MILAN – Shares in UniCredit shot up as much as 9.7% on Wednesday, outperforming a sector rebound, after Italy’s No.2 bank detailed its exposure to Russia and confirmed its cash dividends and plans for a share buyback.
UniCredit said a worst-case scenario, in which it had to reduce its Russia exposure to zero, would knock 2 percentage points off its Common Equity Tier 1 ratio – a key measure of financial strength which stood just above 15% at the end of last year.
Provided that ratio remains above 13% UniCredit said it remained committed to a share buyback of up to 2.6 billion euros ($2.85 billion).
By 1030 GMT shares in UniCredit had gained 8.3% against a 6.3% rise in Europe’s banking index.
Capital distribution plans unveiled in December by new CEO Andrea Orcel had lifted UniCredit shares to a new four-year high on Feb. 10.
However, escalating tensions and the subsequent Russian invasion of Ukraine have driven shares in the Italian bank down 38% since last month’s peak, compared with a 22% drop for the European sector over the same period, Reuters calculation of Refinitiv data showed.
UBS analysts said the impact reflected the large contribution UniCredit derives from central and eastern Europe, which account for roughly a third of group earnings, as well as the increased uncertainty about capital return targets.
Citi analyst Azzurra Guelfi noted UniCredit’s disclosure on risks stemming from the Ukraine war was “more comprehensive than peers … and the capital scenario … more conservative.”
In addition to the potential losses linked to its Russian subsidiary, UniCredit detailed its cross-border and derivatives exposure.
Net of those, UniCredit’s position would be similar to that of peers most exposed to Russia, Citi said.
Among European banks, Austria’s Raiffeisen Bank International and France’s Societe Generale have the largest Russian exposure.
“The capital return is a key component of the group investment case, and any significant slowdown/reduction of the buyback is a key focus for the market, as well as asset quality/macro development and impact on group profitability,” Citi said.
($1 = 0.9132 euros)