We start the final session of the day with Andrea Orcel, CEO of UniCredit. The session will be webcasted, please switch off your phones and avoid moving around during the session. Andrea, it's your fifth conference, thank you very much for your presence today. As you know, unfortunately, I'm restricted on all the other Italian banks, I already apologize if I will indulge with questions, but it's the only bank I can talk about. Starting from your plan, Unlimited. It's meant to combine profitable growth and distribution in the sector. The ambition is to outgrow peers on revenue growth and gain market share gains. With cost income approaching the low 30s and RoTE above 23%. Several peers have taken different routes recently versus their presented plans. Do you remain committed to Unlimited?
First of all, thank you, we are thinking about moving on Mediobanca, he's restricted at us as well. Yeah. I think if we put all the noise aside, which is what we get every day we wake up lately, the core for UniCredit remains our plan. It was the core for the last five years. It is the core today. In the last five years, the team was able to deliver about 6 x net income versus when we started. Total shareholder return, which Andrea reminded me, we're only beated globally by NVIDIA, we don't produce microchips. We're 2 x the number two in the sector. This team has really a focus, which is to win, to generate value for investors, and every action that we take is inspired by this. With Unlimited, it was our way to say, "No, we're not done.
We've Unlocked." In the next five years, we want to do something that has not been done before, a little bit transcend all the variables and the limitation that we're all used to talk about in terms of cost income, profitability, growth, and demonstrate that if a team is united, we can deliver. For that reason, we have a target that Andrea was talking about. I think the two most important pieces in financial terms are, one, that we're committed to grow in every market where we are at a level above the market to secure market share gains. For Italy, that used to mean one percentage point of market share in the targeted segments in three years, and I think we're going to upgrade that.
The second thing is to continue to transform our operating machine, what we call our operating machine, which is basically the entire organization which the commercial effort sits on to make it so efficient to allow not only efficiency, but speed and ability to respond that would put us in five years on par with fintech and hyperscalers and allow us to compete and win in there. The ambition is not only to perform and deliver the results that you have, but the ambition is to create a bank that is able, as a legacy bank, to compete and win not only across other banks, but also fintech and our hyperscalers. That's the core. If you look at what that means in numbers, that means that our net profit should grow 7% per annum over the next five years.
Actually, if you take the underlying, excluding the compression of Russia and the one-off in 2025, we're talking 10% compounded growth rate on the underlying, which shows that the core business is really thriving. Do that without compromising margins, but actually completely defending margins and bringing the return on tangible to 23% or above. If you look at the first quarter, it's clearly in that direction, and it's not financial, but it means that we have all the levers, all the actions, and most importantly, the team completely zoomed in and focused to deliver that. I think you have seen it in Q1, and I will bet you will see it again in the next few quarters.
Thank you. Sounds like your comment on accelerating the market share gains are giving good hints on the delivery and execution of the plan. Do you want to update us on where you see that versus expectations? Especially, can you give us an idea of how the geopolitical turmoil and AI could affect your initial plan?
I think at UniCredit, we have always tried, within reason, obviously, to provide plan and execute plans that we think we can deliver in any macro environment. If you think about it, we announced Unlocked, and two months later, we got the invasion of Ukraine, which meant we went from negative rates and a plan based on fees and commission to very positive rates and a compression of the fees and commission trajectory. We went from a plan where we had zero inflation to a plan where we had inflation. Notwithstanding that, the plan adapted and delivered. If you look at Unlimited, we announced Unlimited, and just to be true to ourselves, I think it was two days later, people started to panic on AI. About three months later, we got in sequence, Venezuela and Iran.
A plan that was predicated on rates at 1.5, was predicated on inflation well below 2%, is now on rates that probably will go to 2.5, and inflation that will be well over that. We have on Q1 upgraded 2026. That, to be fair, 2026 is not going to be affected very much by these changes, but we have also maintained 2027 and 2028 unchanged because what we're seeing in the business is an adjustment from one component of core revenue to the other, i.e., from fees and commission, which may grow slightly less, but NII, which will grow slightly more. Let's remember, we're a commercial bank, so 65% of our P&L is that. Because we think that NII will grow more with, relatively speaking, less volume, is very capital accretive for us.
