Mediobanca expects shareholder remuneration to grow to €3.7 billion in the three-year period 2024/2026. Introduction of the interim dividend
The leaders of Mediobanca they approved the strategic lines of the business plan for the period 2023/2026.
The institution intends to achieve substantial growth in capital-light assets, aiming to achieve best-in-class returns, associated with a low risk profile and a significant increase in shareholder remuneration.
In detail, Mediobanca aims for revenue growth to 3.8 billion euro (+6% the average annual compound growth rate for the three-year period 2023-2026) with a contribution from all business segments. Wealth Management will have the highest organic growth rate (+10% on average per year) exceeding billion in revenues and becoming the first contributor to fees complementary to Corporate & Investment Banking, whose revenue growth is expected to be 11 % (7% organic) up to 0.9 billion euro. Consumer Finance will continue to function as an engine of growth in Mediobanca’s net interest income (about two-thirds of the total) with overall revenue growth of 5% (to around 1.3 billion euro). The Insurance segment will confirm the positive contribution to the institute in Piazzetta Cuccia. with revenues growing by 6% (to around 0.5 billion euro).
Mediobanca estimates a growth in earnings per share of approximately 15% on average each year; as a result, EPS should go from around 1.15 euros to 1.8 eurosconsidering the cancellation of approximately 80% of the shares deriving from the buyback plan, with the growing contribution of Wealth Management and Corporate & Investment Banking and with a minor but further growth of Consumer Finance and the Insurance segment, which confirm the high profitability levels.
Management also expects growth in institution-wide profitability (ROTE to 15% from 12%, RORWA to 2.7% from 2.1%) and divisional: Wealth Management is expected to record the greatest increase in profitability, rising from 2.9% to 4.0%; Corporate & Investment Banking is expected to improve to 1.6% (from 1%), Consumer Finance stable at 2.9%, and the Insurance segment to grow to 3.2% (from 2.7%).
Mediobanca expects one growth in capital generation (approximately 220 basis points annually from 150 basis points) resulting from increased profitability (ROTE from 12% to 15%) and the absence of negative material regulatory impacts in the coming years. The management has signaled that the greater resources will make it possible to finance organic and inorganic growth and to remunerate shareholders.
In this regard, Mediobanca expects shareholder remuneration to grow to €3.7 billion in the three-year period 2024/2026 (+70% compared to the previous four-year period), of which €2.7 billion in dividends and €1 billion through the repurchase and cancellation of treasury shares. The institute has specified that the increase of the distribution will derive from the ability to generate profits and from the implementation of a policy of growth of the assets focused on the segments with low capital absorption.
In particular, the dividend will be paid on the basis of a pay-out of 70%, with lintroduction of the interim dividend. In detail, part of the payment will be paid in advance in May (equal to 70% of the profits produced in the July-December semester) and the remaining part paid in November (equal to 70% of the profits produced in the January-June semester). Consequently, the total dividends distributed in the three-year period (2024-2026) will be equal to 2.7 billion euros, 40% more than the 1.9 billion distributed in the previous four-year period (2020-2023).
An annual program of repurchase of treasury shares for a total value of one billion euro. The amounts will be established annually following the organic growth achieved during the year and will see the cancellation of approximately 80% of the shares repurchased over the three-year period;
Mediobanca specified that the distribution policy, subject to ECB monitoring and/or authorization, will be reviewed in the event that CET1 FL drops below 13.5%.
Mediobanca does not exclude opportunities for external growth through acquisitions.
According to the management, the creation of capital will make it possible to finance organic growth, while the remuneration policy will make it possible to maintain a CET1 above 14.5% over the period of the plan, based on a minimum CET1 FL of 13.5%. and maintain a buffer of approximately 100 basis points of capital to be used for potential external growth operations.
Mediobanca considers target of interest that can accelerate the growth process in characteristic business areas with a preference for businesses with low capital absorption and high fee content.
During conference call presentation of the industrial plan, the CEO of Mediobanca, Alberto Nagel, specified that the buyback relating to the 2023 financial year will be equal to approximately 20-25% of the total amount of the planned buyback of treasury shares.