Italian banks will continue to outperform in 2022 and Unicredit is Mediobanca Securities’ top pick. “We expect base revenue in Q4 2021 to be in line with Q3, meaning lower-than-expected net interest income and higher fees thanks to strong asset management flows. However, in our view, the fourth quarter will be influenced by some “kitchen-sinking” (literally “throwing everything out”, the practice of announcing losses and other negative financial results all at the same time in the hope of diminishing their impact, ed), in view of the new business plans “, reads the note from the investment bank.
In particular, “we believe this is true for Unicredit, Intesa Sanpaolo and Bper Banca, while Banca Popolare di Sondrio and Banco Bpm have little scope to anticipate substantial losses, given the rigorous year-end guidance on revenues / profitability. Loan yields unlikely to match higher swap rates, competition, Tltro and modest loan growth, we see downside risk to 2022 consensus estimates at the interest margin level. We don’t see material changes on fees, cuts. costs that offset inflation and a mixed risk cost, “he predicted.
Therefore, as anticipated, the net interest income of Italian banks in the fourth quarter should show further weakness due to flat growth in loans, pressure on margins and NPE sales. So much so that Mediobanca’s estimates are 1% below those of the Bloomberg consensus for the fourth quarter of 2021 and 1-2% below those of 2022, a year that should show a decline in the interest margin year on year. As for Unicredit, the broker sees pressure on margins in Austria and Germany, but better loan growth in Central and Eastern Europe.
At the same time, “we expect fees to show their usual positive seasonality in the fourth quarter, despite a bumper third quarter, as asset management momentum continued into 2021 and bank and payment fees rose. We are 3%. above the Bloomberg consensus estimate for the fourth quarter, but broadly in line for 2022-2023. While the underlying cost of risk will remain low amidst the considerable one-off events of the fourth quarter, “Mediobanca said.
“There is little room to improve the consensus estimate on the cost of risk for most Italian banks, except Banco Bpm and Bper Banca. However, this will likely depend on regulation, namely NPE provisions and sales. Then, without counting Banca Popolare di Sondrio, Credem and Banco Bpm, we see the Cet1 capital ratios drop in the fourth quarter, in light of the one-off costs. The 2022 Srep ratios “, Mediobanca recalled,” will be announced shortly and could increase due to the Addendum, without changing the picture as the Italian banks are well capitalized, with Intesa Sanpaolo and Unicredit that will pay 11-19% of their market capitalization in the next 16 months, 9-10% Banco Bpm, Bper Banca and Banca Popolare di Sondrio,and double-digit excess returns on capital. ”
In general, Mediobanca recommends overweighting banks in their portfolios as inflation, growth and interest rates are more favorable for the sector than for the market as a whole. “In the fourth quarter and in 2022 we remain constructive on Unicredit, hedged with an outperform rating, in light of the valuation, which has not yet reached the expected returns, and the exceptional remuneration to shareholders over the next three years”, advised Mediobanca, recalling that with the accounts of the fourth quarter, Intesa Sanpaolo, covered with a neutral rating, will also announce its business plan 2022-2025 which, according to it, will still focus on dividend yields and high returns in 2025: “we see Intesa Sanpaolo maintaining its “premium” status
