UniCredit’s Record Quarter Fuels Upgraded 2026 Outlook

UniCredit S.p.A ((IT:UCG)) has held its Q2 earnings call. Read on for the main highlights of the call.

UniCredit’s latest earnings call struck a decidedly upbeat tone, with management celebrating a 22nd consecutive record quarter and the best second quarter and first half in the bank’s history. Executives emphasized broad-based revenue growth, tight cost control and robust capital, arguing that these strengths more than offset near-term uncertainties tied to Commerzbank and regulatory approvals.

Record performance and upgraded guidance

UniCredit highlighted a landmark quarter, marking its 22nd straight period of record results and the strongest Q2 and first half in its history. On the back of this momentum, management lifted its 2026 net profit target to around EUR 11.5bn before integration costs and still well above EUR 11bn after including those charges.

Strong adjusted revenue and profit growth

Adjusted revenues jumped 13% in the second quarter and 10% in the first half, showing that growth is not just a one-off. This translated into adjusted net profit of EUR 3.1bn in Q2 and EUR 6.3bn in H1, with adjusted GOP and NOP rising more than 20% in the quarter and over 15% for the half.

Material per-share and book value gains

Shareholders saw significant value creation, with adjusted earnings per share up 28% year-on-year and dividends per share rising 16%. Tangible book value per share also climbed 16%, underscoring that UniCredit’s profit growth is being converted into harder equity metrics rather than just headline earnings.

Commercial momentum and balance sheet growth

The bank reported solid commercial momentum, with customer loans, deposits and total financial assets each expanding by roughly 8%. Core revenues grew around 5% and underlying revenue about 10%, helped by loan growth of 8% in Italy and 11% in Central and Eastern Europe, pointing to broad-based franchise expansion.

Diversified revenue mix and fee strength

Management stressed that UniCredit is less dependent on interest income thanks to stronger fee and insurance earnings, which rose 14% in Q2 and 11% in H1. Fees and insurance now account for about 39% of net revenues, with Client Solutions delivering EUR 6.5bn of revenues, including EUR 4.7bn from fees and net insurance, both posting double-digit growth.

Top-tier asset quality metrics

Asset quality remains a bright spot, with cost of risk at 17 basis points, comfortably within the 15–20 bps target range that signals conservative risk management. The net non-performing exposure ratio improved to 1.4%, backed by coverage of 45.9% and a default rate of just 0.8%, placing UniCredit firmly in the top tier of European banks on credit quality.

Efficiency gains and transformation-led cost control

UniCredit’s transformation and use of technology, including AI, are translating into tangible savings, with non-business costs down 5% and total costs falling around 2% when excluding perimeter changes. This drove a better cost/income ratio and an impressive EUR 8.8bn “jaws” gap, meaning revenues are rising much faster than expenses.

Capital generation and CET1 trajectory

The bank generated about 85 basis points of organic capital in the quarter, lifting its CET1 ratio to 14.3%, or 14.5% excluding the impact of its Commerzbank stake. Management expects year-end CET1 of around 15%, and close to the same level on a pro forma basis for the Danish compromise, reinforcing UniCredit’s capital strength even as it pursues growth.

Net interest income outlook and structural hedge

Net interest income increased 2% sequentially in Q2, and management sees a further pickup in the second half as hedging strategies and rates support margins. The structural hedge is expected to contribute about EUR 400m in 2026 and cumulatively EUR 1.3bn by 2028 and EUR 2.4bn by 2030, based on moderate Euribor assumptions, adding a visible tailwind to earnings.

Regional franchise performance

Italy remains the profit engine with a return on allocated capital near 31%, net revenue over risk-weighted assets at 10.4% and a strong NII-driven RoAC of 23%. Germany and CEE are also contributing meaningfully, with Germany showing core revenue growth of 8% and a RoAC of 23%, while CEE delivered 6% core revenue growth, 11% lending expansion and a RoAC above 27%.

One-off impacts and Russia compression

Management underlined that the record performance came despite several negative one-offs, including trading effects and a temporary RWA hit linked to the larger Commerzbank stake. Russia-related deleveraging continues to weigh, trimming about EUR 70m from first-half revenues and remaining a headwind as the bank accelerates its exit.

Commerzbank consolidation capital and P&L impact

The potential full consolidation of Commerzbank is a key swing factor, with UniCredit estimating a roughly 200 bps hit to CET1 if completed by year-end, including purchase price allocation and timing effects. The plan requires around EUR 2.2bn of upfront investment and EUR 500m of additional loan coverage, which could temporarily dampen profits and distributions on the Commerzbank perimeter.

Pending Danish compromise and buyback uncertainty

Approval of the Danish compromise, expected around the third quarter, remains a crucial regulatory milestone for capital planning. Until then, the EUR 4.75bn share buyback planned for 2025 is suspended and could be cancelled if Commerzbank is consolidated, creating near-term uncertainty for investors focused on capital returns.

Regional cost of risk normalisation

While the group-wide cost of risk stays low, some markets are moving toward more normal levels after prior releases, with Germany up 9 bps to 22 bps and CEE up 24 bps to 13 bps. Italy’s cost of risk, at about 24 bps, remains higher in absolute terms but still improved by 2 bps, suggesting disciplined risk-taking as growth resumes.

Integration and execution risk for Commerzbank plan

UniCredit sees a two to three-year path to align and integrate Commerzbank, underscoring that value creation will not be instant even if the transaction proceeds. The bank flagged execution and regulatory risks, including the need to work with the German government and works councils, making timing and conditions a key variable for the deal’s ultimate success.

Hedging costs and temporary volatility

The current earnings profile is burdened by hedging costs tied to UniCredit’s Commerzbank stake, which depress reported profitability in the near term. Management expects these costs to disappear once consolidation occurs, but until then they add noise and short-term volatility to the income statement that investors must look through.

Extraordinary impacts from Banca Progetto and ROBOR

The bank also flagged around EUR 140m of potential extraordinary negative impacts related to Banca Progetto and ROBOR changes in Romania, which could weigh on 2026 profits if they materialize. While not large enough to derail the overall plan, these items add another layer of uncertainty to medium-term earnings trajectories.

Upgraded guidance and forward-looking outlook

Looking ahead, UniCredit’s upgraded guidance points to 2026 net profit of around EUR 11.5bn before integration costs and still comfortably above EUR 11bn including them, anchored by a RoTE in the mid-20s and CET1 near 15%. Management expects net interest income to accelerate in the second half, cost of risk to remain within 15–20 bps, and the structural hedge and capital generation to provide ample flexibility even as the Commerzbank strategy and regulatory approvals play out.

UniCredit’s earnings call paints the picture of a bank firing on all cylinders, combining record profits, diversified revenues and strong capital with disciplined risk management. While the Commerzbank strategy, pending Danish compromise and a handful of extraordinary items introduce execution and regulatory risks, the upgraded guidance and sustained momentum suggest that the upside case remains firmly intact for investors watching the stock.