UniCredit Says Share Sale, More Cost Cuts May Lie Ahead

  • Italian bank to announce results of strategic review on Dec.13
  • UniCredit may seek 13 billion euros, Italian press reports

UniCredit SpA, under pressure to replenish its reserves, said for the first time it may announce a share sale when it presents findings from its review of the bank’s strategy next month.

The review, under way since July, encompasses all major areas of the bank and focuses on measures including further ways to reduce expenses, optimize capital and improve risk discipline, the Milan-based lender said in a statement late Thursday.

“As part of the objective of capital optimization, the group is examining a series of alternatives and possible actions, including a possible capital increase,” the bank said. No firm decision has been taken as to its actions on Dec. 13, it said.

Chief Executive Officer Jean Pierre Mustier is trying to restore confidence in a systemically important lender after a slide in share price eroded more than half the company’s market value this year. Italy’s biggest bank is considering raising as much as 13 billion euros ($13.8 billion), according to local press reports.

UniCredit shares were down 4.4 percent to 1.91 euros in Milan trading at 10:29 a.m., putting it on track to fall by more than 4 percent for four consecutive days and making it the worst performer in the Bloomberg Europe Banks and Financial Services Index.

Both UniCredit and Banca Monte dei Paschi di Siena SpA are looking to raise capital as part of overhauls designed to strengthen profitability as investors grow increasingly concerned about Italy’s constitutional referendum on Dec. 4. The outcome could topple the government of Prime Minister Matteo Renzi, who has supported a restructuring of Italy’s banking system.

UniCredit is looking sell its stake in Bank Pekao SA to the Polish government-controlled entities PZU SA and state-run development fund PFR. The parties are seeking an agreement before the referendum, because Italian bank shares may react to the vote, people with knowledge of the plans have said. A decline in the Polish zloty and a fall in Pekao’s share price have combined to diminish the value of the UniCredit stake.

The bank may also set aside as much as 9 billion euros in bad-loan provisions, Il Sole 24 Ore reported on Thursday, citing unidentified people familiar with the matter. It also may securitize as much as 20 billion euros of bad loans.

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