UniCredit Q4 2020: Capital Return Confirmed; Monte dei Paschi Uncertainty Still Weighs on Valuation

No-moat UniCredit reported a net attributable loss of EUR 1.2 billion for fourth-quarter 2020, compared with the EUR 835 million loss it booked for the same period a year ago. Both numbers are, however, heavily distorted by items that are not expected to recur. Underlying net profit for the quarter came to EUR 204 million compared with the EUR 1.4 billion profit UniCredit booked for fourth-quarter 2019. We maintain our EUR 11 per-share fair value estimate and our no moat ratings. UniCredit is currently trading in 4-star territory and if it can hit its EUR 3 billion net profit target for 2021 the share is not expensive--this implies a forward price/earnings multiple of 6 times. We would, however, wait until the uncertainty surrounding a potential government-sponsored takeover of struggling Italian peer Monte dei Paschi di Siena is removed before becoming aggressive buyers.