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UniCredit revises FY'19 revenue guidance as Q2 profit rises 81% YOY

UniCredit SpA lowered its full-year revenue guidance to €18.7 billion from €19.0 billion, citing expectations of a prolonged low interest rate environment, as it reported year-over-year increases in second-quarter and first-half profits.

The Italian lender reported a reclassified second-quarter net profit attributable to the group of €1.85 billion, up 81.0% from €1.02 billion a year earlier. The bank booked extraordinary items of €825 million, mainly related to gains from the sale of its remaining stake in FinecoBank SpA in July. Excluding the extraordinary items, adjusted group net profit amounted to €1.03 billion in the quarter, up 0.4% from €1.02 billion a year ago.

Adjusted return on tangible equity was 8.3% in the quarter, compared to 8.5% a year ago.

Net interest income for the quarter declined on a yearly basis to €2.55 billion from €2.61 billion. Net fees and commissions totaled €1.57 billion, down from €1.61 billion a year earlier. Net trading income fell 19.0% year over year to €253 million.

Net write-downs on loans and provisions for guarantees and commitments widened to €707 million from €502 million in the second quarter of 2018. Other charges and provisions declined to €236 million from €660 million over the same period.

For the first half, attributable net profit came in at €3.24 billion, up 51.7% from €2.14 billion earned a year earlier. Adjusted group net profit increased 1.0% on a yearly basis to €2.16 billion from €2.14 billion.

CEO Jean Pierre Mustier confirmed a number of the Italian lender's full-year objectives, including an adjusted net profit of €4.7 billion, total operating costs of €10.1 billion, a group ROTE of more than 9% and a maximum distributable amount buffer at the upper end of the target range of 200 basis points to 250 basis points.

Additionally, Mustier said the noncore gross nonperforming exposures will be meaningfully below €14.9 billion and closer to €10 billion by the end of the year, well below its initial "Transform 2019" target.

UniCredit said its Transform 2019 plan is well on track, having closed 24 branches in the second quarter, thus achieving 98% of the planned 944 branch closures in western Europe, and fully meeting its full-time employee reduction target of 14,000 job cuts.

At June-end, the group's fully loaded common equity Tier 1 ratio stood at 12.08%, compared to 12.25% at the end of March and 12.51% a year ago. UniCredit noted the CET1 ratio included a positive impact of 24 basis points from the FinecoBank sale and a negative impact of 40 basis points from regulatory headwinds as per guidance.

The bank noted that the 2018 figures were restated to reflect the disposal of FinecoBank.