Unicredit Reports Strong Q2 Profits Amid Acquisition Bid Withdrawal
On September 12, 2024, at the Commerzbank AG headquarters in Frankfurt, Germany, Unicredit made headlines.
The day after retracting its offer to buy Italy’s Banco BPM due to opposition from the government, Unicredit announced a remarkable profit surge for the second quarter, which led to an upgrade of its full-year earnings forecast.
The bank, Italy’s second largest, reported a 25% year-on-year increase in net income, reaching 3.3 billion euros (approximately $3.87 billion) without any one-off items. However, net revenues fell by 4.7% from the previous year to 6 billion euros in the July quarter.
Quarter Highlights
- Returns on tangible equity rose to 24.1% from 22% in the first quarter.
- The Common Equity Tier 1 (CET 1) capital ratio increased to 16.2% compared to 16.1% in March.
- Net interest income, the difference between loan revenue and interest on deposits, decreased slightly to 3.5 billion euros, a mere 0.3% dip from January to March.
Unicredit is now anticipating an annual net profit of 10.5 billion euros, up from the earlier guidance of 9.3 billion euros issued in the first quarter.
This announcement followed the withdrawal of its bid for Banco BPM—a decision spurred by the Italian government’s enforcement of “golden power” rules. This legislation gives the government the authority to intervene in deals deemed to affect national security. The administration led by Giorgia Meloni has insisted on imposing conditions on such transactions.
Unicredit stated that these regulations hindered its ability to negotiate with Banco BPM shareholders, as the typical offer process wasn’t feasible.
Regulators in Italy and Europe have previously supported Unicredit’s pullback from the Russian market. CEO Andrea Orcel had hinted that the acquisition proposal might lapse, noting that unclear governmental requirements could discourage transactions and expose Italian banks to potential penalties approaching 20 billion euros.
The European Union has been increasingly scrutinizing governmental interference in banking mergers. They have already challenged the Italian government’s use of “golden power” in bank acquisitions and criticized Spain for similar interventions in lender bids.
Unicredit is at the forefront of a growing merger and acquisition trend within European banking, especially after two significant approaches since late last year. Although Banco BPM’s bid is currently sidelined, lenders still hold about 28% of shares in German lender Commerzbank through financial instruments, and the German government is also opposed to a takeover.
This news piece has been updated.
