MILAN”•Italy’s biggest bank, UniCredit, announced plans Tuesday to slash 14,000 jobs and raise billions of euros in fresh capital as fears of a banking and political crisis grip the country.
The bank, one of the worst performers in European bank stress tests, confirmed it would need to seek 13 billion euros ($13.8 billion) in fresh capital from investors despite political instability in Italy and the nation’s third-largest bank scrambling to avoid a government-led rescue.
UniCredit also said it would shelve around 14,000 jobs by the end of 2019 as part of a cost-saving drive.
The bank estimated this would save it 1.1 billion euros in staff costs. The bank added it planned to slash other costs by 600 million euros, resulting in an annual saving of 1.7 billion euros.
UniCredit’s announcements came at a time when investor confidence in Italy has been badly shaken by the collapse of former prime minister Matteo Renzi’s government.
And the Italian banking sector is in a perilous state, with the world’s oldest bank, Monte dei Paschi di Siena (BMPS), trying to put together a private-sector rescue after losing 80 percent of its market capitalization in the past year.
Shares in BMPS rose Monday following a statement by the bank it was hopeful a government rescue could be avoided.
The Italian government pledged Friday to intervene to recapitalize BMPS should it fail to raise the money from private investors needed to stay afloat.
Italy’s new Prime Minister Paolo Gentiloni unveiling his cabinet team Monday also helped reassure markets on Monday.
UniCredit’s announcement was part of a major strategic review launched under new chairman Jean-Pierre Mustier, that has so far involved selling off assets to strengthen the bank’s capital base.
UniCredit was among the worst-performing banks in stress tests carried out in July by the European Banking Authority, causing its share price to plummet nearly 10 percent.
Since then, it has disposed of several assets and stopped certain banking activities to focus on its core strengths.
Mustier said the strategic review was a “pragmatic plan based on conservative assumptions, with tangible and achievable targets.”
The bank is targeting a net profit of 4.7 billion euros in 2019.
