UniCredit First-Quarter 2021: Strong Trading Result and Vastly Lower Loan Losses

No-moat UniCredit reported a net attributable loss of EUR 887 million for the first quarter of 2021, compared with the EUR 2.7 billion loss it booked for the same period a year ago. The base was heavily distorted by non-recurring items, but the current quarter was mercifully free of distorting items. It was the first set of results reported by new CEO, Andrea Orcell, but the groundwork was laid by his predecessor, Jean-Pierre Mustier. Loan-loss provisions declined sharply, with a 15-basis-point credit loss ratio far below the 104 basis points UniCredit provided for the same period a year ago. UniCredit’s full-year guidance of a 60-basis-point credit loss ratio looks conservative, but the outlook is uncertain once government support measures are withdrawn. Quarterly revenue grew by 7% year on year largely due to a fourfold jump in revenue generated from the trading of securities. Net interest income declined by 13% year on year as negative short-term rates continue to bite, exacerbated by ballooning deposit accounts as clients benefit from high levels of liquidity in the market. We maintain our EUR 11 per share fair value estimate and our no-moat rating.