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MILAN (Reuters) -New UniCredit Chief Executive Andrea Orcel surprised investors by pledging to return at least 16 billion euros ($18 billion) under a new strategy to 2024 he unveiled on Thursday.
The former UBS investment banking chief, who took the helm in April, said UniCredit would bet on fees, while also further cutting costs, to boost net profit above 4.5 billion euros in 2024 from 3.3 billion this year.
Shares in the bank were up 10.6% by 1150 GMT, a rise which Citi analysts said was mostly driven by the payout figure.
“This is higher versus market expectation and represents the main positive surprise for the market,” Citi said.
Orcel told a news briefing UniCredit would be paying out the new capital it expects to generate under the plan, and may also consider tapping its excess capital buffers.
“If we achieve the plan we will distribute 16 billion euros as an ordinary course and the excess capital is another matter that may come to complement the 16 billion or not,” he said.
UniCredit is also open to considering M&A opportunities if conditions are right, said Orcel, who walked away from a rescue deal for Monte dei Paschi in October having failed to agree terms with Italy’s Treasury.
Any M&A deal would have to help UniCredit achieve its goal of a return on tangible equity of 10% in 2024, the CEO said.
After restructuring under previous CEO Jean Pierre Mustier, who clashed with the bank’s board over strategy, UniCredit targets an average 10% annual rise in net profit under the plan on a 2% yearly revenue increase driven by fees.
Net profit in 2022, which Orcel said would be “a year of consolidation,” is projected above 3.3 billion euros, virtually unchanged from UniCredit’s latest guidance for 2021 based on its new definition of net income.
The capital distribution, which entails a combination of cash dividends and share buybacks, will start with 3.7 billion euros in relation to 2021 results.
($1 = 0.8834 euros)
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