We hosted UniCredit CEO Andrea Orcel, CFO Stefano Porro and Head of IR Magda Palczynska for investor meetings in London last week. Investors'' focus was mainly on the recent developments in inorganic growth, sustainability of profits and levers to defend profitability as well as capital distribution. We reiterate our OP on UCG which remains our Italian top pick, as flagged in our note SOUTHERN EUROPEAN BANKS: A sea of opportunities: Mediterranean banking in 2025.
Guidance for 2025-27 remains supportive
NII is expected to see a moderate decline in ''25 - a c6% drop - as the lower interest rates and the downsizing of Russia will more than offset the growth from CEE. Fees and insurance should grow mid-single digit as the bank leverages the integration of the life JVs in Italy and the strategy to improve fees in corporate and payment solutions. Costs should be flat, accounting for the new perimeter, at cEUR9.6bn with further efforts to keep them under control into ''26-27. With a cost of risk that should be at 15bp in ''25 after using some of the EUR1.7bn overlays that the bank has, the bank targets a broadly in-line net profit in ''25. Going forward, UCG management aims to achieve EUR10bn of net profit in ''27. In our view, the key debate would be how much of the existing buffers that the bank has from overlays and restructuring charges would be used by then - which, given the prudent nature of the guidance from this management team, should still provide some upside.
Inorganic growth only if it enhances the standalone case
During the meetings, management reiterated the priority is to execute the standalone plan and MandA activity should only be done if it enhances the standalone case. The bank provided a comprehensive message on what to expect from the CBK investment and reiterated the message that the c5.1% stake in Generali is just a financial investment. It also reiterated that the bid for Banco BPM has a strong strategic fit in Italy with 12m customers...
