Another promotion for Unicredit arrives after the industrial plan. Jefferies confirmed the buy rating and raised the target price on the Italian bank, led by CEO Andrea Orcel, from 16.2 to 19 euros per share. Today the stock travels weak, yielding 0.5% to 13.3 euros while the Ftse Mib is positive for 0.5%.
The objective of return on capital (coupon plus buyback) of 16 billion (on the other hand more contained expectations of the experts for 10 billion) seems achievable, according to analysts, considering the higher liquidity buffer. The agreement with unions and insurance partners in the coming weeks “could support the consensus updates, with an earnings per share forecast of more than 20% above the consensus in 2024”. The market valuation still remains rather low, equal to 0.5 times the price / book value ratio (P / TNAV expected in 2021) compared to an expected return (Rote) of 7.6% by 2024.
Analysts have made some changes to expected earnings (+ 1% by 2024) with a more aggressive cost savings plan (€ 9.6 billion in 2024, down from the previous € 10.0 billion and compared to the previous year). goal of managers of 9.4 billion given the more conservative view on inflation and investments), partially offset by possible complications on margins (NII) and a higher tax rate, considering the Dta (tax bonuses) used in 2021 .
Jefferies’ 2024 profit forecast is 4 billion, 12% below the target expressed by the managers, but 15% above the consensus expectations. The latter seems to Jefferies rather conservative on margin expectations, while analysts expect the market to be willing to incorporate the projects of greater cost cuts (given a greater degree of management control). If you also add the buyback, the expected earnings per share for 2024 of the American brokers turns out to be more than 20% above the consensus.
The bank trades at 0.5 times the price / book value ratio as of 2021 (P / TNAV) with an expected Rote of 6.6% by 2023 and 7.6% in 2024, exchanging at 7.1 times the price ratio / earnings 2023 and 5.8 times to 2024 against a European banking average covered by analysts which travels double, once the P / TNAV 2021, for a profitability of 10.3% (the Rote in 2023).
Unicredit’s new 2022-2024 business plan envisages net revenues that should rise from over 16 billion expected in 2021 to over 17 billion by 2024, with commissions that would go from about 38% of revenues to about 40% at the end of the plan and a cost / income ratio from 56% to 50%. On the net profit front, the expectations of the CEO, Andrea Orcel, are to go from over 3.3 billion in 2021 to over 4.5 billion in 2024, with a return for the group that should jump from 7% to 10% (+ 42%).
In addition, an organic generation of capital is expected in the order of 150 basis points (1.5%) per year with a Cet 1 ratio that would go from 13.5% -14% in 2021 to 12.5% ​​-13% in 2024. In the three-year period 2022-2024 total ESG volumes are expected (these are the assets under management of the ESG type, the Debt capital market and social lending activity) for a cumulative amount of 150 billion euros.
The plan provides for a shareholder remuneration of at least 16 billion in total for the period 2021-2024. A distribution of 3.7 billion euro is expected for 2022, consisting of a cash dividend equal to 30% of the underlying net profit and share buybacks for the remainder. The total distribution for 2022 is expected to be in line or higher than that of the current year, with a progressive increase starting from 2023. The annual cash dividend for 2022 will be 35% of the net profit and for the following years at least 35% of profits with the remainder in share repurchases. (All rights reserved)

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