By Valentina Za

MILAN (Reuters) -UniCredit CEO Andrea Orcel on Tuesday pledged to keep this year's profit steady despite easing revenue, and said the Italian bank would decide whether to bid for Germany's Commerzbank only in three to five quarters.

An M&A veteran, Orcel last year set UniCredit onto an aggressive expansion path, buying 28% of Commerzbank and launching an all-share bid for smaller domestic rival Banco BPM.

Having met stiff opposition, Orcel has pinned his hopes on the new government Germany will elect this month.

"I'm optimistic that with constructive conversation, you get to a positive outcome," he said.

Meanwhile, he piled pressure on CEO Bettina Orlopp, who presents a new strategy on Thursday, saying Commerzbank had to provide details on its corporate centre, IT and data infrastructure, cost-cutting efforts and ability to hit targets.

To lift the value of UniCredit shares before using them as an acquisition currency, Orcel has returned shareholders 26 billion euros ($27 billion) in share buybacks and dividends between 2021 and 2024.

In the absence of deals, Orcel vowed to surpass in 2025-2026-2027 UniCredit's 9 billion euro payout for last year, when profit stripped of tax benefits reached 9.3 billion euros thanks to a still rising contribution from interest rates.

"Any M&A activity shall be executed solely if it further enhances our base case," he said. "This is a high bar: we are not afraid to walk away."

NO GENERALI ADVENTURE

UniCredit this month disclosed a 4.1% stake in Generali, Italy's biggest insurer, an investment which also gives Orcel influence in other takeover and boardroom battles unfolding in Italian finance.

Orcel said client-driven purchases had pushed UniCredit's Generali stake above 5%, but ruled out any strategic interest.

"We will not engage in adventures. We will engage in value creation, industrial projects and creating value for shareholders," he said.

Generali's top three shareholders are expected to face off in May over the choice of a new chief executive.

One of the three, Delfin, which is the holding company of late Ray-Ban tycoon Leonardo Del Vecchio, is evaluating whether to reduce its 2.7% UniCredit stake.

With UniCredit's share price up six-fold since Orcel's arrival in 2021, that would replenish its coffers at a time when it has stepped up its bets on Italian finance.

After years of record profits and investor payouts fuelled by higher European Central Bank interest rates, European lenders are looking for new profit drivers, and some have turned to M&A.

UniCredit said a projected increase in net fees this year will not fully offset the "moderate decline" expected in net interest margin.

This measure of profit from the gap between lending and deposit rates is compressing due to falling euro zone rates but also UniCredit's efforts to shrink its business in Russia to meet ECB demands.

By shrinking UniCredit's assets during the boon years, Orcel has accumulated 6.5 billion euros in cash in excess of targeted capital reserves, which he would return to shareholders in full without acquisitions.

Asked what would happen in the case of any deals, Orcel said UniCredit would keep its 2025 dividend per share stable even after issuing new stock to finance the BPM bid.

Given current market prices, analysts say a cash top-up is unavoidable, a possibility which Orcel has not ruled out.

As for Commerzbank, any bid would require another nine months to complete.

"That lands you in 2027. Most of our plan is going to be done without any impact from that," he said in reference to payout goals.

UniCredit shares fell 2% by 1419 GMT, underperforming the European sector, with traders saying investors were pocketing gains after last year's 50% rise.

($1 = 0.9684 euros)

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