Unicredit : A credible plan that is on track
Monday 6 March 2017 - - - - Equity data - Reco: Buy - Target: € 16 - Equity Analyst : Jean Sassus - [email protected] - +33-1 44 51 83 08 - ESG Analyst : xxx - Corporate governance: High risk (4) - / - / - - - - - UniCredit has been successful in raising € 13bn of capital. This is clearly the most visible part of its strategic plan announced in December 2016. - This transaction helped to shore up its capital ratios which were hit at the end of 2016 by exceptional provisions and restructuring charges. These provisions increased the NPL coverage ratio by 5 pts to 55.6%. At the same time, UniCredit signed an agreement to deconsolidate € 17.7bn of non-performing loans as quickly as possible; the NPL stockpile shrank to € 56.3bn at end-2016 (pro forma the deconsolidation) from € 77.8bn at end-2015 and is projected at € 44.3bn at end-2019. - > - It now has to achieve a successful transformation of the business model in which cost reduction is key to generating net profit of € 4.7bn in 2019 (compared with € 1.5bn in 2015) and an ROTE of 9%. In this respect, management has not tarried; agreements have been signed with the unions to carry out a massive planned redundancy scheme. - - All told, the targets announced by UniCredit will not give it best-in-class honours in Europe, but they should help offset the economic woes encountered in Italy, stabilise ratings and reassure investors about the group's management. The arrival of Jean Pierre Mustier clearly signals another milestone for UniCredit. - - We are raising our recommendation to Buy on all UniCredit bonds (vs. our previous recommendations of Neutral on senior bonds, Buy on Tier 2 and Reduce on AT1), considering that: 1/ the credit trend is stable; 2/ the convergence of spreads towards those of Intesa is expected to continue; and 3/ the yield is still attractive, buoyed by Italy's spread pick-up attributable to factors external to the credit (UniCredit's rating is restricted by the Italian sovereign, crisis in the Italian banking system, etc.).Unicredit is a pan-European commercial banking group based in Italy. Co. is engaged in the provision of in-branch and online corporate and investment banking services, providing customers with access to banks in 14 core markets as well as to an another 18 countries worldwide. Co.'s operations are organized along six business lines: Commercial Banking Italy; CEE Division; CIB; Commercial Banking Germany; Commercial Banking Austria; and Asset Gathering. Co.'s European banking network includes Italy, Germany, Austria, Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic, Hungary, Romania, Russia, Slovakia, Slovenia, Serbia and Turkey.
Oddo Securities provides securities brokerage and research services. The company offers equity, economic, and derivatives research and credit analysis services. It focuses on insurance, automotive, building materials, pharmaceuticals, telecommunications, information technology, and agri-food industries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.