June 26 (Bloomberg) -- 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.

At least 3,200 of the reductions will be in Italy, Germany and Austria, 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, where it's presenting a new business plan. The bank fell as much as 4 percent in Milan.

UniCredit is struggling to increase earnings after trading losses and credit-market writedowns caused a 51 percent drop in first-quarter profit. Chief Executive Officer Alessandro Profumo is opening 1,300 branches in central and eastern Europe as the world's major economies slow after 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 revenue growth of 6.7 percent a year for the group and 19 percent in central and eastern Europe, as it opens branches and takes on 11,500 employees in the region through 2010. Since the acquisition 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.

Stock Drops

The Italian bank fell 11 cents, or 2.7 percent, to 4.01 euros as of 9:45 a.m. in Milan, giving it a market value of about 54 billion euros ($85 billion). The company has dropped 29 percent this year, which is in line with the slide in the 59-member Bloomberg Europe Banks and Financial Services Index.

Many of the job cuts will be related to the purchase of Capitalia, and the other reductions will be made at the ``corporate center,'' the company said. 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 as part of the business plan. Operating costs will rise 3.4 percent over the period, the company said. It 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.'' -

The 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 5.8 percent in March, said last month it has a long-term target of 6.8 percent. The ratio will be 6 percent by the end of the year, the bank said today.

UniCredit's credit quality is good and the company doesn't plan to make any ``significant asset sales,'' Profumo said today. The company also won't make any further writedowns on asset-backed securities in its second-quarter earnings.

Alessandro Roccati, a London-based analyst for Fox-Pitt, Kelton with an ``in line'' rating on UniCredit, said the company will have to make some asset sales to meet its targets.

``It's difficult to identify new assets to sell,'' Roccati said. ``The market talks about Pioneer. Some top management see it as central 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 Austrian Bank 3-Banken Gruppe.

To contact the reporter on this story: Alessandra Migliaccio at amigliaccio@bloomberg.net

Last Updated: June 26, 2008 04:08 EDT