UniCredit raises medium-term targets after bumper year

(Sharecast News) - UniCredit reported record full-year results for 2025 on Monday and raised its medium-term profit and distribution targets, as earnings from strategic equity stakes and resilient fee income offset pressure from lower interest rates and one-off costs, prompting a strong positive market reaction. Italy's second-largest lender posted an underlying net profit of €10.6bn for 2025, up 14% from the prior year, with return on tangible equity rising to 19.2%.

Reported net profit reached €10.9bn after absorbing €1.4bn of extraordinary charges, mainly linked to hedging its strategic portfolio and front-loaded integration costs aimed at lowering future expenses.

Revenues were broadly flat at €24.5bn despite a 4.3% decline in net interest income, as higher fees and insurance income rose 5.6% and accounted for about 35% of total revenues.

The bank's performance was supported by income from equity stakes in European peers, including Germany's Commerzbank and Greece's Alpha Bank, which helped lift dividend income to €980m, more than double the prior year.

Asset quality remained strong, with a net non-performing exposure ratio of 1.6% and a cost of risk of 15 basis points, while operating costs were held flat at €9.4bn, resulting in a best-in-class cost-to-income ratio of 38%.

For the fourth quarter, UniCredit reported net profit of €1.8bn, up 17% year-on-year but down sharply from the previous quarter, as trading income turned negative and integration costs were front-loaded.

Chief executive Andrea Orcel said the results marked the group's 20th consecutive quarter of disciplined, capital-generative growth and confirmed the transition from the "UniCredit Unlocked" strategy to the new "UniCredit Unlimited" plan.

Under the new strategy, UniCredit was targeting net profit of about €11bn in 2026 and around €13bn in 2028, implying an annual growth rate of roughly 7%, with return on tangible equity expected to exceed 20% in 2026 and 23% by 2028.

Net revenues were projected to rise above €25bn in 2026 and to about €27.5bn by 2028, while costs are expected to decline by around 1% per year.

The bank reaffirmed its commitment to shareholder returns, confirming an ordinary payout ratio of 80% of net profit, split evenly between cash dividends and share buybacks.

Total distributions for 2025 amounted to €9.5bn, including €4.75bn in cash dividends, and UniCredit now planned cumulative distributions of around €30bn over the next three years and about €50bn over the next five years, excluding any additional returns that may be considered annually depending on excess capital.

At 1137 CET (1037 GMT), shares in UniCredit were up 6% in Milan at €78.38.

Reporting by Josh White for Sharecast.com.