European banks are in vogue, as evidenced by the fact that their stock market performance will be better in 2025 than that of Wall Street’s so-called magnificent seven technology companies. The Italian Unicredit is no exception to the strength of financial institutions and has managed to revalue itself by 63% during the year, and is currently moving around 63 euros per share.
The Italian entity whose CEO is Andrea Orcel (frustrated candidate to lead Banco Santander) shows a clear diversification by country, focusing on Europe and its appetite is manifested by inflows into the capital of its competitors in the Old Continent.
On 30 October Unicredit received authorization from the ECB to acquire a direct stake in Alpha Bank up to 29.9%, from the current 9.8%, which will also open it to the Greek market, and is the owner of 26% of the shares of the German Commerzbank, although both the German government and the bank’s board of directors are opposed to the total purchase by Unicredit. His entry into the German bank’s capital was in fact seen as the attempt at a first cross-border merger, an operation that encountered enormous political obstacles and which gives an idea of the ambition of Unicredit’s CEO. Last July, the Italian entity backtracked and withdrew its bid to take over the entire Banco BPM, Italy’s third-largest financial group by assets.
Also part of Orcel’s strategy are the massive share buyback programs with which it has freed up excess capital in recent years and which have driven up its price.
Unicredit’s third quarter results released on October 22 pleased analysts. At Bank of America (Bofa), profits of 2,583 million this quarter stand out, which exceeded estimates. “It has excess capital of between 5,000 and 6,500 million euros, with approximately 8,000 million euros already accumulated for distribution. The ROTE (Profitability Ratio on Tangible Assets) reaches 20%, with earnings per share and dividend per share with double-digit growth.” Bofa analysts recommend purchasing the bank’s shares, indicating an indicative price of 80 euros per share.
Goldman Sachs also updated its estimates after the latest results presented and sees the Unicredit stock at 84.3 euros in a one-year horizon, and projects a PER of 11 times for next year. For Goldman, the bank’s forecast of a net profit of around 10.5 billion euros is feasible, “which should support its distribution target for the year of 9.5 billion euros (i.e. 4.75 billion euros in cash dividends and the other half in share repurchases). We expect a group net profit of around 10.6 billion euros by 2025,” they explain in their report. As downside risks they expose “additional capital pressures resulting from the cessation of operations in Russia, deteriorating macroeconomic conditions, mergers and acquisitions that dilute profitability, significantly lower-than-expected interest rates and a lower net interest margin.”
With the exception of the German Deutsche Bank, which sets the target price of Unicredit shares at 64 euros, buy recommendations are the majority. Mediobanca sees the stock at 80 euros, Santander at 72 euros and JP Morgan at 78 euros. A recent study by the British Barclays indicates a target price of 71.6 euros for Unicredit. “Shares are still cheap and profitability is high. Unicredit is trading with an estimated 2026 P/E of 8.5x and an estimated 2025 book price of 1.5x and offers an expected total return for 2026 of around 9% (distribution of €27 billion over the next 3 years),” they indicate. One of the growing assets will be the consolidation of its purchases. “From 2026 we expect lower (or no) volatility in the income statement and capital. In the 2027 scenario, the 29% stake in Commerzbank and 26% in Alpha should contribute 1 billion euros to Unicredit’s profits”, they conclude.
The strong increases in the banking sector in the last two years appear to continue, according to analysts who only fear a deterioration of the macroeconomic context and a downward path in interest rates.
Bank tax Meloni
Another of the unknowns that weighs on Unicredit and all Italian banks is the tax tightening that Prime Minister Giorgia Meloni applies to entities to cover the public deficit and that “the effort does not fall on the citizens”, as she herself says. This is a recurring fear that caused sharp declines in sector stocks last August. Some drops were motivated, as Bloomberg reports, because Rome was studying an extension of the rules that oblige banks and insurance companies to suspend the use of previous DTAs with an impact on the entire sector of approximately 1.5 billion euros. Tax credits that respond to past losses of financial institutions. In 2025 and 2026 the measure will allow a collection of 4 billion, but now the concern is focused on extending this suspension for another two years (2027 and 2028).
Stock market value similar to that of BBVA
Unicredit’s stock market value these days is around 98 billion euros, lower than Santander itself (128 billion) and equal to that of BBVA. Unicredit has 15 million European customers and employed 75,236 people at the end of 2024. Italy is the main base of its activities where it is the leader. In Germany it operates through the subsidiary HypoVereinsbank, is the leader in the Austrian banking sector in terms of assets and operates in the Czech Republic, Hungary, Slovakia and Slovenia. In Eastern Europe, with almost 4 million customers, it is the number one bank by assets, with a market share of more than 15% in many countries. In particular, they are leaders in Bosnia and Herzegovina and Croatia, second in Romania (including Alpha Bank Romania) and are among the top three in Bulgaria and Serbia.
