UniCredit Shares Surge on Plans to Hand $5.7 Billion to Shareholders

By Mauro Orru

Shares of UniCredit SpA jumped in Tuesday morning trading after the Italian bank set out plans to distribute 5.25 billion euros ($5.70 billion) to shareholders in the coming months, EUR1.5 billion more than in the previous year, after the bank swung to a profit in the fourth quarter and posted revenue well ahead of analysts' forecasts.

At 0820 GMT, UniCredit shares were trading 7.8% higher at EUR17.16.

The Italian bank said Tuesday that the distribution, subject to supervisory board and shareholder approvals, would consist of a EUR1.91 billion cash dividend and a share buyback of EUR3.34 billion. A first tranche of the buyback worth some EUR2.34 billion will launch once approved by the company's annual general meeting at the end of March, followed by another tranche of around EUR1 billion in the second half of the year.

Citi's Azzurra Guelfi wrote in a note to clients that UniCredit's capital return was "impressive." The cash dividend is higher than Citi's roughly EUR1.7 billion forecast, while the buyback is also ahead of Citi's EUR2.1 billion estimate.

UniCredit reported a net profit of EUR2.46 billion for the quarter from October to the end of December, compared with a loss of EUR883 million in the fourth quarter of 2021. The result lifted the bank's annual net profit to EUR6.46 billion from EUR2.10 billion in 2021, with Chief Executive Andrea Orcel calling it the best result in more than a decade.

In the fourth quarter, provisions for credit losses fell to EUR528 million from EUR810 million, while revenue jumped 29% to EUR5.72 billion.

Analysts had forecast a quarterly net profit of EUR1.16 billion, provisions of EUR851 million and revenue of EUR5.15 billion, according to a company-compiled consensus.

Revenue growth was driven by strong commercial momentum, higher interest rates and cost reduction efforts, Mr. Orcel said.

UniCredit's quarterly net interest income--the difference between what lenders earn from loans and pay for deposits, and a key profit driver for retail banks--climbed to EUR3.43 billion from EUR2.40 billion.

Net fees and commissions for the period slipped to EUR1.62 billion from EUR1.70 billion, with net trading income up to EUR613 million from EUR202 million.

The bank said it entered 2023 with strong momentum and is prepared for macroeconomic challenges. More rate hikes are in the pipeline, UniCredit, said, and it expects gross domestic product in the eurozone to stagnate this year and increase 1.3% in 2024.

For 2023, UniCredit expects net revenue of more than EUR18.5 billion and net profit broadly in line with 2022.

Write to Mauro Orru at [e-mail]; @MauroOrru94

(END) Dow Jones Newswires

January 31, 2023 03:45 ET (08:45 GMT)

Copyright (c) 2023 Dow Jones & Company, Inc.