UniCredit Shows a Structural Improvement in Profitability

UniCredit’s transformation under its current management from a perennial underperformer to one of Europe’s most profitable banks has been astounding. Management made good strategic decisions, but the return to positive interest rates after a decade of zero or negative rates did much of the work. In the decade before its turnaround, UniCredit rarely earned a double-digit return on equity and posted losses in four years. It now earns high-double-digit returns, enabling it to return most of its earnings to shareholders while maintaining a significant buffer over its minimum capital requirements.