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UniCredit: 4Q20 & FY20 Group Results - Successfully navigating an extraordinary year from a position of strength

UniCredit maintained its successful operational response throughout the year, delivering enhanced customer service, accelerated digital transformation, and Group-wide measures to protect the health, safety and wellbeing of all stakeholders

 

FY20 underlying net profit of €1.3 billion 1, ahead of guidance thanks to lower annual costs while booking €5 billion of LLPs1,2 to properly reflect the current and future economic impact of Covid-19

 

FY20 stated Cost of Risk 3 at 105 basis points, at the lower end of guidance and anticipating future cost of default in the loan portfolio 4; FY21 stated Cost of Risk expected close to 70 basis points

 

FY21 revenues and costs expected in line with previous guidance; underlying net profit of more than €3 billion

 

Solid balance sheet with very strong capital and liquidity position: FY20 pro forma fully loaded CET1 ratio at 15.08 per cent 5, pro forma CET1 MDA buffer fully loaded at 605 basis points 5

 

FY20 Non Core gross NPEs down to €3.7 billion thanks to proactive and forward looking risk management; Group gross NPE ratio at 4.5 per cent 6; Non Core runoff fully on track

 

Proposed capital distribution of €1.1 billion in ordinary and extraordinary distribution 7

 

 

On 10 February 2021, the Board of Directors of UniCredit S.p.A. ("UniCredit" or "the Group") approved the FY20 consolidated results of the Group as at 31 December 2020.

 

The Group delivered underlying net profit of €1.3 billion for FY20, ahead of guidance of above €0.8 billion thanks to better costs, whilst booking €5 billion of loan loss provisions in 20201,2 as it continued to anticipate the current and future economic impact of the Covid-19 pandemic.

 

Commercial activity reflected the extended Covid-19 related restrictions present in all geographies with lower loan volumes by the year end, market rates pressure as well as lower investment and transactional fees, with improved performance whenever restrictions eased.

 

UniCredit maintained its successful operational response throughout the year, delivering enhanced customer service, accelerated digital transformation, and Group-wide measures to protect the health, safety and wellbeing of all stakeholders.

 

The Group's ability to successfully navigate this extraordinary year was underpinned by its diversified business model and its solid financial foundations with a very strong capital and liquidity position and a de-risked balance sheet following proactive and disciplined efforts over the last five years, including a 20 per cent reduction in the cost base since 2015.

 

UniCredit met the lower end of its stated cost of risk guidance for 2020, while maintaining and exceeding its Non Core rundown target with €3.4 billion in gross NPE disposals during the year, on track for rundown by FY21.

 

Operating costs were down thanks to strict cost discipline and lower HR costs more than offsetting Covid-19 related expenses. The Group's branch network optimisation and FTE reduction program is on track to meet the Team 23 target of around 8,000 FTE reductions and around 500 branch closures.

 

UniCredit expects FY21 underlying net profit of more than €3 billion and FY21 revenues and costs in-line with previous guidance, subject to the potential impact of the Covid-19 pandemic evolution on client activity and market rates stabilising.

 

For 2021, the ordinary capital distribution will comply with ECB recommendations on dividends issued on 15 December 2020, which for UniCredit limits distributions to €447 million8 until 30 September 2021. Consequently, a proposal for an ordinary distribution of €268 million in cash and €179 million in share buybacks will be submitted to the AGM7.

 

The extraordinary capital distribution intended for 2021 amounts to €652 million, fully in the form of share buybacks. It will be submitted to the AGM in April 2021 and execution should commence after 1 October 20217.

 

Combining these ordinary and extraordinary distributions, the total capital return to shareholders in 2021 is €1.1 billion, made up of €0.8 billion of share buybacks and €0.3 billion of cash dividends. The cash dividend is subject to AGM approval, while both buybacks are subject to AGM and regulatory approval.

 

 

Jean Pierre Mustier, Chief Executive Officer of UniCredit S.p.A. :

 

"UniCredit's underlying net profit result was impressive given the impact of Covid-19 on all markets and the 5 billion in loan loss provisions1,2 taken in 2020 in anticipation of future expected impacts.

