UniCredit SpA

The positive outlook reflects our expectation that the more supportive economy in Italy, one of the main geographies where UniCredit operates, will help the bank's financial profile over the next 12-24 months and could sustain its profitability, asset quality, and capitalization. We could raise the ratings by one notch if we conclude that economic risk in Italy has decreased, helping UniCredit's efforts to enhance its profitability and overall credit profile. Specifically, this could occur if the bank continues reducing its legacy stock of deteriorated assets and keeps manageable any potential effects from the pandemic on its asset quality, while maintaining a RAC ratio comfortably above 7%. We could revise the outlook to stable if we conclude that economic risks in

... in Italy, should help UniCredit's performance. After reporting 6.5% and 5.1% GDP growth in 2021, respectively, we expect Italy and the eurozone to expand by 4.7% and 4.1% in 2022. We view the supportive economic environment as essential for UniCredit to get close to the ambitious target it has set out in its recently presented strategic plan of increasing its ROTE to 10%. This would be well above previous levels and closer to the best performing banks. Capitalization will stabilize. We expect our risk-adjusted capital (RAC) ratio to be around 7.5% by end-2023 from 7.7% at end-2020. We anticipate a gradual improvement in pre-provisions income, and credit losses declining to about 60 basis points (bps) in 2022-2023 after an about 76 bps on average in 2020-2021. We factor in about 4 billion per year of profit distribution. Geographic diversification remains a credit strength. The ratings on UniCredit reflect the bank's strong franchise and...

Full Report