• Sees 2022 increase to €400m with new terms
  • No longer expects an increase of up to 1 billion euros in 2023
  • Establishes New Interest Margin Forecast for 2022 with TLTRO

MILAN, October 31 (Reuters) – UniCredit (CRDI.MI) said he expected a contribution of 400 million euros ($396 million) from the European Central Bank’s longer-term funds this year under their new terms, when he no longer saw any upside potential next year.

The ECB has moved to stop banks from reserving a risk-free profit on these funds, known as targeted long-term refinancing operations (TLTROs), as it continues to raise interest rates.

Last week, it raised their cost in a bid to encourage early repayments.

Italy’s second-largest bank, which had released its third-quarter results a day before the ECB set new terms for the TLTRO, detailed their impact on its net interest income.

Taking into account the full-year increase of 400 million euros, UniCredit said it now expects net interest income of more than 9.7 billion euros in 2022. the bank exclude its Russian activities.

UniCredit last week forecast 2022 net interest income of more than 9.6 billion euros without taking into account TLTRO effects. This improved the previous forecast by around 9.2 billion euros to reflect higher official rates.

Net interest income, or margin, measures how much a bank earns on loans net of deposit fees.

UniCredit has €106.8 billion in TLTRO funds and analysts at Mediobanca Securities say it adopts the most conservative accounting methodology among eurozone banks for them, retroactively adjusting their contribution.

This accounting method led UniCredit to suffer a 313 million euro drop in its net interest margin in the third quarter.

For 2023, UniCredit sticks to a forecast of net interest income of at least €10.1 billion, which excludes any impact from the TLTRO.

UniCredit had said that depending on the ECB’s decision on the terms of the TLTRO, it could have reaped an additional profit of up to €1 billion from net interest income in 2023, a possibility that it no longer consider.

“There is no positive effect of the TLTRO on UniCredit’s financial results from 2023,” he said.

UniCredit maintained its forecast for 2023 for an annualized increase in net interest income of around 500 million euros for each percentage point increase in the ECB deposit rate.

UniCredit shares rose more than 2.6% at 1450 GMT, outperforming a 1.4 rise in the Italian banking index (.FTITLMS3010). ($1 = 1.0059 euros)

Editing by David Goodman and Jane Merriman

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