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Good morning and a warm welcome to Squawk Box Europe. I'm Juliana Tattlelebomb and these are your headlines. UniCredit posts a bottom-line beat on the back of stronger-than-expected income in its trading division. CEO Andrea Orcel tells CNBC he's keen to see how much more value the lender can create from its investment in Commerce Bank.
We have not given up. We are observing, as an investor, how much more value they can create, and obviously we cheer for them because now we're tied. The more value they create, the more they propel one of my key engines in net revenue.
Results from two of Europe's big consumer names paint a mixed picture, with Adidas raising its full-year outlook, with L'Oreal posting a sales miss. And Heineken sales fell less than expected in the third quarter, but the brewer flags challenging conditions and cuts its full-year volume guidance.
A warm welcome to Squawk Box Europe. We've got a packed day ahead and already things are kicking off. We've got a number of earnings through and we've also got some UK inflation data. So before we get to the earnings, I want to bring you these latest inflation figures. Quite interesting. I would say the expectation was for the September CPI to come in at 4%. It's actually come in at 3.8%. So steady from where we were in August, unchanged in fact from August. So 3.8% year-on-year. That is a cooler-than-expected inflation print. In terms of core CPI, that was also cooler than expected in September. Core CPI, which excludes energy, food, alcohol, and tobacco, came in at 3.5% year-on-year. 3.7% was the expectation. And as a result, we are seeing sterling come lower. We are seeing sterling fall right now. We're down about 12 basis points. We were down about 18 basis points versus the dollar at one stage, 1.3348. Of course, this could have significant implications for the Bank of England. If today's print came in hotter than expected, 4% or higher, then that could have totally dashed hopes of a further rate cut from the Bank of England this year. Now, the fact that inflation seems to be running a little bit cooler than expected, it could give the Bank of England more breathing room to cut rates further should they see it necessary from a labor market perspective. We of course are grappling with a slowing jobs market here in the UK, persistent inflation pressure. But now, if it looks like the inflation pressures are cooling a little bit or cooling cooler than expected, then that could give the Bank of England more room to cut rates if they see it necessary. So, 3.8% year-on-year is the figure. 4% was the expectation. So interesting inflation data to kick things off this morning. Now over to earnings because it is a busy old day on the earnings front and we've got Barclays' numbers just crossing the wires now. So let's get straight to what the UK investment bank has delivered in terms of third-quarter results. We are looking at Q3 pre-tax profit of 2.1 billion GBP.
We are looking at credit impairment charges in the third quarter of 0.66 billion. In terms of guidance for 2025, we're looking at group NI excluding Barclays' investment bank and head office upgraded to greater than 12.6 billion. Guidance for 2025. Group ROE upgraded to greater than 11% from around 11% previously. So they have upgraded their guidance. In terms of provisioning, Barclays has increased their provisions to 325 million pounds with 235 million additional charges. So they have increased their provisioning in the latest results here. In terms of capital, their core tier 1 capital ratio as of September 30th reduced to 13.9% at the top end of the 13 to 14% target range. So those are the headlines here. We're going to talk a lot more about the Barclays numbers later in the show with a great analyst from Goldman Sachs, but those are the key numbers to bear in mind. Now it's not just Barclays in the banking space that's taking the spotlight today. We've also got UniCredit's numbers. UniCredit confirming its outlook for the year after net profit came in above expectations on the back of a boost to its trading division, hitting 2.6 billion euros off the back of 6.1 in net revenue. Sylvia asked the CEO Andrea Orcel for his take on the quarter.
I think for us I would summarize it with: great performance, great prospects, and we're becoming more bullish. Great shareholder returns now and in the future. And as I continue to say, our people continue to strive to beat quarter after quarter and they've done that 19 times now. So yeah, it is a record third quarter, record nine months. We are on our way to our best year ever. We are very focused on beating all our KPIs both in net revenue, in cost, in capital. We have generated more capital than we thought we would generate.
But the underlying important point is that we're accelerating faster than what we thought we would accelerate when we built the three-year plan that we announced last earlier this year. So the underlying is doing better. We are reviewing our prospects. We think that we will be reviewing targets probably upwards with the year-end results. And for that reason, we're now considering to take a number of new investments to accelerate the performance of 2027, 2028 mostly and a little bit of 2026.
So your strategy at the moment is to perhaps pause investments and make sure that you're going to return enough capital to shareholders.
