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Lower write-downs, costs boost UniCredit Q4'17 result

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Lower write-downs, costs boost UniCredit Q4'17 result

UniCredit SpA said its turnaround plan has started to bear fruit as it reported net profit attributable to the group of €801 million for the fourth quarter of 2017, compared to a restated loss of €13.56 billion in the year-ago period.

Adjusted for one-off items, including a positive impact from the disposals of Bank Pekao SA and Pioneer Global Asset Management SpA, group net profit for the quarter was €708 million, compared to an adjusted year-ago loss of 352 million.

Net interest income totaled €2.58 billion in the quarter, up from the year-ago €2.42 billion. Net fee and commission income also rose on a yearly basis, to €1.68 billion from €1.50 billion.

The group's net write-downs on loans and provisions totaled €772 million in the quarter, compared to €9.59 billion in the same period in 2016. Other charges and provisions also declined on a yearly basis, to €193 million from €973 million. The bank's integration costs declined to €103 million in the period from €1.77 billion a year earlier.

For full year 2017, the bank reported group attributable profit of €5.47 billion, compared to a loss of €11.79 billion for full year 2016. On an adjusted basis, full-year 2017 group net profit was €3.71 billion, compared to 1.30 billion in 2016.

The return on tangible equity for the year was 7.2%, compared to the adjusted 2.0% for the year-ago period.

CEO Jean-Pierre Mustier said 2017 was a "pivotal year" for the Italian lender.

"We launched the Transform 2019 plan, which is already yielding tangible results, leading to a much-improved financial performance and laying the foundations for the future growth and success of UniCredit," Mustier added.

The bank confirmed all its targets under the plan, including a ROTE of above 9% and total cost targets of €10.6 billion.

The group's gross nonperforming exposures declined 14.0% year over year to €48.4 billion, with the NPE ratio falling 1.6 percentage points on a yearly basis to 10.2%. Net NPEs decreased 15.2% year over year to €21.2 billion, against a target of €20.2 billion under its turnaround plan. Net NPE ratio stood at 4.7% in the fourth quarter of 2017, down 0.9 percentage point on a yearly basis, while the coverage ratio was up 0.6 percentage point on an annual basis to 56.2% in the period.

As of the end of 2017, the bank's fully loaded common equity Tier 1 was 13.60%, compared to 13.81% at the end of September 2017. Taking into account the impact of IFRS 9 and the disposal of its Fino nonperforming loans portfolio, the bank's CET1 ratio at 2017-end was 13.02%. On a transitional basis, the CET1 ratio was 13.73% at the end of 2017.

The bank's proposed dividend for 2017 is 32 cents per share, representing a payout ratio of 20% of normalized earnings.