Europe's fourth-largest bank UniCredit laid out bold plans on Thursday for growth in central and eastern Europe (CEE), where it is already the biggest lender, while slashing jobs in western Europe.
In a two-tier strategy for 2008-2010 which banks on "dynamic growth" in CEE, UniCredit said it would open 1,300 outlets there with 11,500 extra jobs, but it will shed 9,000 posts out of 100,000 in Germany, Austria and its domestic base Italy - where it is the country's second-biggest retail bank.
UniCredit had a total workforce of about 180,000 at the end of June. It has already had to sell nearly 200 branches in Italy to meet antitrust requirements. UniCredit said growth in the CEE region and cost cuts would help it boost earnings per share by 10-12 percent annually through to 2010.
"I think the main opportunity for a player like us is to take market share from others," Chief Executive Alessandro Profumo said at a presentation of the plan in Vienna.
Many international banks are suffering from credit crunch woes but those with interests outside struggling economies in western Europe and the United States are faring better. Earlier this month, Spain's Banco Santander bank said its profits would be buoyed by growth in Latin America.
UniCredit said it expected central Europe's economies to grow an average 4.5 percent to 2010 compared with 1.7 percent in the euro zone. In its plans to "unleash the full value of Europe's leading franchise," UniCredit confirmed its earnings per share target of 0.52-0.56 euros for 2008 and said it aimed for compound annual
UniCredit has reported total credit-related writedowns and losses of 1.726 billion euros ($2.69 billion). On Thursday, it said there had been no additional net writedowns in its ABS portfolio during the second quarter.
It said implementing new guidelines on capital adequacy known as Basel 2 - which use a more graduated calculation of the risk attached to assets than Basel 1 - would give it a Core Tier 1 ratio of 5.74 percent and this should be over 6.2 percent in 2008.
Analysts had worried its Core Tier 1 ratio - which is based on capital available against the risk perceived in its assets - would not be adequate for growth and there had been some speculation it might join the likes of Barclays in seeking funds from investors. "We have said very, very clearly that we can go there (Core Tier 1 target) with organic capital generation," Profumo said on Thursday.
The bank, which is worth about 54 billion euros, said it aimed for a Core Tier 1 ratio of 7.1 percent in 2010. It had previously reported a Core Tier 1 under Basel 1 of 5.5 percent at the end of the first quarter and aimed for 6.0 percent at the end of this year on the same basis.
Profumo added UniCredit's asset management business was not for sale, putting paid to speculation it might be on the block as part of plans to improve capital ratios. "Asset management is part of the core business, it is strategic," he said. The business had a virtually flat pretax profit of 225 million euros in the first quarter, a tiny fraction of the bank's total 1.683 billion euro pretax profit for the period.