UniCredit plans US$13.8b stock sale to bolster capital

[MILAN] UniCredit SpA, Italy's biggest bank, plans to raise 13 billion euros (S$19.6 billion) in a rights offer, sell off bad loans and slash costs in its deepest overhaul to boost capital levels and profitability.

The bank is targeting 4.7 billion euros of net profit in 2019 with a return on tangible equity above 9 percent, the Milan-based company said in a statement on Tuesday. As part of the three-year strategy, the bank plans to shed an additional 6,500 jobs as it aims for 1.7 billion euros of cost savings.

UniCredit Chief Executive Officer Jean Pierre Mustier, a 55-year-old Frenchman, in July took the helm of a lender burdened by a mounting pile of bad loans, record-low interest rates and Italy's longest recession since World War II. The bank had the slimmest capital buffer among those deemed important to the financial system in the latest European stress tests.

UniCredit has struggled to build up capital, a task compounded by the bank's complex structure after US$60 billion of acquisitions it made in the past decade under previous management. To simplify the bank and boost buffers, Mr Mustier is disposing of assets including the Pioneer Investments fund management business and its Polish unit, Bank Pekao SA.

UniCredit shares have lost about half of their value this year, closing at 2.424 euros in Milan on Monday, valuing the bank at 15 billion euros.

BLOOMBERG