Unicredit's profit rebounds in the third quarter, improving by almost a third (+31,1%) the performance of the previous quarter and above all recovering ground to reach the target for the 2020 financial year, set at 0,8 billion. For the past three months net profit was $0,7 billion, thanks also to a 4,4% increase in revenues (compared to the second quarter) to 4,4 billion: the figure is worse than that of the third quarter of 2019, which however was pre-Covid and was a particularly brilliant quarter for the bank in piazza Gae Aulenti.
Unicredit has it like this confirmed the profit target for 2020 and also that for 2021, set between 3 and 3,5 billion euros. A return to the dividend is already expected next year: third quarter dividends are down by 30% to 128 million due to the sale of Mediobanca and the reduction of the stake in Yapi, but for 2021 the ordinary payout is confirmed at 50% and the commitment to gradually repay the excess capital. The ordinary distribution, starting in 2021 for 2020, is composed of a maximum of 30% per cent of the underlying net income for the cash dividend payment target and a minimum of 20% for the share buyback
Other data. The interest margin decreased to 2,3 billion, down 3,8% on the quarter due to lower loan volumes, the combined effect of government-guaranteed loans and the sharp decline in the Euribor. Commissions were up by 6,4% to 1,5 billion, thanks to intense customer activity. Trading income is €455 million, up 27,7% Q/Q and also up 10,2% Y/Y.
Operating costs were down 1,4% in the last quarter quarter-on-quarter, thanks to continued cost discipline, which more than offset COVID-19-related expenses of over €18m in the quarter. Team 1's $23 billion gross cost reduction target will be improved by more than $250 million to $1,25 billion. Capitalization also remains very solid, with a fully loaded CET1 ratio at 14,41% and a high liquidity coverage ratio at 183%.
“Thanks to our very solid capital and liquidity positions – he commented CEO Jean-Pierre Mustier -, we will continue to support all of our customers regardless of any circumstances. We were ready to support the increase in client activity during the third quarter following the easing of lockdowns in Western Europe, and we remain with our communities in the face of the second wave of Covid-19. We continue to benefit from the successful implementation of Transform 2019as well as Team 23 initiatives, and through accelerated business model transformation, we improved our Team 23 gross savings target by 25 percent to $1,25 billion. We are on track to deliver our underlying net profit target above €0,8 billion for FY20 and confirm our target of between €3-3,5 billion for FY21.”
“Prudential provisions and rigorous credit discipline based on realistic assumptions – continued the French banker – are distinctive features of our Group. We reconfirm our cost of accounting risk for FY20 at 100-120 basis points, thanks to our willingness to anticipate future impacts and seasonality in 4Q20. We also confirm our FY21 cost of accounting risk target at the lower end of the 70-90 basis points range with underlying cost of risk close to 60 basis points”.
“We remain firmly committed to reinstating our Team 23 capital distribution policy, which combines the distribution of 50 per cent of underlying net earnings, to be achieved through a mix of cash dividends and share repurchases, the gradual distribution, at starting from 2021, of the excess capital, subject to receiving the regulatory "green light". Culture and values are crucial in times like these and we will always continue to “Do the right thing!” for all our stakeholders, always putting the health and safety of our employees and customers first. I would like to thank each and every one of our employees for their commitment, resilience and for continuing to work with determination in these extraordinary circumstances. Together we ensure that UniCredit is and remains a winning pan-European bank”.
The balance sheet presented by Unicredit does not convince investors much at the opening of the session in Piazza Affari: although the Ftse Mib is positively influenced by the news arriving from the USA and immediately gains one and a half percentage points, Unicredit stock initially travels in negative territory, below 7 euros per share.
