MILAN, Feb 5 (Reuters) - UniCredit stunned markets on Monday with a bumper 2023 profit which it said it would distribute entirely to shareholders, and pledged to match it this year despite a toughening backdrop.
Shares in Italy's second-biggest bank jumped 10% to a nine-year high after the much stronger than forecast earnings, and upgrade to its outlook for a year in which interest rates are expected to start declining.
Other leading European banks that reported full-year earnings last week struck a cautious note, in contrast to UniCredit's upbeat tone.
"We face the future with optimism," CEO Andrea Orcel told analysts.
UniCredit shares are now at their highest level since May 2015, having surged nearly 250% since Orcel, former head of investment banking at UBS, took the reins in April 2021.
"Stock is one of most loved in the sector, but the story continues to overdeliver," Citi analyst Azzurra Guelfi said.
The bank reported net income in the October-December period of 2.8 billion euros ($3.01 billion), which includes a 900 million euro writeback of tax assets, and compares with a consensus forecast provided by Unicredit of 1.2 billion euros.
Even stripping out the tax writebacks, revenue confounded forecasts for a decline, rising 4.6% year-on-year.
Both income from lending and net fees strengthened from the previous quarter, while analysts had expected a weakening.
Provisions against loan losses in the fourth quarter were less than half what they had forecast.
The lender reported a full-year 2023 net profit of 8.6 billion euros net of tax asset writeups, and said it would allocate all of that for share buybacks and dividends.
It had been guiding for distribution of at least 6.5 billion euros over 2023 on a net profit of 7.25 billion or higher.
"Beat across the board on the Profit&Loss statement is dwarfed by the umptieth cashback top-up," Mediobanca Securities said.
UniCredit will then adopt a 90% payout policy, raising the cash part to 40% of income from 35% in 2023 and introducing an interim dividend, it said.
With operating costs a touch below expectations, UniCredit booked slightly higher than foreseen one-off charges of 788 million euros, which it plans to use to offset future headwinds, for example by funding costly voluntary staff exits.
Orcel, who is set to be handed a new three-year mandate in the spring, has bet on one of the sector's most ambitious payback policies to boost the bank's share price.
To be able to do so, he has focused the bank on activities that maximise returns in relation to the capital buffers deployed to support them.
UniCredit's core capital stood at 15.9% of risk weighted assets at the end of December.
($1 = 0.9292 euros)
Reporting by Valentina Za Editing by Alexander Smith and Susan Fenton
Source: Reuters