UniCredit: 1Q23 Group Results

 

CONTINUED TRANSFORMATION DELIVERING BEST FIRST QUARTER EVER AND 9th CONSECUTIVE QUARTER OF IMPROVED RESULTS ON ALL FRONTS

 

 

Acceleration of UniCredit Unlocked delivering consistent, high-quality profitable growth: outstanding €2.1 billion net profit¹, RoTE² of 20.4% and organic capital generation of €3.4 billion

 

Net revenue growth of 56.5% year on year driven by commercial momentum in all key lines with NII of €3.3 billion and fees of €2.0 billion

 

Further cost and RWA reduction resulting in a Cost-Income ratio of 39.2% and net revenues on RWA of 7.7% achieving exceptional positive operating and capital leverage

 

Outstanding shareholder value creation year on year with EPS of 1.06, up from 0.13 and Tangible Book Value per share of 28.46, up 21.7%³

 

Improved FY23 guidance: net profit^1,4 of over €6.5 billion and distribution equal to or higher than €5.75 billion⁵, setting a new base for 2023 and beyond

 

Robust balance sheet with best-in-class CET1 ratio at 16.05% net of the €5.25 billion 2022 shareholder distribution and €0.7 billion 1Q23 accrued dividend

 

Strong liquidity profile with LCR at 163%⁶

 

High quality asset portfolio and lines of defence give ability to weather unexpected stress; Cost of Risk guidance for FY23 confirmed at 30-35 basis points

 

Supporting and empowering communities to progress, with increased investments to support youth and education in Europe and deliver on the Group's social commitment

 

 

On 2 May 2023, the Board of Directors of UniCredit S.p.A. ("UniCredit" or "the Group") approved the 1Q23 Consolidated Results as of 31 March 2023.

 

The record-breaking quarter is proof that UniCredit is a transformed bank with a stepped up, consistent and sustainable profitability run rate. The Group has made significant progress in the execution of UniCredit Unlocked and is now entering the second phase of the industrial plan, with further untapped potential.

 

The Group has delivered superior revenue growth driven by a favourable interest rate environment combined with well managed deposit beta and strong commercial momentum. This has resulted in €5.8 billion of net revenues in 1Q23, an increase of 56.5% year on year. It reflects consistent quality growth, delivering on all key levers across all businesses, underpinned by net interest income ("NII") of €3.3 billion, €2.0 billion of fees, €2.3 billion in costs and €0.1 billion loan loss provisions ("LLPs"). Net of the TLTRO, Tiering and Excess liquidity fee contribution booked in 4Q22, net revenues grew 22.3% quarter on quarter and grew 65.4% year on year underpinned by the strength of the commercial franchise and progress on the industrial transformation.

 

LLPs, at €0.1 billion in 1Q23 decreased 82.5% quarter on quarter and were down substantially year on year, also due to the LLPs proactively booked against Russia exposure in 1Q22. The Group has strong lines of defence and a resilient credit portfolio quality with high NPE coverage as well as the existing €1.8 billion overlays. Altogether it results in a structurally low Cost of Risk ("CoR") of 8 basis points in 1Q23, and an unchanged CoR guidance of 30-35 basis points for FY23, with potential tailwinds that could drive it lower.

 

In 1Q23 operational costs were €2.3 billion, reduced by 5.8% quarter on quarter and by 0.6% year on year, confirming the Group's ability to structurally reduce the cost base while protecting revenue growth. This is despite significant inflationary pressures which were circa 10%⁷ year on year for UniCredit's footprint. The Cost-Income ratio stood at 39.2%, proof of operational excellence.

 

The Group continues to drive best-in-class capital efficiency, with 111 basis points of capital organically generated in the first quarter, leading to a stated CET1 ratio of 16.05% which already deducts the approved €5.25 billion 2022 distribution as well as the accrued 1Q23 cash dividend, an increase from 14.91% CET1 ratio in 4Q22. Risk Weighted Assets ("RWA") were reduced quarter on quarter by 3.1%, to €298.8 billion.

 

Following the regulatory and shareholder approval of the 2022 €3.34 billion share buyback, the first tranche of circa €2.34 billion has commenced, while the second tranche of circa €1.0 billion is expected to commence during the second half of 2023. We are delivering on our clear commitment to shareholder value creation, progressively growing the cash dividend and share buybacks to further propel future shareholder returns.

 

The balanced combination of the three levers of net revenues, costs and capital efficiency continues to yield exceptional outcome, unlock internal value and build a track-record in profitability. The resilient and growing financial results are further evidenced by the 1Q23 RoTE of 20.4%².

 

The robust balance sheet together with the favourable liquidity profile stems from a sticky and diversified deposit base, a prudent Asset-Liability Management strategy and an effective management of the pass-through, with a loan to deposit ratio of circa 90%.

 

Russia has been resized and refocused over the last year with the local business condensed and non-local participation exposure substantially reduced through a progressive, proactive and orderly de-risking approach allowing a reduction of overall 68% since March 2022⁸, equivalent to €4.2 billion at minimal cost.

