UniCredit to Cut 8,000 Jobs, Launch EUR2 Billion Buyback -- Update
By Giovanni Legorano and Pietro Lombardi
LONDON -- Italy's largest bank UniCredit SpA ruled out targeting
big acquisitions as it pledged to raise dividends and cut jobs and
costs under a four-year plan unveiled Tuesday.
The bank, Italy's biggest by assets, said it would focus on
growing organically amid a challenging economic environment, after
struggling to increase its share price in comparison to peers in
recent years, despite progress under Chief Executive Jean Pierre
UniCredit intends to cut roughly 8,000 jobs and close about 500
branches through 2023 as it targets gross savings of EUR1 billion
in Western Europe.
Its plan offers an insight into the headwinds facing Europe's
largest lenders, as low rates, stringent regulation and greater
competition from U.S. rivals dent their profits. Most of the
region's banks are downsizing, cost cutting or realigning their
businesses as a result.
UniCredit said it would return EUR8 billion ($8.9 billion) to
shareholders through 2023, including a share buyback of EUR2
billion. This corresponds to an increase of profit distribution to
shareholders of 40% in the next three years, rising to 50% in
The bank's shares rose 0.6% in early trading.
Mr. Mustier said the bank prefers to use capital in this way
instead of buying other European banks. Speculation has mounted in
recent months that UniCredit was eyeing a tie-up with troubled
German lender Commerzbank AG or France's Société Générale SA
UniCredit has never commented on specific potential mergers, but
Mr. Mustier has often cast doubt on the viability of European
cross-border banking tie-ups, citing regulatory hurdles and likely
additional capital needs.
Instead, the bank prefers to buy back some of its shares, he
"In short, no M&A and that's it," he told reporters, saying
the bank would only consider "small bolt-on acquisitions" mainly in
central and Eastern Europe.
UniCredit's new plan comes at a particularly challenging time
for Italian banks. While lenders have made considerable progress in
digesting the pile of bad loans accumulated during the financial
crisis, they are struggling to modernize their operations and make
their businesses leaner.
At the end of June, Italian banks owned EUR177 billion worth of
bad loans, or 8% of their total loans, compared with EUR350
billion, or 17% of total loans, at the end of 2016.
Their revenues are under pressure from ultralow negative rates.
The pressure to deploy liquidity induced by negative rates has
increased competition among banks to lend money. This in turn has
pushed down interest rates applied on new mortgages and company
Consulting firm Oliver Wyman estimated that average interest
rates charged on residential mortgages dropped to 1.69% in August,
from 2% on existing loans up to December last year. Interest rates
on company loans dropped by 80 basis points to 1.26% over the same
Lower rates on government bonds are also putting additional
pressure on banks' revenues.
Italian banks have tried in recent years to make more money
through fees and commissions on wealth and asset management, with
One of the few levers remaining is to cut costs. However,
Italian banks need to make large investments to improve the
digitization of their businesses and train their personnel. Oliver
Wyman estimates that almost half of Italian bank employees need to
be trained in new skills, as their business models change and the
use of new technology spreads.
UniCredit aims to increase its net profit to EUR5 billion for
2023, slightly higher than the EUR4.7 billion planned for this
Earnings per share is seen growing 12% a year, while revenue
should rise roughly 0.8% a year to EUR19.3 billion in 2023. Costs
are expected to decline 0.2% a year and reach EUR10.2 billion when
the plan ends.
The bank said it doesn't plan any more large asset sales after
it agreed over the weekend to cut its stake in Turkish bank Yapi ve
Kredi Bankasi AS to below 32% from roughly 41%, aiming to simplify
its shareholding structure and boost its capital.
Over the last three years, UniCredit has sold several other
assets, including Polish lender Bank Pekao SA and asset management
firm Pioneer Investments. More recently, it sold its stakes in
online lender FinecoBank SpA and in Mediobanca SpA.
Write to Giovanni Legorano at firstname.lastname@example.org and
Pietro Lombardi at Pietro.Lombardi@dowjones.com
(END) Dow Jones Newswires
December 03, 2019 08:01 ET (13:01 GMT)
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