The Coronavirus effect pushes Unicredit to anticipate the update of loan adjustments according to the Ifrs9 principle. The Covid-19 account amounts to 900 million for 2020 in terms of additional adjustments that will be accounted for in the first quarter, explains a note from the banking group which also announces the decision of CEO Jean Pierre Mustier to reduce his remuneration for the 2020 by about 25%. This is about 300.000 euros which will be added to the 2,4 million in variable remuneration which Mustier had already renounced for a total of 2,7 million which the Board of Directors will donate to the UniCredit Foundation with immediate effect.
The cost of risk (CoR) for the first quarter, specifies Unicredit, is estimated at around 110 basis points, of which 80 due to the update of the macroeconomic scenario Ifrs9, and 30 to the underlying CoR. "The latter is significantly better than the original target of 46 basis points for the year." For 2020, “even considering the forecasting difficulties due to the current unprecedented situation, the CoR estimate is approximately 100-120 points. The CoR will derive from the combination of the adjustments relating to the update of the IFRS 9 macroeconomic scenario and the potential effects deriving from the risks that could materialize during the year with reference to specific sectors and counterparties, in particular at the end of the year considering the conclusion of the moratorium period”, specifies the bank. Finally, for 2021, the UniCredit group currently estimates a CoR of 70-90 basis points.
Faced with the new adjustments made necessary by the changed macro-economic scenario, UniCredit nonetheless underlines the solidity of the capital position "with a CET1 MDA buffer that will remain well above the target range of 200-250bps throughout FY20". The Liquidity Coverage Ratio will also remain “above 140 per cent at the end of 1Q20”.
The update of the macro framework is certainly not favorable. With reference to the Eurozone, UniCredit expects a 2020 percent GDP reduction in 13, followed by a 10 percent recovery in 2021. New estimates include both the impact of COVID-19 and the effects of actions announced by governments and by the ECB, "and are in line - specifies the bank - with those published by UniCredit Economics Research on 2 April 2020, as well as being consistent, and in some cases more conservative, with those published by the IMF on 14 April 2020".
