UniCredit bolsters capital ratio on Fineco sale

Italian bank also offloaded Mediobanca stake

UniCredit strengthened its Common Equity Tier 1 (CET1) capital ratio in the three months to end-September, helped by the sale of its remaining stake in online brokerage Fineco. 

The Italian lender’s CET1 ratio improved 53 basis points on the quarter to 12.6%, the highest level since Q1 2018. The sale of the second tranche of Fineco in July contributed 31bp to the overall increase. The sale of the first tranche closed in May.

Net profits for the quarter added a further 28bp. These gains were partially offset by dividend and bond coupon payments in the quarter, which took 10bp off the ratio.

 

Total CET1 capital increased €2.1 billion ($2.3 billion), or 5%, to €48.9 billion in the third quarter. Over the same period, risk-weighted assets rose €635 million to €387.8 billion.

UniCredit also announced the sale of its stake in Mediobanca, another Italian lender, on November 6. The bank said the financial impact of the sale was “irrelevant”. 

Who said what

“We have a strategy, which is to proactively manage for assets, [and] when it makes sense to sell the non-strategic ones to simplify the group structure [we will]. We might have a very few left, actually, in the portfolio, so they should be not very meaningful per se. But you don’t speak only about financial assets or investments. I’ve said that we will keep disposing, for instance, real estate that we don’t feel is strategic and could contribute in terms of our CET1” – Jean Pierre Mustier, chief executive officer of UniCredit. 

What is it?

The CET1 ratio is a measure of bank solvency and is found by dividing CET1 capital by total risk-weighted assets. The higher the ratio, the better capitalised the bank. CET1 constitutes the highest-quality capital available to a bank – namely, shareholder equity. 

Why it matters

UniCredit netted €1.18 billion total from the sale of Fineco. Not only did the sale remove a drag on its capital position, it also helped the bank hit its year-end target CET1 ratio of 12.5% with a quarter to spare. 

It followed up by offloading its share of Mediobanca. The effect of this sale on its capital and income will be disclosed in its Q4 results.

As CEO Mustier explained on the bank’s third-quarter earnings call, UniCredit is reaching the end of its asset selling spree, which means there will be fewer quick wins for its capital ratio in future. This could make the ill effects of incoming “regulatory headwinds” harder to offset. 

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