Analyst Note| Johann Scholtz, CFA |
No-moat Unicredit reported a net attributable profit of EUR 1 billion for the first quarter of 2021, more than double the EUR 420 million net profit it booked for the same period a year ago. The consensus of analysts collected by the company itself expected a net profit of EUR 736 million for the quarter. The earnings beat was driven by lower-than-expected loan loss provisions, a lower-than-expected tax rate, and higher-than-expected income from the trading of securities. The earlier announcement that Unicredit has entered into negotiations to take over troubled state-owned Italian lender MPS, however, overshadowed the results. We believe that the transaction could be beneficial to Unicredit shareholders, provided that the terms exclude the MPS bad-bank and that it is capital neutral. We maintain our EUR 11.50 per share fair value estimate and our no-moat rating.