UniCredit SpA, Italy's biggest bank, plans to cut 9,000 jobs, or 5 percent of its workforce, after making $61 billion of acquisitions during the past three years.
The reductions will be in Italy, Germany and Austria as the company moves its business east following last year's takeover of Rome-based Capitalia SpA and the 2005 purchase of Munich-based HVB Group, the Milan-based company said today in Vienna. The bank fell as much as 4.9 percent in Milan.
Chief Executive Officer Alessandro Profumo is struggling to increase earnings after trading losses and credit-market writedowns caused a 51 percent drop in first-quarter profit. The bank is adding 11,500 staff and opening 1,300 branches in central and eastern Europe over the next 2 1/2 years as major economies slow following the collapse of the U.S. subprime-mortgage market.
``Profumo's strategy is right in the long term,'' said Karim Bertoni, who helps manage $27 billion, including UniCredit shares, at Banque Syz & Co. in Geneva. ``In the short term it might be difficult.''
UniCredit expects annual revenue growth of 6.7 percent through 2010, with an increase of 19 percent a year in central and eastern Europe. Since its purchase of Poland's Pekao SA in 1999, UniCredit has opened offices in countries including Russia, Turkey, Hungary and Kazakhstan. The bank is forecasting stronger growth in central and eastern Europe than in the western part of the continent.
The eastern and central European businesses accounted for 20 percent of the company's total revenue last year.
Stock Drops
The lender fell 16 cents, or 4 percent, to 3.96 euros as of 3:30 p.m. in Milan, giving it a market value of about 52.8 billion euros ($83 billion). The company has dropped 30 percent this year, in line with the slide in the 59-member Bloomberg Europe Banks and Financial Services Index, which declined 3.9 percent today.
Many of UniCredit's job cuts will be related to the purchase of Capitalia, and the other reductions will be made at the ``corporate center,'' the company said, without being more specific. UniCredit in August 2007 reached an agreement with unions for 5,000 job cuts over three years following the Capitalia deal.
The company is ``quite happy'' with its acquisitions of Capitalia and HVB and the integration process is going ``quite well,'' Profumo said today in a Bloomberg Television interview.
UniCredit also plans to cut costs related to information technology and back-office functions and to close 400 branches in Italy as part of the business plan. Operating costs will rise 3.4 percent over the period. The company reiterated an earnings-per- share target for this year of 52 euro cents to 56 euro cents.
UniCredit Is `Solid'
``Profumo will be able to meet these targets,'' said Patrizio Pazzaglia, who oversees about $400 million at Bank Insinger de Beaufort NV in Rome. ``Notwithstanding the market environment, UniCredit is solid thanks to its steersman.''
Profumo, 51, has helped build UniCredit into Europe's fourth- biggest bank by market value, after HSBC Holdings Plc, Banco Santander SA and BNP Paribas SA.
The Italian bank is seeking to strengthen its so-called core Tier-1 capital ratio, the reserve built up to protect depositors against potential losses. UniCredit, which had a core Tier-1 ratio of 5.7 percent in the first quarter, said today it plans to reach 6.2 percent by the end of 2008 and 7.1 percent by 2010. The figures are calculated based on Basel II criteria, the bank said.
UniCredit's credit quality is good and the company doesn't plan any ``significant asset sales,'' Profumo said. The bank also won't make any further writedowns on asset-backed securities in its second-quarter earnings.
Possible Asset Sales
``It's difficult to identify new assets to sell,'' said Alessandro Roccati, a London-based analyst for Fox-Pitt, Kelton with an ``in line'' rating on UniCredit. ``The market talks about Pioneer. Some top management see it as key to eastern Europe.''
The Pioneer fund-management unit isn't for sale, Profumo said today, adding that the bank may divest some real-estate holdings and a stake in Austria's 3-Banken Gruppe that's valued at about 920 million euros, according to Bloomberg calculations.
Profumo also said stakes in Austrian companies held through the B&C foundation are ``non-strategic.'' The assets include paper- maker Lenzing AG, construction company Porr AG and rubber-maker Semperit AG.
