The largest bank in Italy has announced plans to cut 8,000 jobs and obtain regulatory approval for a €2bn ($2.2bn, £1.7bn) share buyback programme.
UniCredit’s chief executive officer Jean Pierre Mustier did not give details of exactly where the job cuts will be implemented, but promised they would be done in a “socially responsible way.” The plans announced this morning, Tuesday, December 3, did detail the closure of 500 branches across western Europe, in the hope of saving €1bn.
Investors and financial institutions will be closely monitoring the progress of UniCredit’s share buyback attempt. In order to gain approval, it will need to show the European Central Bank that its balance sheets are strong enough for excess capital to be returned to shareholders.
This latest round of job cuts comes after three years of redundancies at the company and 14,000 positions have already been phased out since 2016. Banks across the Eurozone have been forced to adapt to ultra-low interest rates and the growing digitalisation of the banking industry.
Since 2018 UniCredit has explored mergers with a number of other embattled large European banks, namely France’s Societe Generale and Germany’s Commerzbank. It has now scrapped such an idea.
When asked about mergers and acquisitions, Mustier said: “No M&A, how can I be more precise...We prefer share buybacks to M&A. We might look at small bolt-on acquisitions, most likely in central and eastern Europe where we have a growth plan, but most likely nothing in western Europe.”
Rather than pursuing more mergers and partnerships, UniCredit is actually cutting costs and streamlining its corporate structure by selling off ventures and unwanted business. This year it raised €785m by selling an 8 per cent holding in the investment bank Mediobanca and raised €2.1bn by selling its stake in Banca Fineco, another Italian bank.
Mr Mustier’s forceful rejection of an idea the bank itself explored for the past 18 months might well indicate that UniCredit no longer sees itself as battling simply to survive. Indeed last month Mr Mustier championed what he described as the banks best quarter in a decade. UniCredit’s profit increased by 26 per cent to €1.1bn. Furthermore, its return on tangible equity improved to 8.7 per cent for the first nine months of the year.
Following the announcement, the bank’s share price rose marginally, up 0.21 per cent at €12.36 (at time of writing), meaning shares are trading at less than half its book value.