MILAN (AFP) — Unicredit, Italy's biggest bank by capitalisation, said on Thursday it would cut 9,000 jobs in western Europe and invest in central and eastern Europe to boost profits following massive acquisitions.
Staffing in western European markets, mainly Italy, Austria and Germany, is to be reduced, "which will affect some 9,000 of the 100,000 jobs" in the region, the company said in a statement presenting its strategic plan for 2008-10.
"(In) central and eastern Europe, the group will expand its network significantly, while in western Europe the focus will be on optimisation, efficiency, restructuring and cost control," the bank added.
The move reflects the attraction of the emerging eastern European economies where incomes are rising fast and consumers are demanding an increasing range of financial products.
"For the foreseeable future the CEE-region (central and eastern Europe) will continue to grow much faster than western Europe," the bank said.
Unicredit said it planned to open 1,300 branches in eastern Europe where 11,500 jobs will be created.
The Italian leader, which has a market capitalisation of 54 billion euros, has been on an acquisition streak over the last few years, snapping up German bank HVB, Italy's Capitalia, Ukraine's Ukrsotsbank and Kazakhstan's ATF, making it the leading bank in eastern Europe.
With Capitalia in its stable, it became what was then the biggest bank in the eurozone and the second-biggest in Europe, and says it has the biggest international network in eastern Europe with 3,600 branches.
The group employed 177,000 people as of the end of 2007, including 100,000 in western Europe.
By 2010, it expects the workforce to total about 180,000, half in eastern Europe, up from 44 percent.
Unicredit chairman Dieter Rampl said that following the string of acquisitions the bank would now concentrate on "extracting value" fom its activities.
By expanding in eastern and central Europe, it said revenues from the region would grow at an annual rate of 19 percent, compared with three percent in western Europe. Group revenues were forecast to increase by 6.7 percent between 2008 and 2010.
The cost-savings and investment will result in growth of net profit per share rising by 10-12 percent annually, excluding exceptional items, Unicredit said.
In eastern Europe the bank will pay particular attention to four countries with "high growth potential" -- Russia, Turkey, Romania and Ukraine -- where 900 of the 1,300 new branches will be located, it said.
Growth will be "more selective" in other countries such as Poland, Croatia, Bosnia and Bulgaria, where Unicredit is already the leading bank.
Some of the job cuts in western Europe are a result of the takeover of Capitalia last year when the two banks' computer systems were merged.
Following the announcement, shares in the bank shed 3.35 percent to 3.98 euros in mid-morning on the Milan stock exchange which was down one percent overall.
Its shares have lost over 40 percent in the past 12 months as a result of the ongoing crisis of the financial markets following the US subprime market collapse, the lowering of its first-quarter projections and the weakening of its capital ratios after the run of acquisitions.
Reacting to the plan, Deutsche Bank said it "seems prudent," while Cheuvreux said it "contains nothing especially new and confirms that Unicredit is affected by the slowdown."
Unicredit is aiming for a Tier 1 capital ratio -- the ratio of a bank's core equity capital to its total risk-weighted assets -- of 7.1 pecent in 2010, against 5.74 percent at the end of the first quarter.
The ratio, closely watched because of the financial crisis, should reach 6.2 percent by the end of 2008.
Unicredit boss Alessandro Profumo has reiterated that no capital increase will be needed to implement the new strategy.
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