(Bloomberg) -- UniCredit SpA improved its outlook and posted results that exceeded expectations, providing a boost to Chief Executive Officer Andrea Orcel as he pursues a potential takeover of rival Commerzbank AG.
Net income at the Italian lender increased to €2.51 billion ($2.7 billion) in the third quarter, according to a statement on Wednesday, beating the analyst estimate. Revenue rose too, defying the prediction of analysts that it would decline slightly.
Orcel lifted guidance for UniCredit’s full-year profit to more than €9 billion and vowed to keep it above that level through the next two years. The Milan, Italy-based lender said it will return more money to shareholders in 2025 and 2026 than this year.
Orcel unveiled a major stake in Commerzbank two months ago and said he’s considering an acquisition of the German lender, which would boost UniCredit’s existing operations in the country and add a substantial business in Poland. But Commerzbank CEO Bettina Orlopp has signaled skepticism over the benefits of a potential tie-up and the German government has come out against it too.
UniCredit “made a strategic investment in Commerzbank” during the third quarter that “may or may not eventually lead to a full combination,” Orcel said in the statement on Wednesday.
Commerzbank reported third-quarter earnings on Wednesday too, similarly beating analyst expectations and lifting guidance. Orlopp unveiled a fresh buyback after announcing one on Monday.
During the period, Orcel also spent money on an insurance joint venture and the Romanian unit of Greece-based Alpha Bank. UniCredit’s common equity tier 1 ratio, a key measure of financial strength, stood at 16.1% in the third quarter, down slightly on the previous three-months period.
Orcel has cut costs and shifted resources from less profitable businesses to more lucrative ones since taking office in early 2021. Boosted by soaring profitability on the back of higher interest rates, UniCredit has ratcheted up the amount of money it pays out to investors.
UniCredit reiterated a promise to return about the same amount of money to shareholders it paid last year, when it was €8.6 billion. The bank’s board on Tuesday approved an interim dividend of €1.44 billion. The lender also said it will raise the cash dividend payout ratio to 50% from 40% next year.
(Updates with Commerzbank earnings in sixth paragraph and more UniCredit earnings details from seventh paragraph)
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