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Is This Beaten-Up Italian Bank Stock A Buy?

Mar. 02, 2018 11:35 AM ETUniCredit S.p.A. (UNCFF)2 Comments
Zheng Bin profile picture
Zheng Bin


  • The company is showing improving profitability metrics.
  • The macro environment is supportive of the bank.
  • It has better capitalization compared to other G-SIB banks.

Italian bank UniCredit (OTCPK:UNCFF) was once trading at $260 before the global financial crisis. Now it is trading at just around $17. But is this a bargain price to buy the once powerful Italian powerhouse at?


Source: Tradingview

In this article, we'll look at the fundamental data and the outlook of the political environment to establish if or when this might be a good time to buy this Italian powerhouse.

Turning the Corner? Improved Profitability

FY 2017 results were released recently, showing a net profit of 5.47 billion euros ($6.7 billion) last year, exceeding analysts' forecasts. I was skeptical of the "Transform 2019 plan" when it was first implemented by Jean Pierre Mustier. But the plan seems to be working. This plan included reducing exposure to bad debts, improving asset quality and cutting jobs by as much as 14,000.

Since ,then the bank has improved asset quality. Net exposure to non-performing debt is down by 15.2% to 21.2 billion euros. There has been a reduction of 9,000 jobs, and 682 branches have closed. If this plan continues to exceed expectations, the bank will be reducing costs further and improve credit quality going forward.

Improving Economy

The economy has also been supportive of the bank. The Bank of Italy came out in early February as revising the GDP growth forecast upward. Governor Ignazio Visco expects the nation's economy to expand in 2018 at the same pace as last year. The governor cited that monetary policy "is working." And the ongoing reduction of economic slack has boosted confidence.

Credit quality normally lags behind economic growth. This turn up in the economic performance should aid UniCredit in its long climb back to its highs. The ECB is also expected to continue this low interest rate environment. This could mean improvements in borrower performance

This article was written by

Zheng Bin profile picture
Currently a popular investor on Etoro under the username FundManagerZech Former investment banking analyst

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in UNCFF over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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