UniCredit SpA, Italy’s biggest bank, plans to open 900 branches in central and eastern Europe in the next five years to tap faster growing markets.
The Milan-based bank is ready to finance expansion in the region without a capital increase, Chief Executive Officer Federico Ghizzoni said at an investor meeting in London today. The parent company will continue to receive dividends from its units in the area, he said.
UniCredit, the biggest lender in emerging Europe with 107.6 billion euros ($141 billion) of assets, said in November that third-quarter pretax profit in the region more than tripled to 366 million euros. The bank, which operates in 22 countries, said it plans to focus on the bigger markets in the area, such as Russia, Poland and Turkey.
“Operating profit in the region will improve, while loan- loss provisions are expected to normalize” and asset quality is getting better, Ghizzoni said.
UniCredit rose 1 percent to 1.60 euros at 12:25 p.m. in Milan, giving the company a market value of 31 billion euros. The Bloomberg Banks and Financial Services Index, which was up 0.4 percent today, has risen 4 percent in the past six months, compared with UniCredit’s 3 percent decline.
Poland and Turkey
The Italian lender plans to expand its Bank Pekao SA Polish unit by opening new branches and strengthening the existing network, Pekao General Manager Luigi Lovaglio said. Pekao, Poland’s second-largest bank, posted a 6.3 percent gain in third-quarter profit as lending revenue increased. The division is benefiting from accelerating growth in Poland, which expanded at a faster-than-estimated 3.5 percent in the second quarter.
“We will keep our eyes open in Poland,” where economic growth will benefit the loan market, Ghizzoni said. Pekao may review its dividend policy in coming months, “going back to a pre-crisis 70-80 percent payout ratio,” Lovaglio said.
UniCredit also plans to expand organically in Turkey, where it owns 50 percent of Yapi ve Kredi Bankasi AS, Deputy CEO Alessandro Decio said. The unit aims to increase its loans and deposits by more than 20 percent in the next five years, opening about 60 branches annually “to guarantee a return on equity around the current level of 20 percent,” he said.
Ukraine, Romania, Bulgaria and Kazakhstan are among the more “fragile” countries where UniCredit operates, the CEO said. “The Kazakhstan unit is not on sale, as we are concentrated on its restructuring.”
UniCredit bought Kazakhstan’s AO ATF Bank, the fifth-largest lender in the country, for $2.1 billion in 2007. It wrote down the value of the unit by 162 million euros in the second quarter because of bad loans.
In Russia, ZAO UniCredit Bank is among potential candidates to advise the country’s government on privatizations planned in coming years, Ghizzoni said.