The banking sector has not exactly covered itself in glory over recent years. It is also not noted as being a winner in a crisis. This was shown in 2008 in the Global Financial Crisis. It may be that analysts and investors looking at the Unicredit share price were bracing themselves for disaster in the wake of the COVID-19 pandemic.
But companies such as Unicredit have underlined that 2020 has so far not been as negative as some would have feared. The Unicredit share price has been protected by personal and retail debts being deferred, while volatile markets in the run up to and aftermath of the emergence of COVID-19 in March have boosted trading income.
Unicredit shares and a surge of liquidity
The need for companies to shore up their balance sheets, plus billions injected into the money markets from central banks, produced a surge in liquidity earlier this year. This ultra lax financial environment has meant that even previously struggling banks of which Unicredit shares have certainly been one, have flourished in relative terms.
Indeed, an earnings boost has been the main factor which has prevented Unicredit shares being split into separate sub holding companies, ostensibly to unlock shareholder value. The call the management of Unicredit has made is that conditions have improved, and will remain benign enough for long enough to allow a recovery to continue for the Unicredit share price.
Unicredit shares Q3 performance
This may prove to be a decent call to make given the Q3 performance. Considering that ahead of the news the market was expecting earnings to come in at €334m, versus the true number at €680m.
Such an overshoot in performance for Unicredit shares suggests we are in a new era for the bank, and that exceptional times could lead to an exceptionally good performance.
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€3bn in unlocked value for Unicredit Shares
This idea is underlined by the way Unicredit decided against a breakup of the company’s Italian and German assets to potentially release €3bn in value. Such a windfall could have delivered a notional 20% rise in share price.
But of course, if the company is confident about the fortunes of Unicredit shares to abandon the plan to unlock shareholder value, it could very well be that we are looking at an inflection point for the UCG share price.
UCG shares dividend hopes
What will be key for Unicredit shares over the rest of the year is what the prospects for a resumption of the dividend may be. This is in the hands of the European Central Bank, and clearly will depend on whether going into the winter it is confident that the worst is over in the financial markets.
If Unicredit shares are trading with a dividend again, it really would underline the turnaround that the pandemic will have inadvertently brought to a problematic fundamental situation.
How to trade shares with ATFX
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1. Register for an account or log in to your existing account
2. Open MT4 either on your desktop or mobile
3. Search for Unicredit shares in the market watch or symbols window
4. Choose your position size
5. Hit buy or sell, and then confirm the trade
Unicredit share price: daily chart analysis
Given the way that Q3 earnings were such a beat on expectations, it is perhaps disappointing that UCG shares have not surged to reflect the strong Q3 update. Perhaps this is due to uncertainty over the re-introduction of the dividend.
What will be interesting to see over the near term is whether the 50 day moving average now at €7.30, can be recovered on a weekly close basis? This is something which could deliver a sustained positive trend change for the bulls. Above €7.30 could lead to post June resistance at €9 by the turn of the year.
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