UniCredit to raise 13 billion euros in Italy's biggest share issue

Tue Dec 13, 2016 10:30am EST
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By Stephen Jewkes, Gianluca Semeraro and Pamela Barbaglia

MILAN/LONDON (Reuters) - Italy's largest bank, UniCredit (CRDI.MI: Quote), plans to raise 13 billion euros ($13.8 billion) in the country's biggest-ever share issue to shore up its balance sheet and shield itself from a broader banking crisis.

The plans announced on Tuesday also include 14,000 job cuts and more than 900 branch closures. They come at a turbulent time for Italian banks and the economy - with Monte dei Paschi di Siena (BMPS.MI: Quote) at risk of failure, a new government just installed in Rome and early elections expected next year.

UniCredit, the only Italian bank deemed important to the stability of the global financial system, has lost about half its market value this year, hit by profitability concerns, bad loans and a weaker balance sheet than major European rivals.

Chief Executive Jean Pierre Mustier said the bank planned to launch the share issue in the first quarter of 2017 and use the money to help mop up 17.7 billion euros worth of bad debts from its balance sheet, enabling it to boost its profits and also dividend payouts by 2019.

Drafted in five months ago, the former Societe Generale (SOGN.PA: Quote) executive has sought to streamline the bank, selling assets like fund manager Pioneer and Polish unit Bank Pekao.

"We've taken some bold actions because self-help is always the best thing to do," the 55-year-old told analysts in a call.

Joseph Oughourlian, CEO at UniCredit shareholder Amber Capital, said he was a firm believer in Mustier.

"Sorting out UniCredit is huge service and a plus for the Italian banking sector. We now have the two largest banks in Italy well-capitalised," he said. Italy's other major bank is Intesa Sanpaolo (ISP.MI: Quote).   Continued...

The headquarters of UniCredit bank is seen in Milan, Italy, in this February 8, 2016.   REUTERS/Stefano Rellandini/File Photo