How are the accounts of Unicredit. The Russian knot
What emerges from Unicredit's 2002 balance sheet. The article by Emanuela Rossi
Eighth quarter of growth for Unicredit which scores a record 2022 for revenues and a profit that even exceeds analysts' estimates, at 5.2 billion. Numbers that have pushed the stock to the Stock Exchange, which rose by 8% at the opening, to the highest for almost 5 years.
“UniCredit has achieved a series of outstanding financial results that demonstrate the significant progress in the industrial transformation path and the ability to obtain excellent performances throughout the cycle”, is the comment of the CEO Andrea Orcel, at the helm of Unicredit for almost two years, who said in an interview with Class CNBC : "We have reached and surpassed the goals of 2022 and even those of 2024. The challenge for 2023 is to build on this and do better". The Roman banker is keen to mark the discontinuity with the past: "It was necessary in some way to simplify our processes" and now Unicredit "is a very different bank from the past".
PROFIT ABOVE ESTIMATED AT 5.2 BILLION, COSTS FALLING
As we said, Piazza Gae Aulenti archives a 2022 with a net profit of 5.2 billion – against the expectations of analysts who stopped at 5.13 billion – and an accounting profit of 6.5 billion. In the fourth quarter, the result stood at 1.4 billion (1.16 billion the consensus) compared to the loss of 1.4 billion in the same period of 2021 for one-off extraordinary items and the accounting result at 2.4 billion. Operating costs fell, excluding Russia, down by 2.6 percent "despite the significant inflationary pressures which are equal to almost 9 percent in the geographical areas where UniCredit is present" highlights the note accompanying the accounts . “The group continues to report capital efficiency among industry leaders, with 117 basis points of organic capital generation in the fourth quarter and 271 basis points in 2022, well ahead of plan, and resulting in a Cet1 accounting ratio of 16 %, already deducting the impact of the adverse regulatory framework, the dividend set aside for 2022 and the impact of Russia”.
For Orcel “our focus on growth, cost discipline and capital efficiency brought RoTE to 10.7 per cent, exceeding the UniCredit Unlocked target. This includes significant provisions and proactive steps taken to strengthen existing defense lines, strengthening the already strong balance sheet and the ability to cope with continuing uncertainties.
RECORD REVENUES, PROFITABILITY GROWS
Excellent performance also on the revenue front which, excluding Russia, recorded record growth, supported by the favorable interest rate environment and the strong commercial momentum: 4.7 billion in the fourth quarter, up 34.9 per cent on year, and 18.1 billion in all of 2022, +14.7 percent on year. “The result reflects strong risk-adjusted profitability, with targets achieved across all key levers and across all businesses, supported by significant growth in net interest income in the quarter of nearly 41 percent year-over-year and 42 percent year-over-year. .5 per cent quarter on quarter, at 3.2 billion euro” reads the note on the accounts.
A plus sign also for the interest margin which in 2022 grew by 16 percent on a trend level, reaching 9.9 billion. Loan loss provisions, amounting to €0.6 billion in the fourth quarter, decreased by 17.8 per cent year on year”.
EXPOSURE TO RUSSIA DECREASES
An extremely topical issue is that of Russia's cross-border exposure which since 2022 all banking groups have found themselves having to manage. Unicredit reduced it during the year, at minimal costs, by a total of about 66 percent, or about 4.1 billion. The group makes it known that it is committed to "maintaining a progressive de-risking approach" thus confirming that it does not want to change its strategy and wants to exit the country in an orderly manner. "The situation is not worrying" Orcel underlined during the conference call with the agencies, as reported by Ansa . "Giving a bank away would not have been the right thing both from an ethical point of view and for compliance with the sanctions".
DIVIDEND GROWING, OVER 5 BILLION TO SHAREHOLDERS
The good news, of course, also has repercussions on shareholders' portfolios which, for 2022, could see €5.25 billion arrive, or €1.5 billion (+40%) compared to 2021. The proposal is for a cash dividend of 1.91 billion and the repurchase of treasury shares for 3.34 billion, subject to the necessary approvals. Precisely on the distribution to shareholders, the CEO said he was "confident of the authorization" by the ECB during the conference call with the agencies.
ORCEL: SHOW RESILIENCE AND STRENGTH, WE LOOK TO THE FUTURE WITH CONFIDENCE
After these results, the CEO of Unicredit can only have a positive attitude towards future challenges. “We have grown for eight consecutive quarters, a clear testimony of the transformation of UniCredit which has shown resilience and strength – reads the comment at the bottom of the note on the accounts -. Double-digit year-over-year growth in net revenues was supported by positive business momentum, a supportive interest rate environment, cost reductions notwithstanding future investments and despite unprecedented inflation, and by a consistently low cost of risk”. All this "respecting our commitment to shareholders of a sustainable and attractive distribution policy, while maintaining our capital solidity".
Orcel's commitment is to continue “to serve and support our clients and our communities in a just and equitable transition, seeking to be an example in all ESG components. Going into 2023, UniCredit is stronger than ever and well positioned to deliver excellent results. We are firmly focused on the execution of UniCredit Unlocked and look to the future with confidence”.
MPS? THE CONDITIONS ARE MISSING
During the conference call, there was no lack of questions about Montepaschi, which for over a year now – that is, since Unicredit announced it no longer wanted to proceed with the acquisition – has been constantly asked again. “If the conditions exist in the very distant future, we'll see. That's not the case today,” Orcel replied, according to reports from Ansa . "Our plan generates more value than any M&A" he added, clarifying that "it must not impact on our plan, on the distribution to shareholders and must have an industrial sense".
THE COMMENT OF FABIO PAVESI
“Orcel has turned the bank inside out, returning from a very troubled past. UniCredit has vigorously resumed making revenues that were in a declining phase. It has made cost efficiencies, it has made agreements to strengthen its grip on asset management, much neglected in the past. And above all, he has promised (and is getting it) to investors, very mortified in recent years, the return of most of the profits that the bank is producing – wrote a few days ago on Mf the finance and banking expert journalist Fabio Pavesi, already al Sole 24 ore – The "Ronaldo of bankers" has done an excellent job, especially on the revenue line, but he must also thank his predecessors: from Ghizzoni and Mustier. In fact, a bank has been found cleansed of the ballast of non-performing loans that have plagued the bank's accounts for years. Suffice it to say that between 2019 and 2020 alone, UniCredit budgeted adjustments on bad loans for the beauty of 8.4 billion. In its management, with the bank relieved of the bulk of the ballast, the adjustments stopped at the end of September at just over 2 billion. And so it was relatively easy to see net profits grow.”
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/come-vanno-i-conti-di-unicredit-il-nodo-russia/ on Tue, 31 Jan 2023 09:26:30 +0000.