UniCredit Says Deposits Rising, Bad Loans in Italy Worsening

UniCredit SpA (UCG)’s deposits are expected to have risen in the second quarter, while bad loans in Italy are increasing because of the country’s third recession in a decade, Chief Executive officer Federico Ghizzoni said.

“Our deposits are growing both in Italy and abroad,” Ghizzoni, CEO of Italy’s biggest bank, said at a meeting with the Milan Foreign Press Club today. “The latest data confirm the trend we have seen in the fourth quarter of last year and first three months of the year.”

UniCredit’s bad loans are worsening in Italy, where the bank lends 35 percent of its total credit, the CEO said. “The negative trend of bad loans we are recording in Italy is not seen in other countries such as Germany and central and eastern Europe.”

The bank is cutting costs and reducing risks as part of its five-year plan approved in November to boost profitability. Ghizzoni confirmed the plan’s main points, including 5,200 job cuts in Italy by 2015. The Milan-based bank has closed about 800 branches in the last two years, he said.

UniCredit is working on a reorganization of its Italian businesses to simplify the structure and reduce costs. The bank’s board will review the plan next week, he said.

CEE leadership

UniCredit may consider exiting some countries in central and eastern Europe as it focuses on profitable businesses. “UniCredit wants to keep its leadership role in central and eastern Europe, even if we don’t keep the same number of countries,” the CEO said.

UniCredit, which operates in 22 countries including Germany, Austria and Poland, gets about 57 percent of its revenue outside Italy. The bank’s profit rose 13 percent to 914 million euros ($1.14 billion) in the first quarter.

The bank, which is the biggest lender in the former communist part of Europe, is focusing investments on its most promising markets, Russia, Turkey, Poland and the Czech Republic, while shelving branch expansion plans in Hungary and Romania.

“This year is tougher than expected,” Ghizzoni said. “The bank is geographically well positioned, and has sound liquidity and capital.” The bank has completed about 60 percent of this year’s funding plan, he said.

To contact the reporter on this story: Sonia Sirletti in Milan at ssirletti@bloomberg.net;

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

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