UPDATE 5-UniCredit to boost investor returns after results beat expectations

Valentina Za

* Posts 835 mln euro quarterly loss vs 1.1 bln euro forecast

* Revenue beats expectations despite lending weakness

* Bank has undergone major restructuring under new boss

* Shares jump 9% (Adds comment from press conference)

MILAN, Feb 6 (Reuters) - UniCredit has met its full-year goals and aims to boost investor returns, it said after better than expected quarterly results and as its turnaround nears completion.

Italy's biggest bank has undergone a major restructuring in the past three years under French boss Jean Pierre Mustier, who has cut costs, dumped bad debts and sold assets, shrinking UniCredit's international presence.

His latest step was a decision in November to pull out of a joint venture in Turkey, which led UniCredit to place on the market 12% of local bank Yapi Kredi.

After failing to clinch a cross-border merger, Mustier is now focusing on improving shareholder returns through dividends and share buybacks in an attempt to lift the shares, which trade well below UniCredit's book value.

"We prefer share buybacks over M&A any day of the week ... There will no M&A for the duration of our plan," Mustier told analysts.

The bank said it would consider returning 50% of its 2020 underlying profit to investors, reaching a capital distribution threshold it had set for 2023 under a plan unveiled in December.

Mustier said this was possible after the head of the European Central Bank's supervisory arm, Andrea Enria, had clarified that a new capital rule would take effect in 2021 rather than 2023, welcoming greater transparency on regulatory changes under Enria.

UniCredit, the shares of which climbed 9% on Thursday, will also consider extraordinary investor remuneration after 2020.

Mustier arrived at UniCredit in mid-2016 to address persistent concerns about its capital weakness. He raised 13 billion euros in cash from investors and roughly as much from asset sales.


Pro-forma core capital totalled 13.1% of assets in December, up from three months earlier, leaving an ample buffer for shareholder compensation.

"Management demonstrated a strong track record in executing restructuring," Citi analysts said.

UniCredit also confirmed its 2020 targets.

After halving its original stake in Yapi to 20% with Wednesday's placement, UniCredit said it would keep it unchanged for 2020 and book a negative 0.8 billion euro impact from the transaction in the first quarter.

The bank's 2023 profit forecast does not include any contribution from Yapi, Mustier said.

The initial reduction of the Yapi stake, together with writedowns of software and other intangible assets, led UniCredit to book 1.2 billion euros in one-off costs in the October-December period.

The bank also brought forward 1 billion euros in planned loan writedowns, leading to a quarterly loss of 835 million euros.

Analysts polled by the bank had expected a 1.1 billion euro loss on revenue of 4.65 billion euros.

Revenue came in at 4.9 billion euros, up 3.4% year on year despite a 7% drop in net interest income, which was more than offset by higher fees and income from trading.

Adjusted for one-off items, full-year net profit hit the bank's target of 4.7 billion euros.

(Reporting by Valentina Za Editing by Edmund Blair and David Goodman)