By Valentina Za
MILAN (Reuters) -Italy’s second-biggest bank UniCredit lifted its 2025 outlook on Monday after posting a surprise increase in quarterly profit but remained resolute that it would not do deals at any cost.
Italian banks have turned to deal making to drive profits now that the boost from higher interest rates is waning.
CEO Andrea Orcel has thrust UniCredit centre stage, with a 14 billion euro ($16 billion) all-share offer for rival Banco BPM and a 6.7% stake in insurer Generali (BIT:GASI), which UniCredit has said is a financial investment, the same as its 28% stake in Commerzbank (ETR:CBKG).
However, the offer for BPM hangs in the balance after Rome imposed strict conditions to clear it and plans for a Commerzbank takeover also face strong opposition from the new German government. The clashes with Rome and Berlin have prompted requests for more clarity about the M&A strategy from some UniCredit board members, sources told Reuters last week.
UniCredit said deal making provided "interesting possibilities" but it would only pursue them if they improved the bank’s "unmatched" prospects as a standalone entity.
It had not yet decided whether to drop the Banco BPM deal due to the government’s conditions and BPM’s move to buy fund manager Anima Holding at a higher cost than anticipated, Orcel told analysts.
"I’ve done M&A for a long time, and I have seen massive destruction of value," Orcel said. "I will not do that, and I’m very patient and calm, and the board is completely aligned."On Commerzbank, Orcel told CNBC television the rival had yet to prove that the "core part" of its business was improving. He added that UniCredit was waiting to engage with the new government.
UniCredit now expects its 2025 net profit to surpass 9.3 billion euros, above last year’s result net of tax credits, when it had previously said it would broadly match it.
Orcel said UniCredit could improve its profit and distribution guidance for 2025 if the momentum that drove first-quarter results to record levels continued in the following two quarters.
During the January-March period, fee and trading income, as well as lower costs, drove an 8% rise in net profit to 2.77 billion euros ($3.14 billion), above a bank-provided 2.36 billion average analyst consensus.
UniCredit shares rose 4% by 0947 GMT, outperforming a 3% rise in Italy’s banking index.
Orcel, the former UBS investment banking chief, has used the record profits fuelled by higher interest rates to boost investor payouts and drive UniCredit’s share price higher, building a strong currency for M&A deals.
It has pledged to distribute more in 2025 than last year’s 9 billion euros.
UniCredit also announced a 10-year partnership with Google (NASDAQ:GOOGL) Cloud, which in 2020 struck a similar deal with Intesa Sanpaolo (OTC:ISNPY), as lenders globally move away from legacy IT systems towards cloud-based digital infrastructure.
($1 = 0.8914 euros)