The core revenue part is performing very well. We have more challenges on the cost part because we committed to a minus 1% per annum over five years. We also got help from AI, and we think we can accelerate our transformation, and we are ahead of our plan on technology, but also on cost. We are adjusting in different ways, but the outcome remains the same. What remains a little bit of question mark, the acceleration on the cost of risk, but we have been very adamant that we needed overlay. We are saying to some that we should have overlays. Those overlays now are coming very handy as any deviation. We have EUR 1.7 billion, which is about two full year of cost of risk to keep the cost of risk well within the 15 to 20 basis points.
That translated means we will continue to deliver in this environment, and unless there is really a further very material degeneration of the environment, we are committed to delivering on the numbers.
Thank you. Sorry, quick follow-up because of your hint. Are you seeing any deterioration as a quality anywhere in the geography?
No, we didn't. Actually, in Q1, our indicators on asset quality improved. I think most people who have done banking for a long time keep on saying, "How is that possible?" They continue to improve. We have, just to be clear, less than 5% of our lending portfolio exposed to energy-intensive private credit. Actually, private credit is 0.1% or less. The portfolio is well-diversified, it is well-covered, and at the moment, we are continuing to see a decline in indicators. For example, I'm sure you have already started doing that, if you apply standard models to the calculation of provisions, the deceleration of growth in Europe due to Hormuz and other things, the increase in inflation means you will mechanically be obliged to improve your provision or increase your provisions. In our case, we will use overlays to compensate that and keep on the trend line.
People who do not have overlays are going to deviate.
That's IFRS 9 in Q2 update.
Exactly.
Okay. I'm running out of courtesy questions. I'm going to move on to M&A, if you don't mind. I'll start with Commerzbank. There is a lot of noise in the market on Commerzbank. Try to leaving it on the side and discussing substance. Can you tell us why UniCredit Commerzbank makes sense as a combination?
Yes, I think we have all been exposed to a very loud and consistent amount of noise. I would add that most of it, if you dig on the facts, completely unsubstantiated, which has diverted from the merit of the transaction. I think on the transaction, I would start with the following. This is a transaction that has been reviewed, considered, analyzed, use the word you want to use because it wasn't done before, several times. When I say several times, it's more than five, certainly, because I was involved in five over the last 20 years. Sometimes it was originated by HVB, sometimes it was originated by Commerzbank. The historic is such because it's one of the best transaction that can be done in Europe. Why is it?
You bring two extremely complementary franchises in Germany together in a very fragmented market that is Germany. We've heard about limitation of choice and other things. The two banks together will have the astonishing market share of 8.5% in Germany. Okay? How does that limit choice? The two banks together will have, we estimate, a market share in the Mittelstand 13%-14%. There is none of that, but there is more critical mass. The other thing that people do not realize is if you take HVB and Commerzbank in Germany, you will see that HVB is very strong in the southern part of Germany. Some people would say the one that looks closer to Italy. Commerzbank is more in the middle front, and we're both fighting in the north. Geographically, very complementary.
If you take client segments, we're very strong in Middle and upper Mittelstand and large corporate. They are very strong in lower Mittelstand and micro businesses, plus a little bit of large corporate. On the retail side, they're in mass, we're in affluent and private. There is very limited client franchise overlaps, which is why there are no dis-synergies. Actually, if anything, there are a lot of synergies on revenues, which we haven't articulated in full because until recently, people like Andrea would say, "Well, the revenue synergies, put them aside, tell me about cost." There are. That is what it is. Germany, if you take the country, it is the country in Europe that has the lowest customer satisfaction. 27% of Germans think banks do not fulfill their duty of service. It is because we're so fragmented.
