UniCredit First-Quarter 2020: Larger Loss Than Expected

No-moat UniCredit reported a net attributable loss of EUR 2.8 billion for the first quarter of 2020 compared with the EUR 1.2 billion profit reported for the first quarter of 2019. Even excluding non-recurring items, mainly the loss on disposal of a portion of UniCredit's interest in Turkish bank Yapi Kredi and retrenchment costs in Italy, UniCredit still made a EUR 58 million loss for the quarter. The loss was greater than the average consensus expectation--as polled by UniCredit itself--of a EUR 1.5 billion net loss for the quarter. Loan loss provisions nearly trebled and revenue was under pressure due to some markdowns taken against UniCredit's trading book. We will update our model in due course, but we do not anticipate an impact on our fair value estimate that exceeds 10%. For the time being we maintain our no-moat rating and EUR 12 per share fair value estimate for the firm.