The reductions will be in Italy, Germany and Austria as the company moves its business east following last year's takeover of Rome-based Capitalia SpA and the 2005 purchase of Munich-based HVB Group, the Milan-based company said today in Vienna. The bank fell as much as 4.9 percent in Milan.
Chief Executive Officer Alessandro Profumo is struggling to increase earnings after trading losses and credit-market writedowns caused a 51 percent drop in first-quarter profit. The bank is adding 11,500 staff and opening 1,300 branches in central and eastern Europe over the next 2 1/2 years as major economies slow following the collapse of the U.S. subprime-mortgage market.
``Profumo's strategy is right in the long term,'' said Karim Bertoni, who helps manage $27 billion, including UniCredit shares, at Banque Syz & Co. in Geneva. ``In the short term it might be difficult.''
UniCredit expects annual revenue growth of 6.7 percent through 2010, with an increase of 19 percent a year in central and eastern Europe. Since its purchase of Poland's Pekao SA in 1999, UniCredit has opened offices in countries including Russia, Turkey, Hungary and Kazakhstan. The bank is forecasting stronger growth in central and eastern Europe than in the western part of the continent.
The eastern and central European businesses accounted for 20 percent of the company's total revenue last year.
Stock Drops
The lender fell 16 cents, or 4 percent, to 3.96 euros as of 3:30 p.m. in Milan, giving it a market value of about 52.8 billion euros ($83 billion). The company has dropped 30 percent this year, in line with the slide in the 59-member Bloomberg Europe Banks and Financial Services Index, which declined 3.9 percent today.
Many of UniCredit's job cuts will be related to the purchase of Capitalia, and the other reductions will be made at the ``corporate center,'' the company said, without being more specific. UniCredit in August 2007 reached an agreement with unions for 5,000 job cuts over three years following the Capitalia deal.
The company is ``quite happy'' with its acquisitions of Capitalia and HVB and the integration process is going ``quite well,'' Profumo said today in a Bloomberg Television interview.
UniCredit also plans to cut costs related to information technology and back-office functions and to close 400 branches in Italy as part of the business plan. Operating costs will rise 3.4 percent over the period. The company reiterated an earnings-per- share target for this year of 52 euro cents to 56 euro cents.
UniCredit Is `Solid'
``Profumo will be able to meet these targets,'' said Patrizio Pazzaglia, who oversees about $400 million at Bank Insinger de Beaufort NV in Rome. ``Notwithstanding the market environment, UniCredit is solid thanks to its steersman.''
Profumo, 51, has helped build UniCredit into Europe's fourth- biggest bank by market value, after HSBC Holdings Plc, Banco Santander SA and BNP Paribas SA.
The Italian bank is seeking to strengthen its so-called core Tier-1 capital ratio, the reserve built up to protect depositors against potential losses. UniCredit, which had a core Tier-1 ratio of 5.7 percent in the first quarter, said today it plans to reach 6.2 percent by the end of 2008 and 7.1 percent by 2010. The figures are calculated based on Basel II criteria, the bank said.
UniCredit's credit quality is good and the company doesn't plan any ``significant asset sales,'' Profumo said. The bank also won't make any further writedowns on asset-backed securities in its second-quarter earnings.
Possible Asset Sales
``It's difficult to identify new assets to sell,'' said Alessandro Roccati, a London-based analyst for Fox-Pitt, Kelton with an ``in line'' rating on UniCredit. ``The market talks about Pioneer. Some top management see it as key to eastern Europe.''
The Pioneer fund-management unit isn't for sale, Profumo said today, adding that the bank may divest some real-estate holdings and a stake in Austria's 3-Banken Gruppe that's valued at about 920 million euros, according to Bloomberg calculations.
Profumo also said stakes in Austrian companies held through the B&C foundation are ``non-strategic.'' The assets include paper- maker Lenzing AG, construction company Porr AG and rubber-maker Semperit AG.
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