It is the market that is the most attacked by fintech. It is the market that is the most attacked by American banks, who have the largest market share increases on large and upper mid cap. Putting together the two allows us to have a critical mass to push back and to regain the share that we have lost. For that reason, in Germany, it makes a ton of sense. Outside of Germany, Poland is something that unfortunately, given our own issues, we had to dispose of, but is a centerpiece for Central and Eastern Europe. We recall all the flows that we used to secure between Poland and Germany, Austria, Czech Republic, Italy, and the rest of CEE. Gaining Poland back for us is very important on the franchise and balances the lesser growth of Germany with a higher growth of Poland and CEE.
In that market, the bank is run extremely well. We can contribute with a significant step up in investment in technology because we think they have been constrained, and by giving them our product factories and the flows that we have. These things make the transaction very complementary, additive of value, and then we get to the value point. The value point is, we have given a breakup of the value that we can create between what we can do with control but no merger, and what we can do with merger. The reason to do that is nobody takes a foregone conclusion that it's all or nothing.
In the part that is running the bank as we would run any other bank in UniCredit, and in particular HVB, we have put forward our views, and I want to underline on that because it seems that our views were, again, not taken very well. We have resisted 18 months on providing a business plan to Commerzbank because we knew that when we provided the view, we would have an emotional reaction. We launched an offer on the March 16th. We were told to pound sand on the April 7th after two meetings. You can go and look at what they said. On the 20th, well before the Q1 result, we put forward our reviews on Unlocked. This was to provide an opportunity to embed them on their plan or to discuss with us. When they reported their numbers on Q4, they didn't do that.
If we now compare Momentum to 2028, post-adjustment and Unlocked, we think we can add and Unlocked demonstrated at least 10% more net profit by 2028 than they have in their updated Momentum. If I update my Unlocked on their update, it will be more than 10%. If you go beyond to 2030, same thing. From a value creation standpoint, there is much more than keeping it separate, and therefore, in our opinion, for shareholders, it is a good opportunity for Poland and Germany, good opportunity for client, good opportunity when we get to employees. I do think that if you were to run a survey of how the employees of UniCredit view their involvement in the strategy, their involvement day to day, the way they are treated, the way their contribution is done, versus I take any bank in Europe, we would rank up there.
For employees, I don't think that this will be or would be a negative thing. It could probably give them more potential than they have at the moment.
Thank you. Just to complete the picture, the Commerzbank management provided a series of arguments spanning from valuation to other aspects. What are your views?
Yeah. Well, I would say noise. I would remind everybody that because of how Germany takeover law works, we have two more weeks to make everybody to make up their mind. I would raise the following. Valuational premium. We would say that Commerzbank already embed a 20 %+ premium. Why would we say that? Very simply because the day after we announced we had more than 5% in Commerzbank, their share price went up 17% to 20% for no other reason than we were there and never retrenched. Second reason, because although that I understand is emotional. While Momentum has delivered to some way, if you look at the net profit growth in Q1, Q2, Q3, Q4, overall 2025, and Q1 2026 of Commerzbank, they underperformed in gross the index and UniCredit.
There is no reason why they're outperforming share price beyond the fact that we're there. They would say the opposite, "We need a 15% premium or we're undervalued." Okay. Let's keep the argument aside and let's see. If we make an offer for X and the share price of the target is completely correlated with a correlation that you can calculate, bar a up to 5% premium or now 2% discount to the share price of the bidder for six weeks and never deviates to 10%, 15% premium, it means that shareholders are not considering that on a differential between our shares and their shares, there is a premium to be paid. That is also substantiated on the degree of tenders that we have had.
By way to be clear, according to our information or data, all institutional investors bar passive, because passive cannot sell, there are only five that has not tendered. All the other have either tendered or sold, which fundamentally indicates that people think that this price is opportune. Otherwise, they wouldn't have done that. The last degree of things that we would say is on the day when Commerzbank reported their results, Q1 plus Momentum upgrade, their share price declined 4% and stopped at the put option price of the bid. From our standpoint, what we're offering is fair. For the facts, and we will see where we are at the end of the offer, this share price is fair. Let's go back at the beginning. We never launched this offer to go to control. Now we are in a situation where we might.
We offered this offer to break the impasse and engage so that we could have a joint plan. We failed on that, both sides. Secondly, where we would go over 30. That was a much greater success than we all expected. That's where we are.