 

Our ability to successfully navigate the last 12 months was possible thanks to the fundamental strengths of the bank with a fortress balance sheet, a deeply embedded risk and cost culture and a focus on delivering sustainable results for the long-term. The bank is well placed to continue to support clients and face the future with confidence.

 

UniCredit has also maintained its commitment to enhanced customer service, digital transformation and sustainability. The bank has a clear ESG roadmap that adheres to highest global standards - as demonstrated by UniCredit's best-in-class coal policy with total phase out by 2028.

 

I would like to extend my sincere thanks and deep gratitude to all UniCredit team members for their continued commitment, resilience and hard work during my time at the bank. Together, they have allowed UniCredit to prosper and to do the right thing for all our stakeholders, particularly through the Covid-19 pandemic.

 

I would also like to welcome my successor, Andrea Orcel, who will join the bank after the AGM in April. Andrea brings a wealth of experience to the bank and an impressive track record in international finance. He is well placed to take UniCredit on the next leg of its journey."

 

Notes

 

1 Underlying net profit is the basis for the ordinary capital distribution policy. For 2021, as an exception, the ordinary capital distribution will comply with the ECB's payout recommendations published on 15 Dec 20. Underlying net profit normalised for integration costs in Italy (-€1,272 m in 1Q20), additional real estate disposals (+€296 m in 1Q20), Yapi Kredi deconsolidation (-€1,576 m in 1Q20), regulatory headwinds impact on CoR (-€3 m in 1Q20, -€4 m in 2Q20, -€3 m in 3Q20 and -€519 m in 4Q20), revaluation of real estate (+€9 m in 1Q20, -€7 m in 2Q20, -€5 m in 3Q20 and +€23 m in 4Q20), Non Core rundown (-€98 m in 2Q20, -€4 m in 3Q20 and -€8 m in 4Q20) and goodwill impairment (-€878 m in 4Q20).

2 Stated LLPs in FY20 (€4,996 m) based on reclassified Profit & Loss (P&L).

3  Stated CoR based on reclassified P&L and Balance sheet (BS).

4 Through increased overlays, proactive classification and regulatory headwinds including the new Definition of Default.

5 Including pro forma deduction of ordinary share buyback of €179 m, subject to both ECB supervisory and AGM approvals; Stated CET1 ratio fully loaded at 15.14 per cent, including the deduction related to the cash dividend for €268 m and stated MDA buffer fully loaded at 611 bps.

6 As at 31 Dec 2020 the Non-Performing Exposures do not incorporate the New Definition of Default classification. However, if the new classification criteria were implemented, the UniCredit Group gross Non-Performing Exposures (NPE) ratio - which at 31 Dec 2020 amounts to 4.5 per cent (5.3 per cent UniCredit S.p.A. ratio) - would have been slightly higher than that detected (approximately 4.8 per cent, and 5.8 per cent referred to UniCredit S.p.A.).

7 Ordinary distribution (€447 m): 60 per cent cash (€268 m), 40 per cent Share buyback (€179 m) ('SBB'). Ordinary cash distribution: €0.12 per share, subject to AGM approval, Ex-dividend date 19 April 2021, record date 20 April 2021 and payment date 21 April 2021. Ordinary SBB distribution subject to supervisory and AGM approval. Ordinary SBB execution expected to commence after AGM in Apr 21. Extraordinary distribution (€652 m): 100 per cent SBB. Extraordinary SBB distribution subject to supervisory and AGM approval (and provided that on 30 Sep 21 the ECB will repeal the recommendation of 15 Dec 20). Extraordinary SBB execution expected to commence not before 01 Oct 21.

8 Calculated as 15 per cent ("ECB cap") of the cumulated stated net profits for the years 2019 and 2020, adjusted as per ECB recommendation. The additional 20 bps of CET1r limit, introduced by ECB, is less stringent for the Group thus it does not apply.