UniCredit promises to boost investor returns after beating forecasts

Italy's top bank UniCredit on Thursday met its full-year goals after a better-than-expected fourth quarter and pledged to consider boosting investor returns now that most of its turnaround is completed. UniCredit has undergone a major restructuring in the past three years under French boss Jean Pierre Mustier, who has slashed costs, dumped bad debts and sold assets, shrinking the bank's international presence.

His latest move was the decision in November to pull out of a joint venture in Turkey, which led UniCredit on Wednesday to place on the market a 12 percent stake in local bank Yapi Kredi. Under a plan presented in December, Mustier is focusing on improving shareholder returns through a combination of dividends and share buybacks in an attempt to lift the stock, which trade well below UniCredit's book value.

The bank said it would consider lifting capital distribution to shareholders to 50 percent of profits in 2020, earlier than initially planned, and would also consider extraordinary investor remuneration after 2020. Mustier arrived at UniCredit in mid-2016 to turn it around and address concerns about its capital weakness. He raised 13 billion euros in cash from investors and roughly as much from asset sales.

The bank said its pro-forma core capital stood at 13.1 percent of assets in December, up from three months earlier, leaving an ample buffer for shareholder compensation.

"UniCredit has delivered all its key targets for 2019," Citi said in a note. "Management demonstrated a strong track record in executing restructuring." UniCredit confirmed its 2020 targets.

After halving its stake in Yapi with Wednesday's placement, UniCredit said it would keep the holding at the current 20 percent level for the rest of the year and book a negative 0.8 billion euro impact from the transaction in the first-quarter.

In the October-December period UniCredit booked 1.2 billion euros in one-off charges linked to the initial reduction of its Yapi stake, other one-off costs and writedowns of software and other intangible assets.

It also brought forward 1 billion euros in planned loan writedowns, leading to a quarterly loss of 835 million euros.

Analysts polled by the bank had expected on average a 1.1 billion euro loss on revenues of 4.65 billion euros.

Fourth-quarter revenues totalled 4.9 billion euros, up 3.4 percent year on year despite a 7 percent drop in the net interest income which was more than offset by higher fees and income from trading.

Adjusted for one-off items, net profit in the full year hit the bank's target of 4.7 billion euros.