You just lead me to the next question, which is, the last update you gave, you are at 42.5. What are the next steps from here? What establishes control? Do you expect to be there and be able to execute on the plan? If you do not reach control, what are you going to do?
As a reminder, we have now a little bit less than two weeks. Effectively we have until the July 3rd. The results will come out, I think, on the J uly 8th, 8th, July 9th. Germany has this structure which is not the same as Italy. You have a first period, which is the core period that's passed. To be very clear, even if we wanted to and we don't, there is no way we can improve, change the terms of a deal. The terms of a deal are the terms of a deal. I hear that people expect a bump. I think they probably missed what German law requires. We are there. We have those two weeks. We will see where we are at the end of the two weeks. That's the first block.
The second block is in Germany, control is determined by 50 +1 share at the AGM on a structural basis. If you take the last AGM, we would have control because they voted 42%. Even if those entire 42% vote against us, which is unlikely, and that none of the share standard are part of that 42%, we would still be slightly over. We will not know the answer to this question until it's over and we know our percentage and what's out there that votes to the AGM. That's the thing. Where we will end, we will know when we end.
At the beginning, it was unlikely we would go to control. Now it's more likely that we go to control. We will know at the end, and I won't speculate. If we go to control, what does it mean control? By the sheer determination of control, it means we get 50 +1 share of the AGM, and it also means we can name the entire supervisory board representative of the shareholders, not the workers' council. With that, we can also make sure that the management team executes on lock. The answer is, if we get to control, we have the ability to do so. Again, this is not because it has been mischaracterized a threat or a lack of constructiveness vis-à-vis other stakeholder. It just I am stating what German laws allows us to do.
While we want to be constructive, we're also going to end up having put something like EUR 15 billion or EUR 20 billion in this bank, and we owe it to our shareholders to execute and bring Unlocked done as fast and as decisively as possible. We will do that. This is if we had control. Now, just an aside, because again, Germany is different from Italy. In Germany, you first tender or you first offer, and then you get the authorizations.
In Italy, you get the authorization and then you offer. Because of that reason, we will have something that will be between, I would say now, given what we know, three and six months after the July 9th. To get sign off from ECB, sign off from antitrust in Brussels, sign off from other regulators such as the Polish regulator, French, American, and others. Until then, we will not have control because the shares formally are not ours. We will still have up to 30%, but we will not have the rest. This, to be clear. If we do not get control, we will just have a repeat of what we have today, i.e., instead of consolidating by equity 26%, we will consolidate, let's call it 42.5%, and we will sit.
We are, as we said the first day, 100% hedged because we don't want the downside given the prices, but we're open to the upside, and we will wait, and we will see what happens in the future. Another thing to be very clear for those of you who are thinking about tendering. If you tender, and in the next 12 months, we were to engage in any transaction that is not in the open market at a higher price, we would need to make whole every single investor that has tendered the shares of the new price. The only possibility of us to buy shares without making anybody's whole, if we buy them over, is if we buy them in the open market and not bilaterally. That means that, for us, we don't see really a negative of tendering, but obviously we would say that.
That's where we are. If you ask my view at the moment, it is a lot more probable that we end up with what the ECB would call control, but not.
I'll take one notch further up the pressure cooker, moving to Italy. In Italy, you are the most profitable bank, despite, that's my judgment, not having the best regional franchise. You're gaining market share organically, as you said before, some of your competitors are changing the competitive landscape. How does this affect your thinking and your positioning? Related to that, it's been over a year that we've been waiting for Danish Compromise approval. Where are we at?
Let's start with the last one, because the last one is easiest. We understand from our regulator that we will get the outcome of the Danish Compromise in the third quarter, probably in the first half of the third quarter, two other banks are expecting the same sign-off, and we'll probably all get more or less at the same time. That's the expectation. We do not see any reason why we shouldn't be getting that, we haven't gotten the formal answer yet. The second thing is I would make two clarifications, which I think are very important. Firstly, too many people continue to look at UniCredit as an Italian bank. We are, we're not. We're extremely proud of our roots, we're extremely proud of our history, 55%-60% of the bank is not in Italy. Why is that important?
