UniCredit gets ECB’s green light for second 1 billion euro share buyback

ITALIAN bank UniCredit said on Wednesday (Aug 31) the European Central Bank had authorised a second share buyback instalment worth up to 1 billion euros (S$1.4 billion), which would bring its overall share repurchases to the targeted 2.58 billion euros.

UniCredit’s capital distribution plan had appeared at risk due to its large exposure to Russia when the Ukraine conflict first broke out. UniCredit said in March it would only execute the buyback in full if its core capital ratio remained above 13 per cent despite the impact of the Russia crisis.

Since then, however, the bank has completed a 1.58 billion euro buyback, repurchasing 7.42 per cent of it own share capital.

It said the second buyback tranche amounted to 32 basis points of its best capital ratio, which stood at 15.73 per cent at the end of June.

Under new CEO Andrea Orcel, the former investment banking chief at UBS, UniCredit has embarked on a strategy that strives to maximise capital, generating 67 basis points in capital in the second quarter.

It said the ECB had approved the buyback after analysing information the bank provided on the expected trajectory of its capital under conservative assumptions and updated adverse macroeconomic scenarios.

The ECB had said in June it would ask banks to factor in a potential recession when calculating their capital trajectories as part of discussions with supervisors over capital distribution plans.

By 0723 GMT shares in UniCredit gained 3.2 per cent outperforming a 1.9 per cent rise in Italy’s banking index. REUTERS