourth quarter the Russia and Ukraine cost 1,1 billion on capital for the devaluation of the ruble. We plan to restore capital levels with organic growth and we exclude increases because the capital is higher than what was indicated by the ECB, so much so that we have had no problem distributing the dividend". Dividend which for the second year in a row is confirmed in the form of script dividend: it is up to the shareholder to choose whether he wants the cash coupon or Unicredit shares. However, the size of the coupon to shareholders is growing by 20% and the payout is 35%.
BAD BANK IS NOT FOR US
GREECE DOESN'T WORRY
The group sees the macro picture improving for 2015 and believes that its forecasts of a GDP growth of 0,4% can be improved. In this context, the group's asset quality “continues to stabilize”. “Unicredit – we read in the press note – expects that non-performing loans will have reached a peak in 2014 and that for 2015 a decrease in both the total amount and percentage of total gross loans is plausible”.
I gross impaired loans they stood at 84,4 billion (+0,9% on year) and the coverage rate is 51,3%, bad loans are slightly growing at 52,1 billion with a coverage rate of 62,2% . “At the end of November 2014 – explains the group in the note on the accounts – the annual growth rate of Unicredit Spa's impaired loans was approximately half the average growth rate of the Italian banking system (ABI sample)”.
In terms of managing non-performing loans, two years ago the group chose to pursue the path of its own "bad bank", separating the activities of the core bank from those of the non-core bank which collects difficult loans.
This is why Ghizzoni is withdrawing from participation in the public-sector Bad Bank relaunched last Saturday on Forex by the governor of the Bank of Italy Ignazio Visco.
“Typically we are not interested to a solution of this type – said Ghizzoni – given that we already created the bad bank at home two years ago. However, it is an interesting idea to pursue, because it serves the Italian banking system. Given the level of bad loans in Italy, a solution of this type is desirable." Among other things, the CEO of Piazza Cordusio wanted to point out that even the Spanish bad bank did not involve large groups such as Santander and BBVA since "a solution of this type is aimed at those who may struggle to absorb the losses in the portfolio or is unable to find counterparties. “We will see – he concluded – what to do when there is a proposal on the table”. In addition to a passive role of credit transfer, it is possible to actively participate in the bad bank by participating in the capital in the case of a solution that also includes private intervention.
Finally, the this time the Greek front is not a concern more so the banker who remembers how the situation is very different compared to two years ago. “Volatility can be expected but I don't think this situation can put the euro's stability at risk. Compared to two years ago, I think today it is more manageable. I rule out the possibility of contagion occurring with the explosion of sovereign risk like two years ago." Unicredit is exposed for 400 million but these are foreign customers operating with activities in Greece.