Because the way we look at it as people of UniCredit is we compete on a pan-European level. Yes, we want to be top three in every country. Yes, we want to be the most profitable in every country. Yes, we take opportunities in every country. There is an obsession, and actually it could be counterproductive for us to be too big in one country. While if you are a bank focused on one country, you go for domination to that country. Very different franchises. When you put in question what we're doing, we're doing it because we look at pan-Europe. We don't look at Italy or Germany or whatever. That's the first question. The second question I think to take into consideration is many people have different objectives. UniCredit has one. We want to create more value than everybody else, I think people forget that.
We want to create more value than anybody else. We win, not if we are the biggest. We win, not if we are the most powerful. We win if structurally we can create more value than anybody else. This is what motivates every person that comes to work in the morning at UniCredit. That means that in the context that you have highlighted on Italy, we have a franchise that has critical mass. We're about 10% market share. In premium products, which for us are consumer savings, insurance, micro-businesses, hedges, et cetera, we're well above 15%. That's where we make most of the money. That's why we are profitable. We have growth opportunity above and beyond anybody who is in the market.
Those growth opportunities, in our opinion, and I know everybody says that, but actually it does happen, are going to be accelerated by the current noise and actions, in terms of mergers, acquisition, countermoves, et cetera. As people are busy with that, and as our plan is laser-focused on growth, we can accelerate the gains of market share. This is the status quo for us, and we see an opportunity to upgrade further the plan in Italy in terms of how much market share gain we can do, potentially we can take two or three points in three or four years. That's half any medium-sized bank post antitrust disposals, and we can do that without spending a penny. This is where we stand at the moment.
I also understand in life there are emotion, history, pressures, and everything else, and Italy is critical to us, so at the right condition, if there is an opportunity in this, we will look. At the moment, we're just an observer, and for the first time, we enjoy very much being an observer and not an actor. It's actually quite entertaining. For us, it's looking at that and seeing where it goes at the moment. I would say another thing, which Andrea will tell me that he always called me a pharmacist. He's right, by the way, because I look too much at numbers and not too much at other things.
If we look at all the rumors that there are, I'm sure that many of you have not missed the point that most of those rumors trade a 30%-35% premium on us on valuation. They also trade 30%-35% premium on Intesa valuation. Whatever you move in there, you need to be confident to be able to generate for our shareholders value by matching that valuation differential, which is only due to speculation, plus, and we struggle. Therefore, for us at the moment, we observe, we see what is going to come up. If there is an opportunity, like always, we will move, but at the moment, we don't see one.
Thank you. We're going very well with time.
I promise.
The room is packed. I will only take time for one more question and then leave it to the floor. I have to end with the digital euro.
I think everybody can go and get a coffee.
Stablecoins, because you recently entered the stablecoin world alongside many other European banks. What is your assessment of the impact of new payment channels, digital euro and stablecoins, for your positioning with clients? How do you see the adoption of new technologies, including AI, impacting the cost income of your business, which you've already set at very low 30s?
I would say I'll start with the second one because I think it's more important. AI, there is now this emotionality or phobia on AI. I do think of the way we look at it is AI is something that allows you to do what we want to do, which is push the boundaries, redefine what is possible because you have AI. What would take you X amount of time and X amount of people, now you can do on no time and with no people. I wouldn't say it's a tool, but it's something that accelerates change. AI alone is not the answer. You need to want to change, identify what you need to change, have the courage of making the change, and then AI makes you address.
I think for UniCredit, we think we start from a point of strength because the whole culture of the last five years has been, how do I not take these things as impossible, and do I change them? This is now very much ingrained and cascading the organization. You take AI on that, and we can multiply the effect, both on the efficiency side, because there are a number of processes, everybody talks about them, I won't repeat them, but with AI can be made a lot more efficient, a lot faster, a lot more responsive. We are quite advanced now in embedding that adoption to do that. The other thing is, as you look to the client franchise, you can improve the client experience, client journey, productivity of people by using AI.
