UniCredit CEO says shareholder payouts sustainable as new buyback nears

MILAN (Reuters) – UniCredit can keep rewarding investors at the current pace for at least another two years, its chief executive said on Tuesday as the bank prepared to launch its second share buyback this year.

After walking away from a rescue deal for state-owned rival Monte dei Paschi, CEO Andrea Orcel has bet on shareholder remuneration to lift UniCredit’s share price.

Despite gaining 136% in value since Orcel took over in April 2021, the stock trades at a discount to book value, lagging peer Intesa Sanpaolo (OTC:).

By cancelling shares bought at a discount, UniCredit can lift its trading multiples and reduce the gap.

“At some point somebody will discover that and then the attraction of the stock will increase,” Orcel told a Mediobanca (OTC:) investor conference.

UniCredit on Tuesday said it would conclude by the end of June the 2.34 billion euro ($2.55 billion) share buyback it launched in April, and kick off a second 1 billion euro tranche immediately after.

“I do absolutely think it’s sustainable,” Orcel said.

UniCredit has been returning 60% of its annual capital generation to shareholders, primarily via buybacks but also through dividends. Distribution as a proportion of income has been falling since 2021, however, thanks to rising profits.

Orcel has focused on capital-light businesses to maximise returns adjusted for the amount of capital deployed.

“Certainly we’ve indicated that we will sustain it in 2024 … We distribute what we can afford, from 2025 onwards organic capital generation will align more with profitability,” he said, adding UniCredit would then review whether it made sense to keep buying its own shares.

The boost to earnings, dividends and tangible book per share from the buyback sets the bar for bolt-on acquisitions, which UniCredit can consider in markets where it could expand its presence such as Romania, but only if they beat the buyback, Orcel said.

($1 = 0.9174 euros)

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