Citi updates its estimates on Unicredit to include the 2021 accounts beyond expectations and by 2024 it expects a profit of more than 4 billion euros. The bank, under the leadership of Andrea Orcel, beat the 2021 guidance with revenues of 18 billion (against the target of 17.5 billion), costs of 9.8 billion (the cost / income dropped to 54, 6%) and an underlying net profit of 3.9 billion against the guidance of over 3.7 billion (Rote of 7.5%). In the fourth quarter alone, revenues amounted to € 4.4 billion, substantially unchanged compared to the previous quarter and the net book loss was € 1.4 billion due to a series of negative extraordinary items, however expected. The underlying net profit for the quarter was 800 million, 600 million more than a year earlier.
“Our estimates are broadly unchanged for 2022-2023. But we are increasing our 2024 earnings per share estimate in light of higher return on equity / buyback,” said Azzurra Guelfi, an analyst at Citi. Unicredit confirmed its commitment to a “significant” shareholder remuneration with the proposed distribution of 3.75 billion between dividends and buybacks (it expects to obtain the authorization of the ECB before the April meeting and start it following the approval of the latter).
So now Citi expects an eps at the end of 2022 of 1.66 euros per share from the 1.63 previously estimated, it sees it at 2.07 euros per share in 2023 (from 2.04 euros per share) and 2.78 euros per share in 2024 (from 2.68 euros per share), the year in which Unicredit should record a net profit of over 4 billion (4.107 billion) from the 3.057 billion expected for this year (3.458 billion in 2023).
Against a dividend estimated for this year at € 0.64 per share (yield of 4.7%), Azzurra Guelfi sees it rise to € 0.78 per share in 2023 (yield of 5.7%). ) and € 1.06 per share in 2024 (yield of 7.7%). Thus, the return on equity (Roe) is expected at 6% at the end of this year and in the following two years at 6.9% and 8.2%.
Unicredit’s guidance for 2022 foresees a net profit of over 3.3 billion, with an interest margin substantially flat year on year, slightly increasing fees, stable operating costs and cost of risk in the 30-35bps area. In 2022, the distribution of capital will be at least 3.75 billion. The Citi expert therefore confirmed the buy rating and the target price of € 15.70 on the Unicredit stock, up 3.55% today on the stock exchange to € 14.232.
However, it maintains a high risk rating due to the uncertainty relating to macro developments in Italy following the outbreak of Covid-19, with risks on the credit quality, balance sheet and revenues of the group, in addition to the risk associated with potential opportunities. of external growth. “We identify a number of sector- and bank-specific risks that could prevent the action from reaching our target price. The new governance of the group could be seen as an opening to the external growth strategy compared to the previous focus on return on capital. and this could lead to growing uncertainty about the bank’s future and the potential risk of execution in the event of a deal “, warned Azzurra Guelfi.
With regard to the M&A chapter, it is recalled that the CEO Orcel confirmed a disciplined approach to M&A, the possible sale of the leasing business in Italy and Germany and announced that the bank will not participate in the tender for the sale of the Russian Otkritie in light of geopolitical uncertainty (current activities in Russia represent approximately 1.7% of the group’s loans and approximately 4% of pre-tax profit).
Furthermore, despite the strong actions in recent years, credit quality is still an area under the investor’s lens, given the amount of loans on moratorium and the macroeconomic challenges, which can also negatively affect the group’s revenue development. Other key risks include the potential deterioration of macroeconomic conditions and the volatility of sovereign debt, the action of rating agencies, political developments in Italy, liquidity and the risk of executing the restructuring plan, “all factors that could weigh on the profitability of the group and on the performance of the share on the stock exchange Unicredit also has a large exposure to Central and Eastern Europe, as well as significant activities on the capital market, which have caused considerable losses in the past. If the impact of any of these factors turns out to be more negative than anticipated, the stock will likely find it difficult to reach our financial and price targets. However, if one of these factors had less of an effect, the stock could substantially exceed our target price, “concluded Azzurra Guelfi.
Objective price that post 2021 accounts JP Morgan raised from 17 to 18 euros (overweight rating) and HSBC from 16.20 to 17 euros (buy rating), after having appreciated the 2021 accounts beyond expectations, the reassuring messages on Russia, ” although the geopolitical risks will continue to weigh on the performance of the shares “, explains the investment bank which raised the estimates of eps by 9% / 5% / 4% in 2022 to 1.67 euros per share, in 2023 to 1, € 85 per share and € 2.31 per share in 2024 (net profit of € 3.957 billion), Intermonte from € 16.5 to € 18.5 (buy) and Mediobanca Securities at € 19 (rating outperform).
“Unicredit must earn the market’s confidence through stability rather than surprise it with a stellar performance and we suspect this is the meaning of the 2022 guidance”, reads the note from Mediobanca which in the meantime appreciated the strategic clarity on bancassurance (internalization option from 2024) and on M&A. “Unicredit remains for us a top pick in the sector”, concluded the investment bank. Instead, this morning Equita substantially reiterated its 2022-2024 estimates, the target price of 16 euros and the buy rating with the stock trading at a tangible 2022 price / capital multiple of 0.47 times with a total return of around 12 %. (All rights reserved)

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