UniCredit stock surges on record FY'22 results, higher shareholder returns

UniCredit SpA will return more than €5 billion to shareholders after delivering what it described as its best results in over a decade, sending its stock up more than 10%.

The Italian lender's full-year 2022 net profit rose to €6.46 billion from €2.10 billion in 2021. Fourth-quarter 2022 net profit was €2.46 billion, compared to a year-ago loss of €883 million, as net interest income rose 43% to €3.43 billion.

UniCredit now intends to pay out €5.25 billion through dividends and share buybacks for 2022, representing a €1.5 billion increase from a year earlier. The proposed distribution comprises €1.91 billion in dividends and €3.34 billion in share buybacks, which the group intends to commence as soon as possible following approval at the company's March 31 annual general meeting.

If the plan is approved, UniCredit will have distributed close to 60% of the target set in its 2022-2024 strategy while improving its common equity Tier 1 ratio, CEO Andrea Orcel said during the bank's Jan. 31 earnings presentation. The group intends to return at least €16 billion to shareholders through 2024 while maintaining or exceeding a CET1 ratio of between 12.5% and 13%.

While UniCredit's distribution plans have come under scrutiny from regulators, Orcel said the lender is confident of securing supervisory approval based on discussions with the European Central Bank due to its "extremely strong" organic capital generation and step up in profitability.

UniCredit generated €8.9 billion of capital organically in 2022, up 279 basis points on a yearly basis. The group's stated CET1 ratio stood at 16% at the end of 2022. Pro forma for distributions, the ratio stood at 14.91%.

Russian business

UniCredit booked a negative impact of €200 million from its Russian subsidiary on its full-year net profit, down from roughly €900 million in the first quarter of 2022. Its total gross exposure to Russia dropped to €5.3 billion from €7.4 billion over the same period.

The efforts to reduce total gross exposure between the first and fourth quarters of 2022 were impacted by an increase of €1.1 billion in the group's local exposure, mainly due to the appreciation of the Russian ruble, according to Orcel.

Orcel said there is "absolutely no change in strategy" regarding Russia and that it will continue to focus on orderly de-risking of its exposure to the country.

UniCredit's shares were 10.8% higher in early afternoon trading.