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UniCredit: 4Q23 and FY23 Group Results. Record 2023 results crowning three years of success and exceeding expectations

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This version has been amended from the original to include the detailed timing of the 2024 interim cash dividend approval

Group FY23 stated net profit of €9.5 billion, €8.6 billion net profit up over 50% versus prior year with a 16.6% RoTE or 20.5% RoTE on a CET1 of 13%, adjusted for excess capital

EPS and DPS increased by 74% to €4.71 and by 80% to €1.78 respectively

Commencing interim dividend and share buyback approach leading to total distribution of circa €10 billion 1  for 2024 calendar year and a dividend yield of circa 10% 2

CET1r 3  of 15.89% up around 100 basis points despite distributing 4 100% of FY23 net profit, reflecting strong capital efficiency, profitability and organic capital generation of €12 billion in 2023

Total revenue of €23.8 billion, underpinned by NII of €14.0 billion and resilient fees of €7.5 billion despite macro headwinds

Transformed and strong asset quality maintained with CoR of 12 basis points and with robust lines of defence to protect against risks

Operational excellence with cost reduction achieved year over year offsetting inflation and without constraining investments, 39.7% FY23 Cost-Income Ratio

Superior shareholder value creation with total distribution 4  of €8.6 billion for FY23, or 100% of net profit, and up by circa €3.35 billion versus prior year

FY24 net profit guidance of broadly in line with prior year and RoTE of circa 16.5% demonstrating our ability to defend profitability across the cycle 

Introducing ordinary distribution policy from 2024 of at least 90% pay-out 5  of net profit 

Strong progress on ESG ambitions during the year and with the focus on our values and culture garnering industry awards

On 4 February 2024, the Board of Directors of UniCredit S.p.A. ("UniCredit" or "the Group") approved the 4Q23 and FY23 Consolidated Results as of 31 December 2023.

This record-breaking year is clear evidence of a transformed UniCredit, well underway on the journey to building sustainable excellence evidenced by FY23 net profit at €8.6 billion and FY23 RoTE of 16.6%. In FY23, stated net profit reached a record €9.5 billion, €3.0 billion higher compared to FY22.

For the 12th consecutive quarter, the Group has shown the execution of the strategic plan and consistent growth across regions, balancing the three financial levers of net revenues, cost and capital and leveraging a unique pan European model resulting in a 4Q23 stated net profit of €2.8 billion, or net profit of €1.9 billion. These high returns were underpinned by €5.7 billion net revenues, composed of €3.6 billion of net interest income ("NII"), an increase of 5.7% year on year mainly due to higher rates and well managed deposit pass-through. Fees stood at €1.8 billion, down 0.6% year on year, largely driven by the impact of current account fee reductions in Italy and higher securitisation costs. Excluding these, fees were up 3.5% year on year affirming their resilience despite macroeconomic headwinds.

Loan loss provisions ("LLPs") stood at €300 million or cost of risk ("CoR") of 28 basis points in 4Q23. The soundness of the Group's asset quality is once more evidenced by a consistently low expected loss, low non-performing exposures ("NPEs") with high coverage, and the existing overlays of €1.8 billion on the performing portfolio.

In 4Q23 operational costs were €2.5 billion, up 6.9% quarter on quarter or 0.8% year on year, mainly driven by the salary drift linked to the new collective salary agreement in Italy and higher performance bonuses. For FY23 total costs were down by 1% versus prior year to €9.5 billion confirming the Group's ability to defend its cost discipline despite inflationary pressures while protecting revenue growth, also reflected in a cost-income ratio ("C/I") of 39.7%.

Further proactive actions taken in 2023 reinforce existing lines of defence and lay the foundations to propel future profitability, in the form of: FY23 integration costs of circa €1.1 billion that will enable the ongoing transformation of the organisation and targeting specific areas for cost reduction; broadly stable overlays on the performing portfolio at €1.8 billion protecting further the future Group's asset quality; and Risk weighted assets ("RWA") reductions of circa €24 billion versus FY22, through securitisation programs and better capital allocation at client level increasing the Group's capital efficiency.

The Group's best-in class capital position is reflected in a CET1 ratio 3 of 15.89%, an increase of 97 3 bps Y/Y from 14.91% CET1r pro forma in FY22 3 , driven by the 389 basis points (or €12.0 billion) of capital generated organically. This significant increase already deducts the full proposed 2023 total distribution 4 of €8.6 billion, a €3.35 billion increase compared to the previous year.

