UniCredit to Cut 14,000 Jobs and Raise Nearly $14 Billion in Overhaul

UniCredit to Cut 14,000 Jobs and Raise Nearly $14 Billion in Overhaul

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The UniCredit Tower in Milan. Italy’s largest bank by assets plans to raise $14 billion and cut nearly a tenth its work force.

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Giuseppe Cacace/Agence France-Presse — Getty Images

LONDON — UniCredit, Italy’s largest bank by assets, said on Tuesday that it planned to cut 14,000 jobs over the next three years and that it would seek to raise nearly $14 billion, part of a strategic overhaul that comes at a crucial time for the country’s troubled banking sector.

The latest reshaping of UniCredit under Jean-Pierre Mustier, who became chief executive in July, will be closely watched for what it says about the willingness of investors to help troubled banks in Italy, where lenders have an estimated 360 billion euros, or $380 billion, in problem loans.

After Italians voted this month against changes to the Constitution, prompting Prime Minister Matteo Renzi’s resignation, there are fears that political instability could deter investors who are needed to provide capital and to help Italian banks dispose of bad debt.

Banks can sell packages of delinquent loans at a discount to get them off their books, but only if private equity companies and other investors are willing to buy.

The plan unveiled by UniCredit would address those problems by raising €13 billion and cutting nearly a tenth of the lender’s work force. The new capital would help the bank absorb the cost of a plan, also announced on Tuesday, to sell €17.7 billion in problem loans to investors.

“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,” Mr. Mustier said in a news release.

The lender said it would cut an additional 6,500 positions, bringing total job reductions to 14,000 by 2019. That would result in lowering personnel costs by an estimated €1.1 billion. As of Sept. 30, UniCredit had more than 142,00 employees, including the joint venture it operates with the Turkish company Koc Financial Group.

Over all, UniCredit said it expected to cut costs by €1.7 billion annually, resulting in a cost base of €10.6 billion in 2019. A majority of those reductions would happen in the next two years, the bank said.

UniCredit said that it planned to move €17.7 billion in gross bad loans off its books through securitization. In the fourth quarter, the lender said that it would take charges of €12.2 billion as part of its efforts to clean up its balance sheet, including €8.1 billion in loan-loss provisions.

The restructuring and capital plan was unveiled just before the lender’s capital markets day for analysts and investors in London on Tuesday. Shareholders are expected to vote on Jan. 12 on whether to approve the plan to raise capital.

Contrary to expectations, shares of Italian banks including UniCredit have risen since Dec. 4, the day of the referendum on the constitutional overhaul, intended to streamline government decision-making.

But the share gains are not necessarily a sign of confidence in the banks. Some investors may be speculating that fear of political populism in Italy will prompt the European Commission and the European Central Bank to support a bank rescue with public funds.

Analysts warn that investor good will toward Italian banks could evaporate quickly.

“We have seen during 2016 how fast markets can revise their views, sometimes for no clear reason,” analysts at Deutsche Bank said in a report last week on the Italian banking sector.

The Italian news media has speculated that the government would contribute €15 billion to €20 billion in guarantees to encourage private sector investors to provide banks with new capital. But using government money for a rescue is complicated because of European Union rules intended to prevent taxpayers from bearing the burden of mistakes by bank executives.

A rescue would be simpler if Italy were allowed to support the banks without invoking rules that would impose some of the burden on middle-class investors. Many Italians own bank bonds. If they have to share the pain, the backlash could play into the hands of populist parties and result in even more political instability.

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