By Valentina Za

MILAN (Reuters). Despite rising salaries and one-off costs, UniCredit reported better results than anticipated for 2021. The push of new chief executive Andrea Orcel began to pay off.

UniCredit was the sole bank Italian supervisors considered of global systemic import. UniCredit also said it is no longer considering a bid for Otkritie Bank Russian lender Otkritie Bank because of current geopolitical tensions in Russia over Ukraine.

Orcel has bold plans for capital distribution to propel UniCredit’s shares up. UniCredit announced it will distribute 3.75 Billion euros ($4.2B) to shareholders. It also stated that UniCredit would pay a 1.17 Billion Euro dividend and buy back 2.58 Billion of UniCredit shares.

UniCredit shares currently trade at an advantage over rivals and rose 2% early trade. This was more than a flat Milan bluechip stock index.

Citi analysts declared, “Onwards & upwards,” adding that results are “already demonstrating evidence of the new group strategy, as well as building for improved return overtime.”

Orcel’s record of investment banking is encouraging UniCredit to pursue a merger/acquisition, even though UniCredit pulled out from the rescue package for Monte dei Paschi last October when it failed to agree terms.

The former Merrill Lynch banker said UniCredit would continue to review its M&A options, but he ruled out pursuing deals of a size that would hurt UniCredit’s goal of returning capital to shareholders in coming years.

Reporters were told by him that he would keep his word when he made a promise.

UniCredit shares rose 19% on Thursday. This was despite the fact that he had pledged Dec. 9 to raise over 16 billion euro capital and to give it back to shareholders through dividends or buybacks.

RUSSIAN DEAL DROPPED

Reports that UniCredit had been looking at a deal for Russian bank Otkritie earlier this month hurt the shares. Markets were worried about increasing geopolitical risk and the possibility of the bank losing its capital return targets.

Orcel explained that UniCredit dropped the deal because of the current political climate.

However, he said that the payout was within bank targets. UniCredit would have traded its local businesses for Otkritie’s controlling stake when Russia’s central banks list it.

UniCredit reported 2021 revenues of 18 billion euro, which was higher than the forecast of 16 billion. It also stated that underlying profits were 3.9 billion euros. This is again more than its projection of 3.7 billion.

Broker Banca Akros stated that “the operating performance was superior than expected with total revenues rising 4.8% year on year.”

The bank also reported overall costs that were lower than its forecasts, even though variable pay for executive was increasing. UniCredit reported an unexpectedly higher core capital ratio.

The restructuring costs and charges associated with disposals of noncore assets in accordance to the 2022-2024 Plan Orcel, which was unveiled Dec. 9, led to a loss of 1.44 billion Euros in October-December quarter. This is higher than the average analyst forecast of 1.15 million euros.

UniCredit announced that it had signed new insurance contracts with Germany’s Allianz (DE) in order to boost fee income over the coming years. Orcel said that UniCredit would keep specializing in its insurance partnerships.

The new agreement with Allianz (which owns 3.133% of UniCredit) allows the Italian lender to sell its products via the digital platform.

They also extended the agreements in Italy between them to 2027. UniCredit has an option to leave Italy from 2024. Orcel indicated that they did not anticipate it being exercised.

($1 = 0.8987 euros)