Unicredit trading income boosted by hedging products

Unicredit posted revenues of €4.5 billion in the third quarter of 2022, up 4.5% compared to the prior year period.

Results were boosted by net interest income growth thanks to the interest rate environment and trading income reflecting favourable commercial activity.

Trading income reached €518m in Q3 2022, up 60% year-on-year (YoY), driven by strong corporate demand for hedging products, especially in Germany, and bond revaluation. Fees were €1.6 bn, down 1.8% YoY due to investment fees, mainly on assets under management (AuM) in Italy, partially offset by higher certificates activities and by transactional services in Italy and Germany.

It was the group’s ‘seventh consecutive quarter of growth, and the best nine-month results in over a decade’, according to its chief executive officer Andrea Orcel (pictured).

Unicredit issued approximately 1,950 certificates targeted at the primary market in Q3 2022, an increase of 37% YoY, according to SRP data.

At €275m, sales volumes for the certificates – which were available across eight different jurisdictions – were down almost 50% from Q3 2021.

In Germany, where revenues totalled €1.2 billion (+6.6% YoY), the bank issued most of its structured products during the quarter. Sales of certificates, at an estimated €300m from 1,859 products  were down 27% YoY. However, volumes fared better compared to the previous quarter when an estimated €200m was collected from 1,880 products.

This quarters’ German products were almost exclusively linked to equities, with €205m collected from 1,715 certificates linked to single shares (-11% YoY) and a further €85m invested in 130 products tied to a single equity index (-15% YoY).

The latter category included Top Zins Garant Zertifikat 09/2027 on the Eurostoxx 50, which with sales of €27m was Unicredit’s best-selling certificate of the quarter.

Equities aside, German issuance also saw nine fund-linked products (€11m) and four credit-linked notes (€2.5m).

Apart from its primary market products, Unicredit also listed some 49,706 turbo certificates in Germany during the quarter (Q3 2021: 52,121).

Outside of Germany, the bank was active, among others, in Italy, Czech Republic, and Slovakia.

In its home market of Italy, total revenues of €2.1 billion were slightly up from Q3 2021 (+0.5%). The bank issued 15 public offers in the quarter, including an express certificate on a worst-of basket comprising Eurostoxx 50 and FTSE MIB that sold €24m.

The bank was also active in the Central and Eastern Europe (CEE) region, issuing structures in the Czech Republic (48 products worth CZK58m (€2.4m)) and Slovakia (21 products worth €1m), among others. Both Czech and Slovak issuance was limited to reverse convertible certificates linked to single stocks, and to a lesser extent, single indices.

The share of Nvidia and Meta (five products each) were the most frequently used in the former while Mercedes Benz (five products) was preferred amongst Slovak investors.

 

As of 30 September 2022, the book value of sovereign debt securities amounted to €106.4 billion, of which €102.5 billion classified in the banking book, over 80% was concentrated in eight countries. Italy, with €36.8 billion, represents about 35% of the total.

The group’s 2022 funding plan focuses mostly on minimum requirement for own funds and eligible liabilities (MREL) instruments, while bank capital needs remain quite limited. Unicredit’s total loss absorbing capacity (TLAC) ratio of risk weighted assets (RWA) stood at 26.88%, down 18 bps QoQ, with a substantial buffer above requirements of 21.58%.

Click the link to read the full Unicredit 3Q and 9M 2022 results and the presentation.