Pop. Milano Says Job Cuts to Cost Up to $243 Million
(Corrects the name of chairman in third paragraph.)
Italy’s sixth-biggest bank may set aside 180 million euros to 200 million euros to cover the costs, Chief Executive Officer Piero Montani said during a conference call today. The lender plans to cut 700 jobs over the next three years, 25 percent of them managers.
Montani and Chairman Andrea Bonomi are reorganizing the bank to boost profit and strengthen capital because it must repay 500 million euros of state aid obtained in 2009. The executives said the bank may sell assets unrelated to its main business.
“We welcome the focus on operating costs and the strengthening of the capital position,” Manuela Meroni, an analyst at Banca IMI SpA, wrote in a note today. “The scenario on the asset quality seems to be more prudent compared with that incorporated in our estimates.”
The job reductions will save about 65 million euros by 2015, the bank said in a statement late yesterday. Popolare Milano plans to reduce its administrative expenses by 12 percent, bringing the cost-to-income ratio to 56 percent in 2015. The bank also is carrying out an impairment test, which may lead to writedowns of its goodwill.
The bank rose 1.9 percent to 32.2 euro cents as of 12:15 p.m. in Milan trading, giving the company a market value of 1.04 billion euros.
Popolare Milano is targeting net income of 270 million euros in 2015, compared with 614 million euros of losses in 2011. It expects revenue to rise to 1.76 billion euros at the end of 2015 from 1.05 billion euros, while operating profit should reach 780 million euros from 307 million euros.
“The 2015 net profit target is broadly achievable,” Mediobanca SpA’s analysts, who have an outperform recommendation on the stock, wrote in a report today.
Popolare Milano’s net income rose to 64.3 million euros in the first three months of the year from 42.3 million euros a year earlier, it said May 15. Popolare Milano’s core tier 1 ratio, which was at 8.3 percent at the end of March, is expected to exceed 9 percent by the end of 2015.
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