If you came to visit buddybank in our centers, you would see young people answering the phone, and on every row of people, there would be one or two specialists of AI because they are constantly interacting between chatbots and AI solution to voice and vice versa. By seeing what works and what doesn't, they iterate and they change the way we respond to call or we respond to an app or whatever it is. Because of that, AI is viewed internally as a means to accelerate the transformation to go beyond what we had before. We have more inflation, but we have more capability to adapt. I also don't agree with this AI will kill all the banks, in my opinion, the banks that will change will gain market share. The banks that will not, will be left behind.
In my opinion, it's a further opportunity to differentiate and to go forward. I also think that if you take the fintechs are already very good on client experience, client journey, and all of the above. They have a good operating machine. They don't have primary clients. We have primary clients. Our operating machine is not very good. We need better client journey. AI is helping us more than it's helping them because they already have that. We don't. In the convergence, it's helping us. We think that we need to take the ball, run with it, and accelerate the change. That's why we're accelerating the rate of investment. In true UniCredit fashion, there is not one project which is very granular all the way down, but is approved unless there is a business case.
We're not going to give Copilot, Gemini, or Claude to everybody. We give it to whoever demonstrate they can use it to improve something. We see a lot of progress in that, we are quite positive on it. If you look at the other part of the coin, because we look at them actually together now, jokes aside, digital asset. Internally, AI and digital asset are called AIDA. AIDA, AI is the efficiency of a machine and everything. Digital asset is, if you look at it, what they will do is they will change the way we interact with clients.
For example, today in our strategy where we focus on SMEs and the smaller ones, very difficult to do a bond of EUR 20 million or of EUR 10 million.
Nobody's going to take them. If I'm on DLT, I can. Actually, the first pilots in Italy were done by UniCredit. What does that mean? That as that flourishes and develops, we will be able to plug our factories into a much more granular environment because you go from bonds to mortgages, to asset management, to hedges that we will be able to push down to much more micro level that we wouldn't be able to do without DLT.
By the way, if you look at fintechs, they may have the technology, they don't have the products. We have the products. That for us is very important. If you believe in that, not only do you invest in trying to improve the take-up of tokenized bonds and other assets, but you also need to have a mean of settlement. Mean of settlement, stablecoin. Europe does not have stablecoin in euros, as shocking as it appears. Today, if you want to use a stablecoin in Europe, good luck, it's in US dollars. We were one of the founding member of Qivalis.
Because by September, we will start rolling out stablecoins. Why is that important? Because in order to settle mini bonds and other things, you need stablecoin in the DLT to do it. That's another building blocks. Does that collide with the digital euro or as people now talk, the tokenized deposit? No, it doesn't. It's alternative. By the way, tokenized deposit is fantastic and may be the point of arrival, but until it's exchangeable between banks.
it's blocked. You need the infrastructure. While the stablecoin is a stablecoin, and then unwinds in euros on the one side and on the other. That's why we went from what is available today. With a digital euro, which is more targeted to retail, I think there will be impact. I think you raised them, so I'm not going to repeat them. We are preparing to see how we absorb a shock because there will be a disintermediation effect, but some positive effects. Hopefully, the infrastructure gets us there and that's fine. For us is, if you look at direction of travel, we say in five years, the rules of engagement in banking will be different. Fintech, hyperscalers, legacy bank, et cetera, are all competing together in a means you can't say, "Oh well, that's a fintech. They do it differently." We all compete.
How do we get there and are among the winners? We need to be the most efficient to compete with fintech. We need to improve the client journey and the client service to compete. We need to transform ABC, and we need to create competitive advantage through digital assets and other things where it's more difficult for fintechs to chase us. That's what we're doing with Unlimited in core of what is the direction of travel.
Fantastic. Let's see if there is at least one question from the audience.
Andrea Filtri said he will never write about the digital euro again if we have one question.
Fair. I'll take that. You see?
You cut it off early.
There's no question.
All right.
Sorry.
Thank you very much, everybody.