UniCredit Second-Quarter 2020: Bearish View Near-Term Earnings Potential Results in Fair Value Cut

No-moat UniCredit reported net attributable profits of EUR 420 million for the second quarter, only 23% of the EUR 1.8 billion net profit it reported during the second quarter of 2019, but a major improvement on the EUR 2.7 billion loss it reported for the first quarter of 2020. Revenue declined by 7% year on year, while costs were flat and the 33% increase in loan-loss provisions increased by 33%, actually a decent outcome in the current environment, helped by the significant provisions UniCredit took in the first quarter of 2020. We update our model to incorporate the recent results and reduce our fair value estimate to EUR 11 per share from EUR 12.