UniCredit Beat 1Q Expectations on Strong Trading, Lower Provisions -- Earnings Review

By Pietro Lombardi

UniCredit SpA reported first-quarter results on Thursday. Here's what you need to know:

NET PROFIT: Net profit for the period was 887 million euros ($1.06 billion). This compares with a loss of EUR2.71 billion a year earlier, when results were dragged by soaring bad-loan provisions, and analysts' expectations of EUR413 million.

REVENUE: Revenue rose 7.1% to EUR4.69 billion, above the EUR4.28 billion analysts had forecast.

WHAT WE WATCHED:

--NEW STRATEGY, M&A: The bank will present a new strategy in the second half of the year. "As we look to the future, it will take time to re-energise and strengthen the business, moving from a period of active retrenchment to one defined by disciplined profitable growth and healthy organic capital generation," Chief Executive Andrea Orcel said Thursday. Key elements of the new strategy will be a focus on clients, technology and a reduction of complexity, he added in a call with analysts. "M&A is not a purpose in itself but I do see it as an accelerator and improver of our strategic outlook," he said. Any deals would have to be in the interest of shareholders and make sense financially and strategically, he said.

--TRADING REVENUE, PROVISIONS: UniCredit posted strong trading revenue, mirroring a trend seen at major European banks. Trading income rose to EUR639 million from EUR173 million. Meanwhile provisions fell roughly 87%, better than analysts had expected.

--GUIDANCE: The bank expects 2021 underlying net profit in line with previous guidance of more than EUR3 billion. Costs should be around the levels seen in 2019, which were roughly EUR9.9 billion. However, it cut the revenue outlook, now seen at about EUR17.2 billion for the year, having previously guided for about EUR17.7 billion. Underlying cost of risk is expected below 60 basis points. The bank said that net interest income will likely face headwinds in 2021, while fees and trading income will benefit from tailwinds this year.

Write to Pietro Lombardi at [e-mail]; @pietrolombard10

(END) Dow Jones Newswires

May 06, 2021 06:08 ET (10:08 GMT)

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