UniCredit: 2Q22 and 1H22 (1) Group Results Excellent Financial Results, well positioned to face macroeconomic headwinds.
Sixth consecutive quarter of profitable growth leading to the strongest first half2 in at least a decade.
Positive operating leverage driven by net revenue growth of 12.5 per cent and cost reduction of 4.4 per cent year on year, resulting in EUR1.5 billion net profit3, excluding Russia4
Best in class capital position with 2Q22 CET1 ratio at 15.73 per cent with 67 basis points of organic capital generation
Profitability above Cost of Equity with high risk-adjusted returns across all regions, and 2Q22 Group RoTE at 13.0 per cent, excluding Russia
Further reduction of Russia exposures and commitment to progressive de-risking
Completed first 2021 share buyback tranche of EUR1.6 billion, equal to 7.4 per cent of the share capital and submitted the remaining EUR1 billion tranche5 to ECB for approval; 1H22 dividend accrual of EUR0.9 billion
Improved 2022 guidance on the back of strong first half performance, supportive interest rate environment and lower Cost of Risk6
Solid foundations to navigate macroeconomic uncertainty with improved operating performance, strong capital, robust organic capital generation, and sound asset quality and provisioning
Confident in delivering UniCredit Unlocked 2022-2024 guidance and distribution ambition, assuming the updated macroeconomic 'slowdown'7 scenario
Supporting our communities with targeted donations and our work with partners to deliver on our social commitment
On 26 July 2022, the Board of Directors of UniCredit S.p.A. ('UniCredit' or 'the Group') approved the Consolidated First Half Financial Report as at 30 June 2022.
The quarter sets a number of records demonstrating the strong commercial momentum within the business. Excluding the impact of Russia, Group net profit was EUR1.5 billion, resulting in healthy organic capital generation of 67 basis points in the quarter resulting in a CET1 Ratio of 15.73 per cent.
Excluding Russia, the 2Q22 net revenues were EUR4.4 billion, 12.5 per cent higher year on year, reflecting high risk-adjusted returns across all regions, underpinned by the net interest income ('NII') increase to EUR2.3 billion, and by lower Loan Loss Provision ('LLPs'), reflecting solid asset quality.
Excluding Russia, 2Q22 operational costs were reduced by 4.4 per cent year on year, demonstrating the Group's discipline in managing the cost base while protecting revenue generation.
Russia exposure was reduced overall by circa EUR2.7 billion8, through proactive and disciplined actions, whilst Russia's Risk Weighted assets ('RWAs') were reduced by EUR2.7 billion. UniCredit is committed to maintaining a progressive de-risking approach.
The Group is well positioned and has the right foundations to enter a period of macroeconomic uncertainty given its strong CET1 ratio, enhanced business model with a capital light focus and solid asset quality. This is further strengthened by provisioning levels, existing overlays on performing exposures at circa EUR1.0 billion and a rigorous risk approach, strengthening the Group's capacity to absorb macroeconomic shocks. Gross Non-Performing Exposures ('NPEs') stood at EUR13.9 billion and are primarily composed of Unlikely-To-Pay ('UTP') which will further benefit from the recently announced partnership agreement with Prelios in Italy for the specialised management of UTPs. Both Group Net and Gross NPE ratios continued to decline quarter on quarter, to 1.5 per cent and 2.9 per cent, respectively.
Cost of Risk ('CoR'), excluding Russia, is well below guidance at 10 basis points, and full year guidance is improved to below 30 basis points7.
On 14 July 2022, the 2021 first share buyback tranche of EUR1.6 billion, equivalent to 7.4 per cent of share capital has been successfully completed, and on 19 July 2022 the shares were cancelled. The Group intends to call for an EGM in 3Q22 for shareholder authorisation to increase the number of shares to be purchased for 2021 the second share buyback tranche of EUR1.0 billion9.
