Investing.com -- UniCredit’s CEO and CFO led a meeting with sell-side analysts yesterday, where the focus was on open Mergers & Acquisitions (M&A) fronts, the direction of the stand-alone business, and the generation of excess capital.
On the Italian M&A front, the company is awaiting clarifications from the government regarding golden power conditionalities, which are expected soon. UniCredit’s management elaborated on the complications these conditions introduce and why the transaction would be difficult to sustain if these conditions remain unchanged.
In Germany, the focus is on Commerzbank (ETR:CBKG)’s (CBK) profitability evolution and relative valuations. UniCredit’s management emphasized their flexibility to navigate in any direction, aided by the locked-in capital gains from their stake in CBK.
However, they also noted that the conversion of this stake, along with the pro-quota profit and loss contribution from CBK, introduces volatility due to an accounting mismatch with the hedge.
As for the business evolution, the emphasis remains on allocating capital towards high-margin lending on a risk-adjusted basis and capital-light products. The company believes there is still room for improvement in the efficiencies of Risk-Weighted Assets (RWAs), which supports their confidence in the continued organic capital generation above net income.
The management is committed to using or returning the excess capital, which stood at €9.3bn (at the mid-point) in March, by 2027.
Other topics discussed during the meeting included the situation in Russia, the competitive environment, and expected lending trends.
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