The FY23 €8.6 billion shareholder distribution 4 is intended to be in the form of €5.6 billion in share buybacks and €3.0 billion in dividend, subject to supervisory and shareholder approvals. This implies a 100% total pay-out on the FY23 net profit. UniCredit has already commenced the execution of part of the FY23 distribution by frontloading a first share buyback tranche of €2.5 billion commenced in October 2023, of which €1.4 billion was completed at year end 2023.

The Group ordinary distribution policy from 2024 introduces a total distribution pay-out 5 of at least 90% of net profit. The dividend accrual will increase to 40% of net profit (from the 35% pay-out on FY23), with the residual pay-out 5 on net profit in the form of share buybacks. The final split between dividends and share buy-back will depend on market conditions, and it will be decided after 2024 results, together with the final decision on distributions.

The interim distribution approach, applicable to both interim dividend and interim share buyback, is assumed at circa 40% of the total full year distributions. The 2024 interim cash dividend is expected to be approved by the UniCredit Board of Directors on 23 October 2024.

The introduction of the interim dividend on FY24 earnings should allow for approximately €10 billion of calendar year distributions in 2024, of which circa €7.2 billion related to the residual FY23 distribution 4 (i.e. not including the 1.4 billion of FY23 share buyback already executed during 2023 calendar year), and circa €3 billion FY24 interim distribution.

Creating shareholder value remains a priority and this is demonstrated by the improvement of our profitability and upgraded metrics on a per-share basis also via share buybacks, generating in FY23 EPS[1] of €4.71, a threefold increase compared to the average 2017-2019, DPS of €1.78, a ninefold increase compared to the average 2017-2019, and TBVPS of €33.3, +46% versus the average 2017-2019.

2023 was a year characterized by significant progress on our ESG ambitions with net zero sector targets and ongoing support to clients in a just transition. UniCredit remains focused on strengthening its focus on social issues thereby helping communities to progress. This was demonstrated by €20.5 million in grants to support youth and education such as scholarships by the UniCredit Foundation. The Group remains committed to playing an important role in the social function that goes far beyond traditional banking activities.

UniCredit has been recognised by the Top Employers Institute as a Top Employer in Bulgaria, Germany, Italy and Serbia as well as by the Group's branch in Poland for 2024. Being certified as a Top Employer at a European level is evidence of an organisation's dedication to a better work environment, excellent HR policies, and people practices enabling talent retention and engagement. In recognition of the Group's financial success, the Bank has also been recognised by The Banker with the industry award of "Bank of the year", as well as "Bank of the Year in Western Europe", "Bank of the Year in Italy" and "Bank of the Year in Bulgaria". Our employees are a critical factor in the ongoing success of our strategy and these awards are resounding proof of our ongoing transformation .

The key recent events in 4Q23 and in January 2024 include:

• Launch of the first tranche of €2.5 billion of the FY23 share buyback programme; UniCredit purchased a total of 58.2 million shares or 4.5% share capital since the date of launch as of 30 January 2024;
• Successful issuance of €750 million Senior Preferred Green bond;
• Successful issuance of €1.0 billion Tier 2 callable bond;
• Upgrade of Moody's deposit outlook to stable, recognizing an improved Financial Profile;
• Cancellation of 72 million treasury shares on the 16 January 2024, equal to the sum of the remaining shares purchased in execution of the 2022 Buy-Back Program and not previously cancelled and the shares purchased in execution of the First Tranche of the 2023 Buy-Back Program up to the date of 29 December 2023.

Andrea Orcel, Chief Executive Officer of UniCredit S.p.A. said:

"For the full year UniCredit produced a record net profit of €8.6 billion, an increase of over 50% versus the prior year. 4Q23 was the twelfth consecutive quarter of quality profitable growth, indisputable proof of our unique and winning strategy. It illustrates what we can achieve when we put clients at the centre of what we do and focus on executing our industrial transformation, with all thirteen countries of our pan-European franchise contributing to our success. And while we have significantly exceeded our initial ambitions of UniCredit Unlocked our progress is far from over.  

Net revenue growth, cost discipline while investing and despite inflation, and capital efficiency contributed to a RoTE of 16.6%, or 20.5% on a 13% CET1 ratio. Our higher CET1 ratio of 15.9%, resilient asset quality and strong lines of defence put us in an enviable position to continue managing successfully through an uncertain environment.

We intend to distribute a total of €8.6 billion to shareholders for 2023 or 100% of net profit, pending approvals, up €3.35 billion versus prior year while increasing our CET1 ratio around 100 bps to 15.9%. Since 2021, we will have returned this year €17.6 billion to our shareholders, underpinned by extremely strong organic capital generation and with sustainability of returns secured by our strategic momentum and significant excess capital.

We capped a year of progress towards our Group Net Zero targets with the recent announcement of our 2030 steel sector target. Across our sustainability agenda we are taking great strides and are making a significant, positive impact on our communities.

