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(Sharecast News) - UniCredit reported record full-year results for 2025 on Monday and raised its medium-term profit and distribution targets, as earnings from strategic equity stakes and resilient fee income offset pressure from lower interest rates and one-off costs, prompting a strong positive market reaction.
Italy's second-largest lender posted an underlying net profit of 10.6bn for 2025, up 14% from the prior year, with return on tangible equity rising to 19.2%.
Reported net profit reached 10.9bn after absorbing 1.4bn of extraordinary charges, mainly linked to hedging its strategic portfolio and front-loaded integration costs aimed at lowering future expenses.
Revenues were broadly flat at 24.5bn despite a 4.3% decline in net interest income, as higher fees and insurance income rose 5.6% and accounted for about 35% of total revenues.
The bank's performance was supported by income from equity stakes in European peers, including Germany's Commerzbank and Greece's Alpha Bank, which helped lift dividend income to 980m, more than double the prior year.
Asset quality remained strong, with a net non-performing exposure ratio of 1.6% and a cost of risk of 15 basis points, while operating costs were held flat at 9.4bn, resulting in a best-in-class cost-to-income ratio of 38%.
For the fourth quarter, UniCredit reported net profit of 1.8bn, up 17% year-on-year but down sharply from the previous quarter, as trading income turned negative and integration costs were front-loaded.
Chief executive Andrea Orcel said the results marked the group's 20th consecutive quarter of disciplined, capital-generative growth and confirmed the transition from the "UniCredit Unlocked" strategy to the new "UniCredit Unlimited" plan.
Under the new strategy, UniCredit was targeting net profit of about 11bn in 2026 and around 13bn in 2028, implying an annual growth rate of roughly 7%, with return on tangible equity expected to exceed 20% in 2026 and 23% by 2028.
Net revenues were projected to rise above 25bn in 2026 and to about 27.5bn by 2028, while costs are expected to decline by around 1% per year.
The bank reaffirmed its commitment to shareholder returns, confirming an ordinary payout ratio of 80% of net profit, split evenly between cash dividends and share buybacks.
Total distributions for 2025 amounted to 9.5bn, including 4.75bn in cash dividends, and UniCredit now planned cumulative distributions of around 30bn over the next three years and about 50bn over the next five years, excluding any additional returns that may be considered annually depending on excess capital.
At 1137 CET (1037 GMT), shares in UniCredit were up 6% in Milan at 78.38.
Reporting by Josh White for Sharecast.com.