• Ghizzoni to present measures to revamp the bank on Wednesday
  • Costs, complexity hurt profitability at biggest Italian bank

When Federico Ghizzoni presents his latest measures to overhaul UniCredit SpA on Wednesday, boosting profitability and generating more capital are two of the main challenges he’ll have to address.

Ghizzoni, chief executive officer at Italy’s largest bank since 2010, has already shaken up management. Next, he may announce plans to sell assets and cut as many as 12,000 jobs, or 9.4 percent of the workforce, people with knowledge of the matter have said. UniCredit is revising a business plan it introduced last year as low interest rates and increasing capital demands squeeze returns. 

The Milan-based bank, which also releases earnings on Wednesday, will probably post a 47 percent drop in third-quarter profit to 383 million euros ($411 million), based on the average estimate of eight analysts surveyed by Bloomberg.

Below are five charts that illustrate the hurdles Ghizzoni is facing.

1. Profitability: UniCredit’s return on tangible equity, a key measure of profitability, trails peers including Intesa Sanpaolo SpA, its largest Italian competitor. Loan-loss provisions and narrow lending margins are weighing on earnings.

2. Capital: The bank’s buffers lag behind some of its largest European rivals and are considered by analysts including Carlo Digrandi at HSBC Holdings Plc as too close to the regulatory threshold.

3. Geographical complexity: A presence across Europe after a decade of acquisitions has led to duplication of functions and a costly business mix.

4. Costs: With revenue under pressure, UniCredit hasn’t done enough to bring down expenses to improve profitability. Costs swallow up about 60 percent of income.

5. Share performance: UniCredit’s stock has fallen by about half since Ghizzoni took the helm in October 2010, versus an 8 percent drop in a benchmark European bank index.

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