No, no, no, no. What I would say is continue to invest. I think what JFK said, you build your roof when the sun is shining. We have a roof as you can see, but I think we continue to reinforce the core performance of the bank given the record results and given that we are witnessing that all of our countries and all of our business are accelerating better than expected. We will be taking new investments and we're considering the magnitude of them and we will be taking the customer's investment into Q4 to further accelerate 2026, 2027 and 2028 for shareholders' remuneration and distribution. I think that as you will see in my presentation or in our presentation, if you look at what consensus expected from us in terms of distribution to shareholders post the stakes, our dividends are up.
Our share buybacks are slightly down, but together with dividend, the total distribution of these two is in line to before. But what we now have is 6.5 billion invested in two stakes that through consolidation are adding 1 billion more than we had in our numbers before to 2027, and that billion is growing and is growing at the same speed as us without consuming any capital. So you could say that the shareholder remuneration will remain top-tier if not best-in-class for the next three years.
Now when thinking about the guidance for next year, I was very interested in one key sentence in the report. You are confirming the levels at 10.5 billion euros when it comes to net profit guidance. But you are again highlighting excluding potential management actions indeed to benefit 2026, 2027. Can you give us a little bit more color in terms of what sort of activity, what sort of investments do you think would benefit the bank for 2026-27?
Oh, look, I think when we did the first, the third multi-year plan of phase two of our UniCredit Unlocked acceleration, there were two things that have changed. One, we had just launched an offer on BPM. And two, we were extrapolating or trying to map what could be the extent of our acceleration. Today, we don't have BPM anymore and our acceleration is faster. As our acceleration is faster, to give you an example, and I mentioned it before, Italy has worked on and we will give details further down the line on a new growth plan. That growth plan requires further investment in our network, in our people, more people, in our technology, in AI to propel the results further. The other countries are on the same level. So all the investments that we're going to make are going to be expensed towards a year that is a record year without affecting significantly the fact that it will be a record year. But in this way putting more gasoline to the growth rates trajectory of our earnings and our distribution, a little bit more in 2026 because most of his action will hit in 2027 and 2028, but we're working on having a 2026 that doesn't disappoint.
Sylvia also asked the UniCredit CEO about the lender's investment in Commerce Bank.
We have not given up. We are observing as an investor how much more value they can create and obviously we cheer for them because now we're tied. The more value they create, the more they propel one of my key engines in net revenue. So I want them to do more value. I think we were mischaracterized by some saying, ah, they don't want the price to go up. I want the price to go up, but I want it to go up on fundamentals at a valuation that is there at the moment. They were detached, but if those fundamentals catch up, and I sincerely hope they do, and the price continues to go up, music to our ears, we will make more money from it and we will drive further. At some point I hope people will realize that given the setup of a group as a full combination or as a greater partnership, we can generate a ton of value as we're generating for Alpha and with Alpha in Greece.
We will be getting out to Italy a little bit later in the show to Sylvia who conducted that interview with Andrea Orcel just a little while ago. But let's turn back to Barclays. We've got a little bit more detail now on what the UK bank has reported for the third quarter. So just to reiterate, the bank delivering a return on tangible equity of 10.6% for Q3 2025. They also announced a 500 million pound share buyback and in terms of guidance are on track to deliver against 2025 guidance and 2026 targets. In terms of the detail here by division, you're looking at UK income increasing 16% year-on-year. Barclays UK corporate bank income increasing 17%. In terms of the investment bank at Barclays, income increasing 8% growth across global markets and investment banking supported by continued growth in more stable income streams and this is a key part of how they are looking to adapt the business and move toward more durable, stable income streams. So it looks like decent progress there. In terms of the US consumer bank income at Barclays increased 19% there, so some good progress on that front. In terms of impairment charges, credit impairment charges were 0.6 billion pounds in the quarter. And in terms of operating expenses, we did see an uptick in operating expenses over the course of the quarter. 