 

On the back of the strong financial results and supportive interest rate environment, UniCredit has improved its financial guidance⁹ for 2023 to NII of over €12.6 billion, net revenues above €20.3 billion and net profit^1,4 above €6.5 billion, setting a new baseline for 2024-2025. We have increased our shareholder distribution intention for 2023 to at least €5.75 billion⁵.

 

UniCredit's Social Strategy, refined in the course of 2022, pursues five strategic goals addressed to specific beneficiaries, among others to ensure the communities' sustainable progress, with a focus on Youth and Education. Fully in line with these ambitions, the UniCredit Foundation aims to create equal opportunities in education, and leverages its extensive educational network, partnerships and in-depth knowledge of our geographies in order to help build a better future for our young people and their communities across Europe. During 2023, UniCredit Foundation will grant a total of €20 million to support projects tackling school dropouts, enhancing employability, and encouraging university attendance attainment. This is part of the Group's Purpose, our ESG commitment and strategic plan.

 

In 1Q23 UniCredit won the ESG Elite Award for the Best Standard Ethics Rating, alongside three further prizes for innovative products and services at this year's Milano Finanza Banking Awards. UniCredit continues to support its clients' green transition with strong total ESG volumes at €61.7 billion since 2022, on track to achieving the €150 billion 2024 target. Underpinned with a strong governance, we will continue to work on Environmental and Social Topics, which to us are equally important, as demonstrated by our ESG strategy and targets setting.

 

The key recent events in 1Q23 include:

 

·       2022 share buyback of €3.34 billion approved with ongoing execution of the related first share buyback tranche of €2.34 billion. As of 28 April 2023 UniCredit purchased 50.78 million shares equal to 2.62% of share capital;

·       €1.9 billion 2022 dividend paid on 26 April 2023;

·       Notice of early redemption of €1.25 billion AT1 instrument on first call date of 3 June 2023.

 

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

For the 9^th consecutive quarter UniCredit delivered excellent financial results improving its profitability and distribution run rate as we continue to unlock the intrinsic value of our franchise. We are making significant progress in the execution of our strategic plan and are in the second phase of our ongoing industrial transformation, setting a new benchmark for banking. We are reinforcing the commercial franchise and optimizing our products and services to deliver the best to our clients in the most efficient way.

 

Our record first quarter net profit of €2.1 billion was delivered with double digit net revenue growth supported by very strong net interest income and further cost reduction, creating positive operational leverage. We continued to generate a high amount of organic capital resulting in a best in class 16.05% CET1 ratio, already reflecting our 2022 distribution of €5.25 billion and first quarter cash dividend accrual of €0.7 billion. Our liquidity is solid, and our asset quality strong. The improved macro-outlook and rate environment, positive business trends and our continuing transformation and strengthened lines of defence have enabled us to increase our 2023 guidance across key metrics. We now expect net profit of over €6.5 billion and a higher shareholder distribution of at least €5.75 billion. The low Cost of Risk of 30-35 basis points for 2023, with potential tailwinds that could drive it lower, is a result of our solid credit portfolio, high coverage and significant overlays.

 

Thus far Europe has proven itself to be relatively resilient to exogenous shocks and periods of heightened uncertainty. At UniCredit we anticipated a difficult macroeconomic scenario and prepared ourselves with strengthened lines of defence and preemptive actions to secure our future performance. While we remain vigilant, we are also confident that we will, for the foreseeable future, continue to deliver consistent, high-quality profitable growth with a structurally reduced cost base and Cost of Risk.

 

What we are accomplishing in terms of our industrial transformation is surpassing our UniCredit Unlocked ambitions, but the journey is by no means complete and will continue to propel our financial results, shareholder distributions and the way we support our clients and communities in the coming years.

 

 

^[1] "Net profit" (new definition): means "Stated net profit" adjusted for impacts from DTAs tax loss carry forward resulting from sustainability test;

"Stated net profit": means accounting net profit;

"Net profit after AT1/CASHES coupons" (the base for cash dividend accrual): means net profit, as defined above, adjusted from impacts from AT1 and CASHES coupons.

^[2] Calculated at 13.0% CET1 ratio.

^[3] TBVpS year on year delta of 21.7% is the growth rate between 1Q23 TBVpS of 28.46 plus 0.99 FY22 cash DPS and 1Q22 TBVpS (including FY21 cash DPS).

^[4] Net profit guidance for 2023 of over €6.5 billion is pre AT1 and CASHES coupons, which for FY23 are expected to be at circa €0.4 billion after tax, and post-integration costs, which for FY23 are expected to be circa €0.3 billion before tax.

^[5] Subject to supervisory and shareholder approvals.

^[6] End of period value.

^[7] Preliminary figures for 1Q23.

^[8] Delta since 8 March 2022 excluding change in FX hedging (+€0.7 billion included in derivatives as of 8 March 2022 and additional intragroup exposure).

^[9] UniCredit Group 2023 financial guidance available in section "Group key financial 2023 guidance" at page 5.

 

 

Milan, 3 May 2023

 

Contacts

Investor Relations:

e-mail: investorrelations@unicredit.eu

 

Media Relations:

e-mail: mediarelations@unicredit.eu