UniCredit, Italy’s biggest bank, is planning to raise €13bn, cut 14,000 jobs and and sell-off €17.7bn of bad loans to restore the bank to health and “achieve future long-term profitability”.
The bank plans to use €13bn rights issue – Italy’s biggest ever – to help finance the removal of the almost €18bn of bad loans from its balance sheet.
Unicredit said it has entered into two separate agreements, one with Fortress Investment Group and one with Pimco, to transfer two portfolios of non-performing loans to newly set-up and independent entities in which it will retain a minority position.
The bank’s restructuring plan, which will cost €12.2bn, is set to cut 14,000 jobs — equivalent to 11% of the bank’s workforce — and involves the closure of 944 of the bank 3,800 branches.
“We have developed a pragmatic plan based on conservative assumptions, with tangible and achievable targets, dependent on cost and risk management, levers which are firmly under our own control,” said Unicredit CEO Jean Pierre Mustier.
“All these actions will allow us to generate a return on tangible equity of above 9% in 2019 and allow for a cash dividend pay-out policy of between 20% to 50%,” he added.
Mustier aims to boost Unicredit’s common equity tier one ratio from 10.8% to 12.5% by 2019, well above its 10.5% regulatory minimum, on the back of the disposal of the bank’s holdings in Pekao and Pioneer and a 30% stake in Fineco, coupled with cost savings and organic capital generation.