Unicredit (UCG) share price has been firing on all cylinders in the past few months. The stock surged by more than 85% in the past 12 months, beating the closely watched Invesco Bank Index (KBW), which is down by 5% in the same period. It has done better than other global banking groups like JPMorgan, Barclays, and Goldman Sachs.
Strong growth and executionUnicredit’s stock surge has coincided with the strong performance of Italian stocks. The FTSE MIB index, which tracks the biggest companies in Italy, has risen to a record high. Unlike the S&P 500 index, which has been propelled by the Magnificent 7, most companies in the blue-chip Italian index have been in the green.
Unicredit has done well, helped by the management’s strong execution in the past few years. This was evidenced by the company’s strong financial results. Its net profit jumped to €2.3 billion as its EPS soared by 54% YoY.
It has achieved all this while maintaining strong capital controls, as evidenced by its strong CET1 ratio of 17.2%. In contrast, companies like JPMorgan and Bank of America have a CET1 ratio of less than 14. Most notably, Unicredit achieved a Return on Tangible Equity (RoTE) of 23.8%.
Unicredit has achieved this while still rewarding its shareholders through dividends and share buybacks. It has a dividend yield of 3.8%, which is a few points above that of its key competitors. The company paid €113 million in dividends in the third quarter.
Unicredit, like other banks, has benefited from the actions of the European Central Bank (ECB), which hiked interest rates to a record high last year. In a statement on Monday, a senior executive at the ECB warned that it might not cut this year.
Higher interest rates have been a good thing for Unicredit as it has boosted its net interest income. In the most recent results, the company said that its NII jumped by 43.3% in the first nine months of the year to €10.9 billion. In Q3, the NII figure rose by 45% YoY. For the year, the company guided to a net profit of €7.2 billion.
Unicredit share price forecast
Unicredit stock has been a good investment for most investors as it has jumped from €11.4 in December 2022 to over €25 today. In this period, as expected, the shares have remained above the 50-day and 100-day Exponential Moving Averages (EMA), which is a positive sign.
However, a bearish pattern is emerging as the stock has formed a rising wedge pattern, which is typically a red flag. This wedge is nearing a confluence level. Therefore, there is a likelihood that the shares will have a bearish breakout later this year. If this happens, the stock will likely retest the support at €24.
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