UniCredit SpA Chief Executive Officer Andrea Orcel said shareholders can expect higher returns on last year’s earnings as rising rates and a streamlining of the lender provide tailwinds.
(Bloomberg) — UniCredit SpA Chief Executive Officer Andrea Orcel said shareholders can expect higher returns on last year’s earnings as rising rates and a streamlining of the lender provide tailwinds.
“We indicated at the beginning of the year that we had an ambition to be in line or higher than 2021,” Orcel said Thursday in an interview with Bloomberg Television’s Francine Lacqua at the World Economic Forum in Davos. “I would say that on the numbers that we had on at the nine months, we can be higher.”
Since Orcel took the helm at Italy’s second-biggest bank in 2021, he’s exited businesses and cut jobs in non-core locations, shifting to more lucrative products and capital-light activities. He’s pledging €16 billion of returns through a combination of buybacks and dividends through 2024, one of the biggest payouts in Europe. The bank, which along with competitors is benefiting from rising interest rates, boosted revenue and profit targets for 2022 for a second straight quarter in October.
”Given the rationalization that we were going through on the operational side and the capital efficiency, we felt we were going to generate very significant organic capital,” said Orcel. “We are quite comfortable with our ability to distribute and to continue distributing sustainably.”
UniCredit paid out €3.8 billion euros, comprised of €1.2 billion cash dividends and €2.6 billion share buybacks, on 2021 earnings.
Orcel also added his voice to the cautious optimism expressed by many delegates at Davos over the economic outlook. UniCredit is expecting Europe to avoid a recession this year, he said, adding that the region may even see slight growth.
At the same time, he warned several risks could still derail the outlook, including the war in Ukraine and the impact of higher interest rates on economy.
Orcel has taken a relatively optimistic view, as UniCredit’s stock of non-performing loans is declining and the cost of risk is coming down.
“But if we are wrong, I have a big buffer equal to one year of cost of risk to compliment whatever hits me,” he said.
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