UNCFF - UniCredit: Another Show Of Strength
2024-02-09 10:35:51 ET
Summary
- UniCredit has the potential to return 17-18% via dividend and buyback until 2025.
- Impressive results and the Italian financial institution (once again) increased its yearly guidance.
- New remuneration policy with an interim dividend. This is a solid buy.
Our readers know that we like financial institutions, and we started upgrading UniCredit ([[UNCFF]], [[UNCRY]]) with a publication called The Bank Could Return Its Entire Capitalisation In 4 Years . No sooner said than done. Indeed, the company's total return exceeded our rosy expectations and has delivered a plus >170% since early June 2022 (Fig below). Ten years ago, the Italian banking system underwent the most complex restructuring in its history. That said, we recognized UniCredit and Intesa Sanpaolo as the two leading banks capable of benefitting from the current macroeconomic context. The rise in interest rates has revived profitability that had remained stagnant for over a decade. This, coupled with a tightening monetary policy and solid credit quality, has produced robust profit growth and generous remuneration policies both in terms of dividends and buybacks. Regarding UniCredit, the RoTE (return on tangible capital) moved from 7.5% in 2021 to >20% in 2023, while shareholders received €3.75 billion in 2022 and €5.25 billion in 2023. This year, the bank is targeting €10 billion in coupons and share repurchases, which translate into a total return of more than 16%. Looking at the share price evolution, UniCredit also benefited from the strong level of undervaluation. Indeed, the price-to-book value multiple has gone from 0.3 times in the last months of Mustier's management (this was the previous CEO before Orcel's appointment) to the current 0.80 times. In our latest publications, we expressed our long-standing buy rating on the Italian bank, and we suggest our reader check our most recent analysis:
UniCredit: Another Show Of Strength