The Group's 2Q22 CET1 ratio stood at 15.73 per cent, an improvement of 173 basis points quarter on quarter. This was mainly driven by organic capital generation of 67 basis points excluding Russia, and the positive impact from Russia of 62 basis points.
On the back of the strong financial results, and improved interest rate environment, UniCredit has improved its financial guidance for 20227, with revenues above EUR16.7 billion and net profit at circa EUR4.0 billion, excluding Russia.
The UniCredit Unlocked 2024 financial ambitions of average annual organic capital generation of 150 basis points, incremental net revenue of circa EUR1.1 billion and a RoTE of circa 10.0 per cent are confirmed under the slowdown scenario with positive results already being delivered by combining the three levers of net revenues, costs and capital efficiency. The Bank continues its focus on the execution of the 2022-2024 Strategic Plan to fully unlock the value of UniCredit and is committed to delivering attractive and sustainable returns, with the ambition to return at least EUR16 billion to shareholders by 2024.
Key recent events include the following:
2021 first share buyback tranche of EUR1.6 billion completed on 14 July 2022 with all shares cancelled on 19 July 2022. UniCredit purchased 162.2 million shares equal to 7.4 per cent of share capital.
Executing strategy to reduce non-performing exposure, with the following actions:
Disposal of circa EUR2.0 billion of UTP portfolio
Disposals of circa EUR1.3 billion of NPL portfolio
Signed partnership with Prelios for management of UTP loans in Italy.
EGM in 3Q22 for shareholder authorisation to increase the number of shares to be purchased for 2021 second share buyback tranche of EUR1.0 billion9.
Andrea Orcel, Chief Executive Officer of UniCredit S.p.A. :
'UniCredit continued to perform well in the second quarter, leading to the best first half performance in over a decade driven by profitable growth, healthy organic capital generation and a reduction of our cost base despite the impact of inflation. Our CET1 ratio further strengthened to 15.73 per cent as we demonstrated strong asset quality, with a Cost of Risk at just 10 basis points, excluding Russia. On the back of our excellent performance and a more supportive interest rate environment we have improved our 2022 guidance, an important step in the delivery of our three year plan.
The global economy is facing unprecedented challenges and much uncertainty. It is at times like this that our unwavering focus on delivering our UniCredit Unlocked strategy is especially critical. UniCredit is built on solid foundations, which position us well to navigate whatever macroeconomic environment lies ahead. Ensuring we remain strong and resilient will allow us to fulfil our responsibility to our clients, communities and wider stakeholders, supporting them as they navigate challenging times ahead.'
Notes:
1 All 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.
32Q22 stated net profit for Group including Russia at 2.0 bn, +>100 per cent Q/Q and +94.5 per cent Y/Y. 2Q22 stated net profit for Group excluding Russia at 1.7 bn, +39.8 per cent Q/Q and +73.9 per cent Y/Y.
4Russia includes the local bank and legal entities, plus the cross-border exposure booked in UniCredit SpA, see page 12 for the Russia segment 2Q22 results. For Group consolidated results, including Russia, see page 13.
5Extraordinary General Meeting (EGM) in 3Q22 for shareholder authorisation to increase the number of shares to be purchased for 2021 second share buyback tranche of EUR1.0 billion.
6UniCredit Group 2022 financial guidance available in section 'Group excluding Russia key financial 2022 guidance' at page 15.
7Macroeconomic slowdown for the UniCredit footprint updated to a GDP growth of 2.3 per cent in 2022 and 2.5 per cent in 2023, and inflation of 7.3 per cent in 2022 and 4.5 per cent in 2023. GDP and inflation growth of Group footprint are calculated based on a weighted GDP and inflation average of the respective countries (excluding Russia).
8Delta since 8th March 2022 excluding change in FX hedging and additional exposures (as per page 3 of 1Q22 market presentation)?.
9Subject to supervisory approval.
UniCredit: 2Q22 and 1H22 Group Results Excellent Financial Results, well positioned to face macroeconomic headwinds
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