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