As we said, we launched this offer to unlock a situation of lack of dialogue and total lack of engagement from the other side. We didn't succeed because after only two meetings of about an hour each, they decided to stick to their positions.
UniCredit's first quarter beat expectations with a net profit of 3.2 billion, up over 20% from what analysts had expected. It was a strong quarter that also led the bank to raise its forecasts for the full year. Andrea Orcel, CEO, thank you for being with us this morning. Let's start with these numbers, these results. How did you achieve them and what gives you the confidence to raise your forecasts for the end of this year?
This is the 21st consecutive quarter of record results. The numbers beat across all lines from revenues to what we call our core revenues — meaning net interest margin, fees, and insurance results. From the contribution of investments in other companies, particularly Commerzbank and Alpha, from costs that were better than expected. Our cost-to-income ratio has dropped to 33.4%. Our returns on equity are now close to 26%. And I believe this demonstrates that the continuation of a transformation that started in 2021 and now continues with 'Unlimited' gives us sustainability, consistency, and results that tend to outperform the sector.
Meanwhile, Mr. Orcel, there is a war, a conflict that is also an economic shock. What impact do you foresee it could have on your results going forward, and how has the new quarter started?
For the moment, we see that everything happening from a geopolitical and macroeconomic perspective, we're able to absorb it. Why can we absorb it? Because the transformation allows us to go beyond, to compensate for a whole series of factors. We also have very strong lines of defense. We still have 1.7 billion in overlays to cover potential credit problems. Our credit coverage has improved. Our costs will continue to decline because we took on integration costs last year, so we have various levers to compensate. Based on what we see today, we believe we can reach 11 billion or more in net profit this year, and we have reaffirmed our conviction regarding our 2028 and 2030 results. Obviously, the environment is what it is, and if it continues to worsen, we would need to revise things, but for the moment we don't believe we need to do so and we believe we can compensate.
Meanwhile, the ECB says there are upside inflation risks and downside growth risks, and the market thinks it will raise interest rates in June. How much of this is already in your plans, in your numbers, and in the impact it could have?
I believe that, more modestly, if we look at what happened in 2022 with the invasion of Ukraine, there was slower growth, inflation, and rising rates — it wasn't negative for banks. In our case, we believe that if rates rise and growth is more moderate — the growth we're seeing now will be lower — but margins will be wider, and this should have a neutral effect on our net interest margin, a neutral-to-slightly-negative effect on our fees. We have a whole series of other levers, including costs still declining, that should help us in an inflationary scenario. So when we put it all together, we believe we should be moving a bit faster, but that we can absorb these factors and deliver what our shareholders expect.
You mentioned Commerzbank — the tender offer starts today, an operation you launched also to unlock a stalemate situation after over 18 months. What are your expectations? Because the reactions haven't been positive, nor was the presentation of the new strategy, 'Unlocked.' The other side says it's a plan to dismantle the bank and there would be no premium compared to the offer.
As we said, we launched this offer to unlock a situation of lack of dialogue and total lack of engagement from the other side. We didn't succeed because after only two meetings of about an hour each, they decided to stick to their positions. At this moment, there is an offer that, in our view, incorporates a premium, given that Commerzbank's stock rose 20% when we made our investment. It's up to Commerzbank shareholders to decide what they want to do. From our point of view, we win either way. If we remain below control, which is the most probable scenario, we'll continue to have a return from a significant investment in Commerzbank of over 20%, which, as you can see, this quarter helps support our results. If Commerzbank does better because it revises its plan, we'll benefit more. If Commerzbank does worse because it fails to execute, we have a put option coverage that allows us not to be worried. If instead we reach control, we've presented our point of view, and I want to be clear — we presented it because Commerzbank didn't want to engage and present a common point of view, a common plan, so we were forced to put forward our own. It's clear to everyone that it would create much more value than their plan. It's clear that it's incremental to their plan, so if they revise their momentum upward, our trajectories would be higher. It's not a dismantling at all, but rather a refocusing on Germany and Poland. We believe Commerzbank is drifting abroad, going into new business areas with higher risk overseas, and we believe it should refocus more on Germany and Poland, delivering the results we're already delivering from HVB.
