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.