UniCredit SpA (UNCFF) Q1 2025 Earnings Call Highlights: Record-Breaking Quarter with Strong ...
Net Profit: Increased by 8.3% to EUR 2.8 billion.
Return on Tangible Equity (RoTE): Achieved 22%, with an adjusted RoTE of 26% at 13% CET1.
Cost-to-Income Ratio: Reduced to 35.4%.
Net Interest Income (NII) Return on Allocated Capital (RoAC): Increased to 20%.
Fee Income Growth: Grew 8.2% year-on-year and 16.5% quarter-on-quarter.
Cost of Risk: Remained low at 8 basis points.
CET1 Ratio: Increased to 16.1%, or 16.6% excluding the accrued share buyback.
EPS Growth: Increased by 18%.
Dividend Per Share Growth: Increased by 46%.
Organic Capital Generation: Generated EUR 3.1 billion organically and EUR 5.3 billion overall.
Fee to Revenue Ratio: Climbed to 36%.
Loan-to-Deposit Ratio: Stands at 87%.
Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR): Above 140% and 125%, respectively.
Warning! GuruFocus has detected 5 Warning Sign with UNCFF.
Release Date: May 12, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
UniCredit SpA (UNCFF) reported its best quarter in history, with record results across all key performance indicators (KPIs).
Net profit increased by 8.3% to EUR 2.8 billion, achieving a 22% return on tangible equity.
The company upgraded its 2025 guidance, expecting to exceed 2024 net income and return on tangible equity, with distributions above last year.
Fee income reached a new record, growing 8.2% year-on-year, with strong performance across various categories and regions.
UniCredit SpA (UNCFF) maintained a strong capital position, with a CET1 ratio of 16.1%, and a buffer of EUR 8.5 billion to EUR 10 billion.
Net interest income (NII) showed a decline, although it was offset by strong fee generation.
The macroeconomic environment remains challenging, with expectations of softer net operating profit due to normalizing rates and cost of risk.
The company faces potential volatility in trading revenues, which may not repeat the significant overperformance seen in Q1.
There is uncertainty surrounding M&A opportunities, with political hostilities and strategic considerations impacting potential deals.
The company has a significant amount of excess capital, which it aims to address by 2027, but this may be impacted by market conditions and strategic decisions.
Q: How much of the potential upward revision of guidance on net revenues is from provisions and trading, and how much from fees and costs? Also, can you clarify your stance on M&A, particularly regarding Commerzbank and strategic objectives? A: Andrea Orcel, CEO: The significant beat on core revenues is due to better-than-expected fees and expected NII. Trading was benign, driven by client risk management and treasury performance. Costs and provisions were better than expected. We may increase guidance further if trends continue. On M&A, we evaluate opportunities in every market but will only pursue those that enhance shareholder value. We prioritize new market entry, strengthening factories, and share buybacks, depending on returns.
Q: What is the expected trend in headcount and any related cost implications from the Google partnership? Also, can you provide more color on the CET1 capital strength this quarter? A: Andrea Orcel, CEO: We focus on cost efficiencies rather than FTE reduction, reinternalizing activities and investing in younger talent. The Google partnership will transform the bank, similar to other strategic partnerships. Stefano Porro, CFO: The CET1 capital strength was bolstered by ruble appreciation and strategic portfolio performance, with a buffer maintained for volatility.
Q: Can you provide details on the impact of the mark-to-market of strategic stakes like Commerzbank and Generali on CET1 and trading? Also, what's the timeline for the Banco BPM transaction? A: Andrea Orcel, CEO: The strategic portfolio had a positive 25 basis points impact on CET1, with a EUR40 million negative impact on trading due to hedges. Regarding Banco BPM, we are evaluating the situation, considering factors like asset quality and capital projections, and awaiting clarification on the golden power before making a decision.
Q: What drove the decline in net interest income in Austria, and what is the expected impact of the replication portfolio? Also, can you elaborate on the EUR400 million net profit benefit expected by 2027? A: Stefano Porro, CFO: The decline in Austria's NII was due to customer rate trends and deposit repricing. The replication portfolio is expected to contribute EUR500 million over three years, mainly in 2026 and 2027. The EUR400 million net profit benefit by 2027 includes contributions from insurance, Alpha Romania, and Aion-Vodeno, with synergies expected in the coming years.
Q: How are you planning to address excess capital, and what are your expectations for NII given the lower pass-through this quarter? A: Andrea Orcel, CEO: We remain committed to returning excess capital above 13% CET1 by 2027, either through M&A or share buybacks, depending on shareholder value. Stefano Porro, CFO: We expect a moderate decline in NII, with potential upside if pass-through reductions continue. Our assumptions include a deposit facility rate below 2% by year-end.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
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