UniCredito will cut 9,000 jobs and run Germany's HVB on a tight leash once it carries out Europe's biggest cross-border takeover, the head of the Italian bank said on Monday. "After the deal is completed, financial discipline will be the key word," UniCredito CEO Alessandro Profumo said, seeking to address concerns that he might acquire skeletons in HVB's cupboards, as well as its assets in fast-growing eastern Europe.
Under his 20 billion-euro ($24.47 billion) plan to combine banks stretching from Turkey through Europe to the Baltic Sea, UniCredito aims to slash almost 900 million euros ($1.10 billion) in costs in three years, more than analysts expected.
UniCredito plans to offer five new shares for each one in HVB. It will also pay stock or cash for HVB units Bank Austria Creditanstalt and BPH in Poland.
Markets welcomed Profumo's reassurances, sending shares in UniCredito and HVB both up nearly 4 percent.
"There are some deals that make sense to start with and others that don't. This one makes a lot of sense to us," analysts at investment bank Morgan Stanley said in a report.
"We like it." Profumo said 1.35 billion euros would be taken in restructuring charges this year to streamline operations and impose discipline on the ailing HVB.
Investors are keen to see the star manager improve risk management at HVB.
It has been forced to write down 5.7 billion euros in bad assets in the last three years and concerns persist that losses from real estate lending could resurface.
"There is nothing that worries us," Profumo said, explaining auditors Deloitte had examined HVB's accounts as well as paperwork relating to the bank drawn up by the German bank's auditors and by local regulators.
"We will be very, very tight and manage capital allocation and manage the risk-weighted assets of the group."
The Morgan Stanley analysts said UniCredito could face pretax clean-up costs of up to 3 billion euros, or none at all, depending on what might be discovered in HVB's balance sheet.
The banks said on Monday the planned job cuts represent about 7 percent of the group's combined workforce.
HVB Chief Executive Dieter Rampl said he did not expect problems from German labour unions, despite plans to cut 7 percent of staff in the country.
Two percent of Italian staff will be cut while 9 percent of employees in central and eastern Europe will be axed.
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