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UniCredit: 3Q22 and 9M22 Group Results (1)

 

Seventh consecutive quarter of record growth, and best first nine months2 and third quarter in at least a decade, delivering across all levers and businesses, proof of a transforming UniCredit

 

Focused on delivering sustainable profitability and capital distributions with unwavering commitment to the ambitions of UniCredit Unlocked

 

Re-empowered commercial engine driving excellent net revenue growth of 6.8 per cent year on year or 14.6 per cent excluding the one-off impact of TLTRO III, paired with strong cost discipline, leading to positive operating leverage and €1.7 billion net profit including Russia or €1.3 billion net profit3, excluding Russia4

 

Cost base down by 3.1 per cent year on year, despite significant inflationary pressures, while protecting revenue generation and investing for the future

 

Russia4 exposures further reduced with focus on progressive de-risking

 

Best in class capital position with 3Q22 CET1 ratio at 15.41 per cent, including €3.75 billion 2021 shareholder distribution and € 1.4 billion 2022 dividend accrual

 

Proactive enhancement of existing robust lines of defence and with overlays, up circa €0.3 billion to circa €1.3 billion, with vigilant approach on risk and macro developments; low Cost of Risk at 7 basis points including Russia or 20 basis points excluding Russia

 

Good commercial dynamics, a favourable interest rate environment and cost discipline leading to further improved 2022 guidance5 for a net profit of over €4.8 billion for the year, excluding Russia

 

Supporting communities through proactive initiatives and by fostering gender equity and inclusion in the workplace, acknowledged through recently awarded EDGE certification

 

The Group is well ahead on UniCredit Unlocked targets with strong environmental lending at €8.2 billion and social lending at €3.3 billion as at 9M22

 

 

 

 

On 25 October 2022, the Board of Directors of UniCredit S.p.A. ("UniCredit" or "the Group") approved the 3Q22 and 9M22 Consolidated Results as at 30 September 2022.

 

The record breaking quarter is clear evidence of a transformed UniCredit, demonstrating ongoing commercial momentum within the business and a strong capital position to protect against macroeconomic uncertainty.

 

Excluding the impact of Russia, the Group continued to deliver compelling revenue growth  with client driven activities and interest rate dynamics more than offsetting the negative one off effect from TLTRO III and the impact of market volatility on fees, resulting in €4.2 billion net revenues, an increase of 6.8 per cent year on year. Excluding the negative one-off impact of the TLTRO III, the group delivered €4.6 billion net revenues, a 14.6 per cent increase year on year. This reflects high risk-adjusted returns across all regions, underpinned by the year on year increase in net interest income ("NII") to €2.2 billion, and by lower Loan Loss Provisions ("LLPs"), supported by solid asset quality. The net profit was €1.3 billion, resulting in healthy organic capital generation of 42 basis points.

 

Excluding Russia, 3Q22 operational costs were reduced by 3.1 per cent year on year, demonstrating the Group's discipline in structurally managing the cost base while protecting revenue generation.

 

The sound capital position is reflected in a CET1 ratio of 15.41 per cent which already deducts the second tranche of the 2021 share buyback of €1.0 billion, and which fulfils the €3.75 billion 2021 shareholder distribution commitment. The high organic capital generation of 158 basis points in the first nine months of the year, well ahead of the plan, is proof of the Group's strong operational and improving capital efficiency. The continuing financial momentum creates a base for delivering a 2022 distribution in line with or better than 20216, while maintaining a robust CET1 ratio.

 

The Group is well positioned in a period of macroeconomic uncertainty with its sound CET1 ratio, a profitable business model combining a capital light focus and solid asset quality. This has been further strengthened by early and proactive enhancement of existing strong lines of defense, such as high provisioning levels, reinforcement of existing overlays on performing exposures at circa €1.3 billion and a rigorous risk approach, strengthening the Group's capacity to absorb macroeconomic shocks.

 

UniCredit has a robust loan portfolio characterized by a large majority investment grade exposures, a low percentage of high risk exposure7 and a stable low expected loss in its overall loan stock, as well as the lowest default rate in its history. This is further bolstered by a vigilant approach to new business and an improved non-performing exposures ("NPE") coverage ratio driven by positive mix effect and NPE disposals to preserve the asset quality from potential macro deterioration in the event of a mild or severe recession.

 

Russia cross-border exposure has been reduced overall 50 per cent to circa €3.1 billion8 at minimal cost, through proactive and disciplined actions. UniCredit is committed to maintaining a progressive de-risking approach.

 

Cost of Risk ("CoR"), excluding Russia, at 20 basis points, is well below guidance and the full year 2022 guidance is improved to circa 25 basis points5.

 

On the back of an improved interest rate environment, low cost of risk and better than expected cost reduction, UniCredit has improved its financial guidance for 20225, and expects to end the year with revenues above €17.4 billion and net profit exceeding €4.8 billion, excluding Russia.

