Home » UniCredit, Orcel on profits and governance. The sentence on ECB rates and deposits

UniCredit, Orcel on profits and governance. The sentence on ECB rates and deposits

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UniCredit, Orcel on profits and governance.  The sentence on ECB rates and deposits

UniCredit stock under observation after the interview released by CEO Andrea Orcel at Corriere della Sera.

Orcel commented the latest news that emerged from Piazza Gae Aulenti, first of all the excellent accounts, which highlighted the best half-year ever and the tenth consecutive quarter of profitability growth for the Italian bank, thanks to the positive impact of the ECB rate hikes on the NII interest margin. An impact that Orcel pointed out during the interview, which could also have a boomerang effect.

The CEO, also known as Ronaldo of the bankers, confirmed its confidence in the future of UniCredit, also remarking the metamorphosis that the bank has initiated with his arrival: a metamorphosis, as Orcel said, “not from the front page”, but which is changing the very way of being of the bank.

Just think of yesterday’s announcement, relating to the board decision to adopt the one-tier governance system: a change that will result in an amendment to the bylaws, to be voted on by the shareholders’ meeting.

There are lenders that improve for M&A, we instead have a group of 13 banks that we are cleaning up and an excess of bureaucracy that we are flattening. We become more efficient and faster with each passing day by reinvesting in business, technology and data”, said Orcel, also recalling how UniCredit, which had “an average cycle underlying cost of risk of around 40-50 basis points”, for a value of approximately 2 billion, managed to halve it to 20-25 basis points.

Of course, Piazza Gae Aulenti believes that “the credit and interest rate squeezes will push the cost of risk to rise and exceed 25 basis points”.

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But Orcel is calm, since “we have additional reserves or overlays of almost 2 billion (extra hedging) which we believe will allow us to keep the cost of risk at normalized values ​​and therefore go through this cycle keeping the 25 basis points”.

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The UniCredit stock does not benefit today from the words of Andrea Orcel, in a context in which Piazza Affari sees the Ftse Mib retreating by more than 1%.

Piazza Affari, like the rest of the global stock market, is discounting the downgrade on the US debt rating arrived from the rating agency Fitchwhich followed the threat raised during the weeks of May, in which the Biden administration and the Republicans had not yet managed to reach an agreement to raise the ceiling on the US debt.

The sentiment of traders and investors today is depressed by the rejection of Fitch, which it follows after 11 years that of the ‘sister’ rating agency Standard & Poor’s.

Returning to UniCredit, the news of the last few days, in addition to the accounts and also the dream guidance, with which the CEO Andrea Orcel has also made yet another promise of more luscious dividends to shareholders, the bank updated the market on the outcome of the second tranche of its buyback plan, announcing in a press release that, “as of July 28, 2023, starting from the launch of the Second Tranche of the 2022 Buy-Back Programme, UniCredit bought a total of n. 5,184,030 shares, equal to 0.27% of the share capital for a total value of 116,162,539.73 euros”.

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The bank added that, again on 28 July, considering “the purchases made during the First Tranche of the 2022 Buy-Back program which ended on 29 June 2022, UniCredit purchased 130,220,203 treasury shares equal to 6.71% of the share capital.

The other big news is, precisely, the new governance system, with which UniCredit decided, on 31 July 2023, to replace the traditional one.

Objective: “further improve the quality of governance, guaranteeing greater effectiveness of the controls through the integration of the control body within the Board and fully enhancing the driving role of the members of the control body through their direct participation in the decision-making processes of the Board”.

“This governance system was also considered to correspond to the models widely followed abroad – explained UniCredit, pointing out that “the one-tier governance system is characterized by the presence of a Board of Directors, which is responsible for the strategic supervision and management, and a Management Control Committee, set up within the same Board, which performs control functions”.

Going back to the statements that the CEO Andrea Orcel made to Corriere della Sera, it should be highlighted the sentence on the rise in interest rates and on the effect of the same on the profitability of Piazza Gae Aulenti.

To the observation on how the rate hike has “made the banks happy”, Orcel replied:

I wouldn’t say it made the banks happy: it has created a profitability peak that the market is not appreciating because it wonders what our profitability will be when rates adjust. On rates it is not clear whether there will be further hikes, but it seems that we are reaching the peak. The real question is how long will they go up and how long will they stay at that level. What will change will be the pass through (coefficient of transfer of interest rates on deposits) on deposits, but in many countries and in central Europe we are already seeing a normalisation”.

On this passthrough on deposits, Orcel said that “in our opinion, a passthrough consistent with those of the past will be achieved in 2024”.

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