Unicredit travels in the red for 2.03% to 8.26 euros and 18.59 billion capitalization, with the Ftse Mib down by 0.67%. After the last conference call with the CEO Jean Pierre Mustier, who left the bank, the analysts took stock of the situation of a job, that of the French manager, which began in 2016 with a capital increase of 13 billion euros and closed post-pandemic and the sale of several profitable assets.
Santander confirms the buy rating and the 10 euro target price on the share, underlining that today Unicredit has excess capital equal to the current market capitalization. The bank therefore sits on almost 19 billion in cash. “Although some concerns remain on the front of revenues and the quality of assets”, the Spanish analysts write, the latter believe that Unicredit can continue “to increase the return on capital for shareholders”.
The payout on earnings for 2020 is 85% between coupon and buyback and, in the future, brokers believe that the 50% target should be considered as a base case, equivalent in any case to a yield of around 8%, “with ample room for extraordinary distribution above this level”.
In the meantime, the group’s loans on a quarterly basis decreased by 2.4% and, within this figure, the investment bank (the Cib, which caused a devaluation of 900 million euros) lost 6%, of which Germany accounts for 2%, Austria 1%, but Italy only 0.4%. Part of the decline is due to the bank’s decision to limit the segment of consumer loans, moreover, analysts write, it is also necessary to take into account the effect of some prepayments in the Cib and loans to businesses. Looking to the future, the bank’s expectations are for a recovery in GDP in 2021, with a rebound in loans, even if the latter is perceived to be lagging behind the country’s growth.
As for the quality of assets, provisions recorded “a sharp increase, partly due to the fact that in some Eastern European countries the moratoriums were about to end and the bank decided to adopt a more cautious approach to move some loans into bonis in the category of unlikely to pay “. To this proposal, analysts write, it is interesting to note that most of the loans that came out of the moratorium “actually showed better asset quality than expected”. For 2021, the bank confirmed guidance on the cost of risk of 70 basis points.
During the conference call, the group explained that the capital “in excess above the regulatory minimum and practically the same size as the current market capitalization of the bank, equal to approximately 19 billion”. And here Santander calculates that the total payment target of the 2020 profits between coupon and buyback envisaged by the group is 1.1 billion and that “the ordinary payment of 50% for 2021 would mean over 1.5 billion euros”. On the other hand, the liquidity buffer (Mda buffer) stands at 605 basis points, equal to 19 billion.
Even if the bank halved the bearing from 605 to 300 basis points by remunerating shareholders (compared to the target range of 200-250 basis of the guidance), “it would still mean an excess liquidity of 10 billion, or many multiples of an ordinary dividend that the bank could pay “. For Santander analysts, “the arithmetic would suggest that Unicredit could see an extraordinary distribution in the next few years”.
Today Equita Sim raised the target price by 12% to 10 euros on Unicredit, confirming the hold opinion “despite the improvement in the asset quality and the excellent position, waiting for greater visibility on the strategy of the new CEO, Andrea Orcel, on the way in April and, in particular, on
