Italian banking group UniCredit has unveiled plans to launch a €13bn rights issue and axe a further 6,500 jobs to bolster profitability.
The rights issue, which will take place in the first quarter of 2017, will be used to shed €17.7bn worth of gross bad loans from the bank’s balance sheet.
As part of this effort, the bank signed separate agreements with newly created firms controlled by Fortress Investment Group and PIMCO to transfer two portfolios of non-performing loans. UniCredit would retain a minority stake in the two companies.
The additional job cuts planned by UniCredit will take the bank’s net redundancies to 14,000 by 2019, and are expected to reduce personnel costs by €1.1bn.
The Italian lender also plans to reduce other operating costs by €600m, overall targeting €1.7bn in annual cost savings.
The bank also aims a common equity Tier 1 ratio of above 12.5% by 2019, and targets an annual net profit of €4.7bn that year.
UniCredit CEO Jean Pierre Mustier said: "We are taking decisive actions to deal with our NPE legacy issues to improve and support recurring future profitability to become one of Europe's most attractive banks. We are going to build on our existing competitive advantages such as our unique Western, Central and Eastern European network as well as boosting the benefit of our simple commercial banking model with a fully plugged in CIB, by transforming it further.
“And, we shall capture opportunities whilst keeping a tight rein on risk, execution and costs. All these actions will allow us to generate a return on tangible equity of above 9 per cent in 2019 and allow for a cash dividend pay-out policy of between 20 to 50 per cent.”
In July 2016, UniCredit launched a strategic review of the bank under CEO Mustier to boost capital. In the same month, the bank offloaded minority stakes in its Polish subsidiary Bank Pekao and its online bank FinecoBank as part of this strategy.
Early this month, UniCredit agreed to dispose a 32.8% stake in Bank Pekao to local insurance group PZU and a local development fund for PLN10.6bn ($2.6bn).