4.5 billion was the total, up 14% year-on-year and cost income ratio of 63%. That's up versus 61% in the same quarter last year. And finally, in terms of guidance for this year, we're now looking at a ROE of greater than 11%. Previously, the company had been targeting around 11%. So, it looks like they have upgraded their returns guidance for this year, greater than 11%. In terms of capital returns, Barclays is saying a progressive increase in total capital returns versus 2024 is the guide. In terms of group NI, and of course, this is key for the banking sector, excluding IB and head office, greater than 12.6 billion pounds, of which Barclays UK NI of greater than 7.6 billion pounds is targeted. And finally in terms of impairments, and this is certainly going to be an area of focus this earnings season given the concerns around credit quality in the US and whether we're going to see any spillover to the European banks on the impairment front. Barclays is guiding to the expectation of an LLR of 50 to 60 bps through the cycle. And finally, in terms of capital, we're looking at a core tier 1 ratio target range of 13 to 14% for this year. And they are on track for their 2026 targets. And again, just a reminder, we're going to speak a lot more about these Barclays numbers and what to expect for the other European banks when we've got Goldman Sachs, their banks analyst joining us a little bit later in the show. Now, on to the geopolitics, the macro, a little bit of movement on the US-China trade front. The highly anticipated talks between Donald Trump and his Chinese counterpart Xi Jinping may not materialize, the US president said yesterday, adding that if they did go ahead, he expected a good result for the US. Now, Trump had previously said a meeting would likely take place in about 2 weeks. So, yesterday perhaps managing expectations a little bit in case one of the two sides pulls out. Coming up on the show, falling flat, Dutch brewer Heineken cuts its outlook after flagging a challenging third quarter. We'll look at the numbers and what they tell us about the strength of the consumer. Plus, Tesla is scheduled to release earnings after the bell later today. We'll talk robo-taxis, AI ambitions, and much more on the show with Argin. And holding the look, annual UK inflation comes in at 3.8% again in September, below expectations. Don't miss our conversation with the UK's shadow financial secretary to the Treasury, Gareth Davies. That's coming up at 8:30 London time.
Let's get a quick check on your markets. And we kick it off over in Wall Street and take a look at the US close where it was a mixed picture. The Dow Jones actually reaching a fresh record high. This is after some strong corporate results from the likes of 3M and Coca-Cola. You can see the S&P 500 traded or closed out the session flat. The Nasdaq 100 though underperforming, down nearly two-tenths of a percent. US futures though are moving to the upside this morning. Let's flip up the board and take a look at the Asian session when we see it's mostly a down picture today. This is a different picture to what we saw yesterday. I want to focus in on the Nikkei now gaining a little bit more momentum, up some nearly three-tenths of a percent. This is despite the fact that trade data did miss estimates. There's a lot of focus on SA to catch new leadership. We also had SoftBank shares a touch softer today dragging on that index. But you see the Hang Seng nearly 1%. Let's flip up the board. I want to hone in on some of those precious metals. Gold, silver, and copper moving to the upside today. You can see spot gold up three-tenths of a percent, but this is after yesterday we saw gold retreating in a big way from those record highs. We saw gold actually posting, I believe, its biggest one-day selloff since 2020. But if you look at that yellow metal on a yearly basis, still up more than 50%. And finally, let's see how futures are shaping up over here in Europe. You can see for most of those major bourses looks like it's set to be a down day. CAC 40 down some half of a percent there. The outlier clearly here, FTSE futures up nearly three-tenths of a percent. Of course Juliana you broke that CPI data at the top of the hour coming in lower than expected, 3.8%, the expectation was 4%. So that's providing a bit more positive sentiment for stocks here in the UK.
Certainly the Bank of England will be breathing a sigh of relief this morning looking at those figures. Richa, thanks for the breakdown. Let's zoom in on Heineken. The company has lowered its full-year volume outlook and trimmed its adjusted earnings expectations after what CEO Dolph Vandenbrink labeled a challenging quarter. The Dutch brewer now expects full-year operating profit to come in at the lower end of its 4 to 8% range. Trevor Sterling joins us now, senior analyst for European Beverages at Bernstein. Trevor, great to have you with us again. Always a fruitful conversation. So these Heineken numbers, I don't think the market was expecting much from these numbers given my sense speaking to analysts and investors that the company had been talking fairly downbeat in the lead-up to today's print. How did the numbers compare to expectation in your view?
Yeah. No, I think you're absolutely right. The company had been very downbeat in the lead-up to this, talking at the conferences in the autumn about how challenging the quarter had been, particularly in Brazil, I guess the United States, Poland, all very very weak markets. They probably came in slightly better than expected because they had very strong growth on premium brands in Vietnam and that meant the revenue number was slightly better than expected. But you're also correct historically to say they've narrowed their guidance down to the bottom end of the 4 to 8% range, previous range. So yeah, a tough quarter for Heineken.
And in terms of the geographic mix, I mean, you mentioned that Vietnam has emerged as a bright spot. But for Heineken, in addition to Eastern Asia, they're also quite big in Latam, in parts of Europe, a little bit of Africa. Any sign of green shoots in any of their other markets?
