The Squadra Azzurra fell to Switzerland in the round of 16 at the European Football Championships. In contrast, Italy is the European champion on the stock market. UniCredit shares gained 50% in price so far in 2024. This puts the Milan-based bank at the top of the STOXX Europe 50 performance ranking. In the index of the 50 largest large caps on the old continent, UniCredit was ahead of technology giant ASML and also outperformed Novo-Nordisk. At the beginning of June, the upward trend came to a brief halt. However, during the European Championships, which were disappointing for the Tifosi, UniCredit turned upwards and reversed the short-term consolidation. The share is now heading towards the EUR 40 mark for the first time in 13 years. When Andrea Orcel moved into the executive suite at the Milan headquarters in April 2021, the share price was bobbing around in the single-digit range.
The former UBS investment banker has turned UniCredit inside out. CEO Orcel focused the business on activities that promise maximum return on capital. With success: at the beginning of May, UniCredit reported its 13th consecutive quarter of profitable growth. At the bottom line, the company earned EUR 2.6 billion - almost a quarter more than in the opening quarter of 2023. The Italians thus exceeded market expectations by almost half a billion euros. The bank also beat analyst consensus in terms of revenue. From January to March, UniCredit generated net revenues of just under EUR 6.3 billion. In addition to higher fee and trading income, the rise in interest rates and higher lending volumes were once again noticeable here. At EUR 3.6 billion, net interest income in the first quarter of 2024 was almost a tenth above the previous year's level. "We continue to outperform market expectations and our competitors," commented Andrea Orcel on the interim report.
Consequently, he opened the forecast upwards: UniCredit is expected to earn more than EUR 8.5 billion in 2024. The CEO had previously announced a net profit in the region of the previous year's level of EUR 8.6 billion. At first glance, the adjustment does not sound very spectacular. What makes the difference is the outlook for distributions. Through dividends and share buybacks, the management intends to pay out a total of EUR 8.6 billion, as it did last year. A piquant fact: UniCredit is targeting a payout ratio of 90% for 2024. In this respect, those responsible should expect a profit of a good EUR 9.5 bn. Otherwise, the bank would have to draw on its reserves to actually be able to distribute the forecast EUR 8.6 bn. There is no shortage of funds. For the first quarter of 2024, UniCredit estimated the surplus capital to total more than EUR 6.5 bn. The CEO, whose contract has just been extended by three years, wants to find a use for this by 2027. In addition to distributions and share buybacks, mergers and acquisitions are an option. However, Orcel only wants to go on a shopping spree if it fits strategically and the earnings after realized synergies stand up to comparison with share buybacks.
UniCredit and the Softcallable Barrier Reverse Convertibles (BRC) are a perfect match. Leonteq offers two alternatives on the "European stock market champion". The BRC pays a quarterly coupon of 8.00% p.a. in the product currency CHF. The EUR-denominated alternative pays a double-digit percentage distribution. Investors receive a coupon of 10.60% p.a. every three months, irrespective of the performance of the UniCredit share. Otherwise, there is no difference between the variants. The bank share enters the 18-month term with a barrier of 59% of the initial level. As long as the share does not fall back to or below this level, the issuer will repay the nominal value in full at maturity. However, if the cushion is not sufficient, the partial protection expires. In this scenario, the redemption would be exposed to UniCredit's share price risk. Please also note the soft callable feature. Due to this structure, early termination and redemption of the BRCs presented is possible.
We look forward to answering all of your questions about our products and how they are traded. Please don't hesitate to get in touch! Phone: 058 800 11 11, email info@leonteq.com or contact us here.