Investing.com -- Shares of UniCredit (BIT:CRDI) rose more than 2% on Monday after the bank posted a record first-quarter net profit of €2.8 billion, exceeding analyst expectations by 17%.
The strong beat, driven by strong trading income and higher fees, prompted the lender to upgrade its full-year 2025 guidance.
Net profit for Q1 rose 8.3% year-over-year, supported by total revenues of €6.5 billion, up 2.8% from a year earlier.
Fee income grew 8.2% to €2.3 billion, while trading income surged 19.9% to €641 million, more than offsetting a 2.9% decline in net interest income (NII) to €3.5 billion, which the bank attributed to fewer calendar days and a lower average Euribor.
Operating costs fell 1.3% on a like-for-like basis to €2.3 billion, improving the cost-to-income ratio to 35.4% from 36.2% in Q1 2024.
According to Jefferies analysts, pre-provision profit was 13% ahead of consensus, supported by strict cost discipline and a 1% YoY reduction in headcount.
In a note, Jefferies analysts called the results a “positive set,” with strong core trends. “The highlight is CET1, which is up 20bps compared to December despite Basel regulatory impacts,” they said.
Revenues came in 8% above expectations, thanks to stronger-than-expected trading income, even after factoring in the negative effect of hedges related to Commerzbank (ETR:CBKG).
Fees were 6% above consensus, buoyed by strong client hedging activity and 13% YoY growth in investment fees.
Loan loss provisions (LLPs) came in below expectations at €83 million, or 8 basis points of cost of risk, compared to a 17bps consensus. As a result, net income landed 17% above estimates.
The Common Equity Tier 1 (CET1) ratio rose to 16.1%, up 20bps from Q4 and ahead of the 15.4% consensus estimate.
Organic capital generation contributed 10bps of the increase, while the Basel IV impact (–60bps) was more than offset by positive FX reserve movements (+27bps) and perimeter changes (+10bps).
Total risk-weighted assets increased 3.6% QoQ to €287 billion, primarily due to regulatory changes. Net non-performing exposures dropped 8.1% YoY to €6.1 billion, while the NPE coverage ratio rose to 46.9%. The NPL ratio remained stable at 2.6%.
Earnings per share rose 18.2% to €1.79, and return on tangible equity (RoTE) reached 22%. RoTE at a normalized 13% CET1 ratio was 25.7%.
Following the strong Q1 results, UniCredit raised its full-year 2025 net profit guidance to above €9.3 billion, from “around €9.3 billion” previously.
The bank also reaffirmed its FY2027 net profit target of around €10 billion, with RoTE projected above 17%.
Total shareholder distributions in 2025 are expected to exceed 2024 levels, subject to regulatory approval.
Visible Alpha consensus currently forecasts €9.4 billion in net profit for 2025 and €9.8 billion in 2027.
In a separate announcement, UniCredit announced a 10-year strategic partnership with Google (NASDAQ:GOOGL) Cloud to accelerate its digital transformation.
The collaboration includes migrating key IT infrastructure to the cloud, integrating AI and analytics tools across 13 core markets, and training staff in digital and AI skills.
The bank will use Google’s Vertex (NASDAQ:VRTX) AI and Gemini models to enhance operational efficiency and product innovation.