 

The UniCredit Unlocked 2024 financial ambitions of average annual organic capital generation of 150 basis points, incremental net revenue of circa €1.1 billion and a RoTE of circa 10.0 per cent are confirmed. Positive results are already being delivered by combining the three levers of net revenues, costs and capital efficiency. The third quarter RoTE, excluding Russia, of 11.4 per cent already exceeds that of the 2024 target. The Bank continues its focus on the execution of the 2022-2024 strategic and industrial transformation plan to fully unlock the value of UniCredit and is committed to delivering attractive and sustainable results and returns, with the ambition of  returning at least €16 billion to shareholders by 20246. In the event of a severe recession the impact would be meaningful but the Group would expect to be in a position to able to honour the majority of its 2022-2024 distribution ambition6.

 

Key recent events include the following:

  • Ongoing execution of the 2021 second share buyback tranche of €1.0 billion. As of 21 October 2022 UniCredit repurchased 54.4 million shares equal to 2.7 per cent of share capital.
  • Execution of following actions as part of the industrial transformation:

           o   Simplification of the bancassurance agreement with CNP in Italy, increasing strategic flexibility

           o   Consolidation of the partnership with Allianz in Croatia to unlock more value

           o   Merger of UniCredit Services ScpA into UniCredit SpA to support UniCredit's IT and digital Strategy

 

 

Andrea Orcel, Chief Executive Officer of UniCredit S.p.A. :

 

UniCredit has delivered yet again an outstanding set of financial results. This is our seventh consecutive quarter of growth, and the best nine-month results in over a decade.  We are well ahead of target, despite a prudent build up of lines of defence.  UniCredit Unlocked is delivering: our industrial transformation is well underway, our results recurrently positive, and we are further improving our full year 2022 guidance.

 

In the first nine months of the year, we reached a record net profit of €4.0 billion, excluding Russia (€3.8 billion overall), beating full year 2021, demonstrating growth, higher risk-adjusted profitability and greater capital efficiency in each and every business. The step change in our operational excellence is the outcome of good commercial dynamics, a favourable interest rate environment, continued cost discipline, a low cost of risk, and most importantly the commitment and work of our employees, allowing us to further improve our full year 2022 guidance to a net profit exceeding €4.8 billion. This, combined with the marked enhancement in our capital efficiency allows us to also improve our full year 2022 guidance for organic capital generation to exceed 200 basis points.

 

Our CET ratio of 15.41 per cent remains best in class and includes absorbing regulatory headwinds meeting our full 2021 distribution commitment to shareholders of €3.75 billion, and accruing €1.4 billion for the 2022 dividend.

 

UniCredit has entered this period of macroeconomic uncertainty with a profitable business model, sound asset quality, conservative coverage, increased organic capital generation and strong capital. We continued taking early actions to proactively enhance our existing lines of defence, reinforcing our rock-solid foundations.  We are facing an uncertain future with confidence.

 

We believe it is equally important to be socially responsible as well as financially successful. Therefore, we continue to support our clients and those communities in which we operate in these challenging times. They are who we ultimately exist to serve, and who we must have in mind throughout all of our actions.

 

We are committed to executing our 2024 strategic plan to unlock the value of our Group. I am confident that UniCredit is well positioned to manage through whatever economic environment we face, delivering strong results and prudent capital distribution, as well as value for all our stakeholders across Europe."

 

 

1All figures related to Group excluding Russia, except CET1 ratio, or unless otherwise stated.

2Gross Operating Profit and Profit before taxes. 2022 figures Group excluding Russia. Stated figures for previous years.

33Q22 stated net profit for Group including Russia at €1.7 billion, -15.0 per cent Q/Q and +61.6 per cent Y/Y. 3Q22 stated net profit for Group excluding Russia at €1.4 billion, -18.1 per cent Q/Q and +37.3 per cent Y/Y. Refer to Annex for Stated Net Profit and Net Profit definitions.

4Russia includes the local bank and legal entities, plus the cross-border exposure booked in UniCredit SpA, see page 12 for the Russia segment 3Q22 results. For Group consolidated results, including Russia, see page 13.

5UniCredit Group 2022 financial guidance available in section "Group excluding Russia key financial 2022 guidance" at page 14.

6Distribution subject to supervisory and shareholder approvals.

7Refer to slide 41 of the 3Q22 Market Presentation

8Delta since 8th March 2022 excluding change in FX hedging and additional exposures (as per page 3 of 1Q22 market presentation)​.

 

 

Milan, 26 October 2022

 

 

Contacts:

 

Investor Relations:

e-mail: investorrelations@unicredit.eu

 

Media Relations:

e-mail: mediarelations@unicredit.eu