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(Sharecast News) - UniCredit reported its highest quarterly profit on record on Tuesday and raised its full-year outlook, as the Italian lender launched a 35bn all-share offer for Commerzbank despite opposition from the German bank and Berlin.
Net profit rose 16% year on year to 3.22bn in the first quarter, well ahead of the 2.7bn expected by analysts in a company-compiled consensus.
Revenue increased 4.9% to 6.87bn, also above expectations of 6.42bn, as higher fees, insurance revenue and dividends from equity investments offset pressure from lower interest rates and the continued run-down of UniCredit's Russian business.
The bank lifted its 2026 net profit forecast to at least 11bn, compared with previous guidance for around that level, and confirmed its 2028 targets.
UniCredit said the improved outlook reflected early progress in its transformation plan and continued strength in profitability and capital generation.
Chief executive Andrea Orcel said UniCredit had delivered "a record set of quarterly results" across its key financial metrics.
JPMorgan analysts said that "whilst investor focus continues to remain on M&A, UniCredit continues to deliver strong profitability and capital distribution."
The quarter was supported by about 400m of dividends from equity investments built under Orcel's dealmaking strategy. UniCredit has taken stakes in Commerzbank, Greece's Alpha Bank and Italian insurer Generali, while also bringing its life insurance business in-house.
The bank said earnings also benefited from higher loan volumes, stronger net fees and further cost reductions.
The results came as UniCredit opened its offer to Commerzbank shareholders, with the acceptance period beginning on 5 May and running until 16 June, according to Bloomberg.
The offer valued Commerzbank at about 35bn and proposes 0.485 UniCredit shares for each Commerzbank share, implying about 32 a share based on Tuesday's opening price.
That was below Commerzbank's market price of about 34.80, suggesting a low likelihood of broad investor acceptance without improved terms.
UniCredit said the offer was designed to lift its stake in Commerzbank above 30%, from just below that level, rather than immediately secure control.
Crossing that threshold would give UniCredit flexibility to increase its holding further through open-market purchases from next year under German takeover rules.
Commerzbank had rejected the approach and was backed by the German government, which holds about 12% of the bank, in seeking to remain independent.
UniCredit's intervention had already prompted a political backlash in Germany, particularly after it set out proposals to improve Commerzbank's performance, which the German lender characterised as a restructuring plan that would dismantle its business model.
UniCredit said its standalone strategy would remain the baseline and that the Commerzbank offer was an additional opportunity across all outcomes.
The offer document also outlined expected improvements if a deal were completed, including savings at Commerzbank's corporate centre and IT optimisation, which UniCredit estimated could generate 1.1bn of additional annual pre-tax value.
It also set out measures that UniCredit said could create 0.8bn of pre-tax value if Commerzbank remained independent.
At 1155 CEST (1055 BST), shares in UniCredit were up 5% in Milan at 67.26.
Reporting by Josh White for Sharecast.com.