Unicredit presents itself to the appointment with the presentation of the new business plan, scheduled for tomorrow 9 December, with the wind in its sails on the Stock Exchange. With + 2.4% yesterday (close to 11.706 euros), it brought the annual highs of 8 October even closer to a whisker from 12 euros. The balance from the beginning of the year is over + 53%, the third best performer of the Ftse Mib behind Interpump (+56%) e CNH (+55.5%).
A performance also dictated by the fact that UniCredit, as Bloomberg points out in the preview in view of the new plan, is one of the few European banks whose shares have not returned to pre-crisis levels and is traded at an undemanding valuation.
There is great anticipation to know the details of the new plan by Andrea Orcel. After the breakdown of negotiations with MPS, we look at the possible indications that the group in Piazza Gae Aulenti will give to give breath to the growth of the group in the coming years. moving away from the era of restructuring that characterized the previous Mustier management.
Majority analysts say buy
Among analysts monitored by Bloomberg those who say buy on Unicredit are 66.7%, while 26.7% say hold and only 6.6% are sell. The average target price indicated is € 13.75, which is 17% above current levels. JP Morgan at the beginning of the week he raised the recommendation from neutral to overweight and the target price from € 12 to € 15. The US home business focuses on one factor in particular, namely the outlook on the interest rate front. Markets are pricing in a rate hike in 2023, but the extent of the upcoming hikes is underestimated, according to JPM. The American investment bank expects ECB rates to rise by 0.25% in September 2023 and by 0.5% in 2024. And Unicredit is listed as one of the most sensitive banks to interest rate movements. JPM indicates + 13% EPS for every 50 bp rate hike. JP Morgan also expects a higher remuneration of shareholders through buybacks and dividends with a total payout ratio of 11.6% in the period 2022-24.
Last week analysts of Deutsche Bank added the Unicredit stock among their top picks, noting how the bank in Piazza Gae Aulenti is a story of “self-help through the reduction of the complexity of the group, the acceleration of revenue growth and the increase in the return on capital,” with the purchase and sale of shares at a significant valuation discount “.
The most optimistic about the stock are the analysts of Goldman Sachs which indicate a target price of 18.10 euros, almost 55% above current levels.
What to expect from the plan
The first rumors about the contents of the Orcel plan indicate a new round of cuts coming. The Bloomberg agency last week anticipated the possibility of cuts for about 3 thousand units which should concern both Italy and abroad, in addition to the 3,900 that have yet to be implemented in the bank’s previous strategic plan. It should still be leave on a voluntary basis, to be implemented through early retirement and with the provision of new hires.
Many analysts expect Orcel’s plan to be detailed will focus on higher returns on capital. The risk is that expectations are not met.
The consensus now expects UniCredit to increase its annual payout ratio to around 65%-70% from the current 50%. Among the most cautious is UBS which sees the level remain at 50%. JPMorgan analysts, on the other hand, are among the most optimistic. In fact, they expect the bank to make buybacks for 3 billion euros by the end of 2024, which would raise the payout ratio to 75%.
In terms of financial targets, Equita SIM expects the new index plan to generate revenue dynamics driven by the commission component, which – after the excellent performance of 2021 – could maintain a solid growth path (2020-24 CAGR 4%), also thanks to the rationalization of commercial agreements in asset management and bancassurance. “On the other hand, we expect that, despite a positive dynamics on the disbursement front and a progressive reduction of the negative impact caused by excess liquidity, the NII will return to 2020 levels only at the end of the plan, considering the gradual disappearance of the contribution from TLTRO and a continuous rate compression on the back book ”, argues the Milanese sim. The dynamics of costs are expected to be under control, with further operational efficiencies (see Bloomberg rumor on cuts for 3 thousand units), offset by greater investments in innovation and digitalization (cost / income expected in the 55% area).
The Milanese sim estimates that Net income of Unicredit reaches 4.2 billion euros in 2024 from the 3.7 billion expected at the end of 2021, benefiting from lower systemic charges due to the lack of ex ante contributions to the SRF post 2023. Estimated CAGR of 1% of revenues in course of the plan reaching 18.2 billion in 2024, while operating profits are seen to rise by 2% on average per year reaching 8.2 billion in 2024. Finally, the dividend it is seen at € 0.171 per share compared to the € 0.187 indicated by the consensus. “In our opinion, Unicredit has ample room to strengthen its dividend policy through a payout ratio increase (currently at 50% between dividend and buyback) ”, remarks Equita which has a buy rating on UCG with tp at 13.6 euros.