UniCredit SpA Bank reported revenue, which turned out to be the highest in more than eight years.

The mentioned financial institution, which is based in Milan, increased shareholders’ income from profits last year to 8.6 billion euros ($9.3 billion). The lender has once again raised the payout benchmark for banks operating in Europe.

On the morning of Monday, February 5, the indicator of the price of UniCredit shares at the time of the opening of trading in Milan showed an increase of 8.5%. This figure has reached the highest level since November 2015. Later the financial institution’s share price was fixed at 8.2% or 28.86 euros per security.

UniCredit’s value has tripled since Andrea Orcel became the bank’s chief executive officer in 2021. Currently, the financial institution is the growth leader among European lenders.

UniCredit, which is Italy’s second-largest bank, recorded a net profit of about 2.81 billion euros in the fourth quarter of 2023. This figure is almost three times higher than analysts’ forecasts. In the fourth quarter of last year, the financial institution recorded an increase in revenue and a decrease in provisions for bad loans and gains related to deferred tax assets. The bank distributes 100% of adjusted net profit for the year and intends to return at least 7.7 billion euros in profit for 2024.

An analyst at Citigroup Inc. Azzurra Guelfi wrote in a note that UniCredit managed to exceed all expectations by increasing profits, improving the outlook for the current year, and growing distribution. The expert noted that the shares of this financial institution are among the most popular in the banking sector, but the story continues to make a profit. In this case, the influence of the so-called brand name on commercial performance is implied. This means that the history of the organization, which forms its market and industry status, contributes to strengthening its financial position.

In a sense, Andrea Orcel has become a beneficiary of rising interest rates in Europe. Also, the head of the financial institution is currently not without satisfaction observing significant positive results due to increased efficiency, which has been the main goal within the framework of the bank’s activities over the past few years.

UniCredit managed to please investors with the best returns in the region, but the circumstances of the external environment indicate that the current wave of success is likely to begin to weaken in every possible way in the foreseeable future. The bank has improved its results, but nevertheless, it will not be able to ignore and even more so solve such a problem as a large-scale deterioration of the economic situation. Also, the financial institution, like other organizations in the relevant sector, is gradually approaching a new reality in the form of interest rate cuts, which is a measure in the context of a change in the policy of central banks towards easing.

The Milan-based lender has distributed almost 18 billion euros in cash dividends and share buyback since 2021. The financial institution managed to achieve its goal planned by the end of 2024 a year ahead of schedule. In the current year, the bank will introduce interim dividends and plans to distribute at least 90% of its net adjusted profit. The relevant information is contained in the official statement of the financial institution.

Andrea Orcel says that sustainable asset quality and strong lines of defense put the bank in an enviable position to continue successful management in an uncertain environment. Currently, the head of the financial institution plans to focus on the fee-generating business as a second source of profit.

Andrea Orcel is making several changes, including rebuilding revenue-generating product factories to develop new services and increase fees. In 2024, the head of the bank expects a decrease in net interest income, as customers need higher rates on their deposits.

Lento Tang and Ilia Shchupko, analysts at Bloomberg Intelligence, say that the overall outlook of the financial institution, compared with the consensus forecast for the fourth quarter, assumes stable profitability in 2024 with the reliable goal of maintaining return on equity at the level of the middle of last year – 16%. According to experts, the total distribution of shares for the 2023-24 financial years may amount to almost 16 billion euros, which is equivalent to about 35% of the bank’s market capitalization. Analysts say that the bank’s assumptions about interest rates for the current year are realistic, and asset quality remains favorable.

UniCredit has intensified the implementation of cost-cutting measures. In the fourth quarter of last year, the management of the financial institution decided to lay off about 1,350 employees. According to official data released by the bank on Monday, the full-time staff of the lender in December 2023 was 70,752 people. The financial institution has planned integration costs of 1.1 billion euros.

UniCredit’s Tier 1 common equity ratio, the main indicator of financial stability, was fixed at 15.9% at the end of December. During the last quarter, the lender allocated 300 million euros to cover bad loans, which is 50% of analysts’ expectations. Andrea Orcel often says that the financial institution is in a good position for a period of macroeconomic uncertainty with additional reserves in case of potential losses, confirmed at about 1.8 billion euros.

As we have reported earlier, Citigroup Fixes $1.8 Billion Fourth-Quarter Loss.