I am immensely proud of our employees for their commitment and enthusiasm. We have built a strong foundation and as we enter the next stage of UniCredit's growth I know that we will continue to evolve and deliver excellence to all our stakeholders."

Please refer to the General Notes and Main Definition sections at the back of this document for information regarding the financial metrics and defined terms mentioned in this press release.

[1] FY24 calendar distribution of €10 billion, of which circa €7.2 billion related to the residual FY23 distribution (i.e. not including the 1.4 billion of FY23 share buyback already executed during 2023 calendar year), and circa €3 billion FY24 interim distribution. Distribution subject to shareholder and supervisory approvals.

[2] Distribution and yield referring to 2024 calendar year view, i.e. including interim for FY24 distributions; yield calculated on market capitalisation as of 1 January 2024.

[3] 4Q23 and FY23 CET1r is net of the accrual for the total FY23 distribution following the new EBA Q&A 2023_6887, i.e. including also the share buy-back not authorized yet by shareholders and supervisor. For a coherent Y/Y and FY/FY comparison, the FY22 and 4Q22 CET1r reported hereafter is pro forma for all 2022 distributions, including the shares buy-back deducted from Own Funds in 1Q23.

[4] Distribution subject to shareholder and supervisory approvals.

[5] On net profit equal to stated net profit adjusted for the impacts from TLCF DTAs and potential one-offs related to strategic items.

[6] Net profit for FY22 and FY23 as defined in the main definition section of this document; underlying net profit for FY21; for comparison purposes the FY17-19 net profit is the simple average of net profit recast figures for Group excluding Turkey and Fineco. 

UniCredit: 4Q23 and FY23 Group Results

Milan, 5 February 2024

Investor Relations:

e-mail:  [email protected]

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e-mail:  [email protected]

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UniCredit shines on Orcel's $18 billion investor payout promise

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• CEO says capital return goal compatible with M&A
• To pay out nearly two thirds of market value
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• Targets around 10% ROTE in 2024 from 7% in 2021

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Reporting by Valentina Za; editing by Jane Merriman, Elaine Hardcastle

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UniCredit stock surges on record FY'22 results, higher shareholder returns

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Banking Essentials Newsletter: 7th February Edition

• 31 Jan, 2023
• Author Erin Tanchico
• Theme Healthcare & Pharmaceuticals Real Estate Banking Fintech Insurance

UniCredit SpA will return more than € 5 billion to shareholders after delivering what it described as its best results in over a decade, sending its stock up more than 10%.

The Italian lender's full-year 2022 net profit rose to €6.46 billion from €2.10 billion in 2021. Fourth-quarter 2022 net profit was €2.46 billion, compared to a year-ago loss of €883 million, as net interest income rose 43% to €3.43 billion.

UniCredit now intends to pay out €5.25 billion through dividends and share buybacks for 2022, representing a €1.5 billion increase from a year earlier. The proposed distribution comprises €1.91 billion in dividends and €3.34 billion in share buybacks, which the group intends to commence as soon as possible following approval at the company's March 31 annual general meeting.

If the plan is approved, UniCredit will have distributed close to 60% of the target set in its 2022-2024 strategy while improving its common equity Tier 1 ratio, CEO Andrea Orcel said during the bank's Jan. 31 earnings presentation. The group intends to return at least €16 billion to shareholders through 2024 while maintaining or exceeding a CET1 ratio of between 12.5% and 13%.

While UniCredit's distribution plans have come under scrutiny from regulators, Orcel said the lender is confident of securing supervisory approval based on discussions with the European Central Bank due to its "extremely strong" organic capital generation and step up in profitability.

UniCredit generated €8.9 billion of capital organically in 2022, up 279 basis points on a yearly basis. The group's stated CET1 ratio stood at 16% at the end of 2022. Pro forma for distributions, the ratio stood at 14.91%.

Russian business

UniCredit booked a negative impact of €200 million from its Russian subsidiary on its full-year net profit, down from roughly €900 million in the first quarter of 2022. Its total gross exposure to Russia dropped to €5.3 billion from €7.4 billion over the same period.

The efforts to reduce total gross exposure between the first and fourth quarters of 2022 were impacted by an increase of €1.1 billion in the group's local exposure, mainly due to the appreciation of the Russian ruble, according to Orcel.

Orcel said there is "absolutely no change in strategy" regarding Russia and that it will continue to focus on orderly de-risking of its exposure to the country.

UniCredit's shares were 10.8% higher in early afternoon trading.

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• Healthcare & Pharmaceuticals Real Estate Banking Fintech Insurance

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