BUY opportunity on Unicredit.
As already stated in a previous analysis, everyone depends on the financial sector. We believe that the recovery of the economy will pass through it. More specifically, looking at the Italian banking sector, there are several reasons that lead us to consider it interesting.
First, the current price of Italian banks. Based on a fundamental analysis, we believe that the prices of Italian institutions are currently at a discount compared to those of European and American competitors. Italian banks have always been considered risky. This is due to the heavy weight of Italian debt on their balance sheets and the country associated risk. The purchases of government bonds that the ECB is carrying out in the face of the pandemic represent a great support and help to reduce the perceived risk.
Because of the financial system central role in the economic recovery, we believe in the creation of a European bad bank. The ECB is in fact developing guidelines for European governments that are considering "bad banks" to house lenders' toxic assets. This would satisfy not only the interest of Italy, but also countries such as Germany, which is getting close to accepting legislation that would help its banks to create individual bad banks. This evolution, which would allow banks to merge impaired debts, would certainly relieve the Italian system.
With the news of the merger between Intesa Sanpaolo and UBI, a phase of aggregation of banking institutions has begun. We believe that this trend will continue to develop not only at the national level, but also at the European level. Larger banks should be able to better support the financing needed for economic recovery and growth.
For all these aspects, from a medium-term perspective we see the Italian banking sector positively. We believe that among the Italian institutions, Unicredit represents good opportunities and therefore a BUY.