Bumper loss, but strong capital for Italy's UniCredit as CEO departs

Italy's UniCredit parted ways with CEO Jean Pierre Mustier on Thursday as it posted a larger-than-expected quarterly loss after writing down the value of its investment banking business.
 

In nearly five years at the helm, Mustier rebuilt UniCredit's capital reserves and cleaned up its balance sheet, but failed to find sustained profit drivers or lift the bank's depressed stock price.
 

The shares, which trade at a discount of more than 60% to the bank's book value despite a recent rally, were down 2.8% at 1300 GMT, hit by uncertainty over future strategy and a weak revenue performance.
 

"The fourth quarter confirms revenues as the biggest challenge faced by UniCredit at this stage," UBS analysts said in a note.

Excluding one-off items, UniCredit beat its underlying 2020 net profit target thanks to lower-than-forecast loan loss provisions and costs, which more than offset softer revenues.
 

Core capital strengthened unexpectedly to 15.1% of assets, paving the way for a pledge to distribute 1.1 billion euros to investors through dividends and share buybacks.

The results "amplify the gap between the stock's positives (capital, dividend, cost of risk normalisation) and negatives (revenue momentum)," UBS said.
 

After steering UniCredit through restructuring, Mustier said on Nov. 30 he would quit, blaming a clash with the board over strategy.
 

His successor, former UBS investment banking chief Andrea Orcel, is due to take over after the annual shareholder meeting in mid-April. In the meantime, Co-Chief Operating Officer Ranieri de Marchis will be interim general manager.
 

BOAT 'IN ORDER'
 

"After a deep clean, Mustier is leaving the boat in order, with a major question mark on what is the next course," Mediobanca Securities analysts said.
 

Orcel's first challenge will be to decide whether to yield to pressure from the Italian Treasury to acquire state-owned lender Monte dei Paschi di Siena (MPS).
 

Little interested in expanding UniCredit's domestic footprint despite a consolidation wave in Italy, Mustier had negotiated strict terms to consider a deal.
 

It will fall to Orcel to asses whether Rome has lined up enough sweeteners to take on MPS, which on Wednesday posted a 2020 loss of 1.7 billion euros.
 

UniCredit confirmed its 2021 revenue and cost guidance, forecasting an underlying net profit of more than 3 billion euros, versus a previous target of 3.0-3.5 billion.
 

For the fourth quarter, it reported a net loss of 1.18 billion euros, above analysts' average forecast of 686 million euros in a company poll.
 

The result was affected by an 878 million euro goodwill writedown at UniCredit's Corporate and Investment Banking Unit.

Bracing for pandemic-related hits, UniCredit wrote down 5 billion euros of loans in 2020, at the low end of guidance.
 

In line with regulatory restrictions on payouts until the end of September, UniCredit said it would pay 268 million euros as cash dividends and buy back shares for 179 million euros.
 

Another 652 million euro buyback is slated for the autumn.