MILAN - UniCredit on Tuesday posted better than expected 2024 earnings and said it aimed to keep profit stable this year despite declining rates, promising to increase shareholder rewards in 2025-2027.

The Italian bank forecast "a moderate decline" in its 2025 net interest margin, a measure of profit from the gap in lending and deposit rates, due to lower euro zone interest rates but also efforts to shrink its Russian business. 

UniCredit faces European Central Bank demands to speed up its exit from the country.

A "mid-single digit" increase in fees projected for 2025 would not be enough to offset the drag from lower rates, with revenues seen above 23 billion euros ($24 billion) versus 24.8 billion last year, it said.

After years of record profits fuelled by the ECB's rate hiking cycle, European lenders are looking for new profit drivers, and some have turned to mergers and acquisitions.

Under the leadership of CEO Andrea Orcel, an M&A veteran, UniCredit has embarked on an aggressive expansion strategy, building a 28% stake in Germany's Commerzbank and launching an all-share bid for smaller domestic peer Banco BPM .

Earlier this month, the bank announced it had taken a 4.1% stake in Generali. Italy's biggest insurer, an investment which also gives it influence in other takeover and boardroom battles unfolding in Italian finance.

UniCredit said it would pursue external growth options only "if they meet strict strategic and financial parameters".

Profit in the October-December period totalled 1.97 billion euros ($2.03 billion), above a 1.63 billion euro company-gathered consensus forecast, helped by a stronger than forecast net interest margin.

That compared with 2.8 billion euros a year ago, when the boost from tax credits linked to past losses was more than twice as big. ($1 = 0.9702 euros)

(Reporting by Valentina Za; Editing by Alvise Armellini and Kate Mayberry)