UniCredit SpA (BIT:UCG), the largest bank in Italy, announced on Tuesday that it planned to launch a $13.8 billion (€13 billion) share issue, which is the Italy's largest share issue, to deal with the bad debts problems and boost profits.
According to Jean Pierre Mustier, the CEO of UniCredit, the share issue would be launched in the first quarter of 2017. The money was planned to offset the €17.7 million bad debts in balance sheet, and boost its profits and dividend payouts by 2019.
In the announcement, the company said that it would cut 14,000 jobs, or around 11% of staff by the end of 2015. However, the share issue will raise the bank’s core capital ratio to 12.5% in 2019. The company also planned to shut up 944 branches in Italy, Germany and Austria by 2019.
UniCredit expected that the net profit would rise to €4.7 billion in 2019 from €1.5 billion in 2015, and revenue was expected to increase 0.6% per year. In addition, Jean Pierre Mustier pledged to cut his salary by 40% to €1.2 million without annual bonus in 2016 or during the 2019 plan.
Morgan Stanley, UBS, BofA Merrill Lynch, JP Morgan and Mediobanca, have signed pre-underwriting agreement to assist marketing the share issue. Fortress Investment Group and PIMCO will buy the bad loans, and UniCredit will remain minority stakes in both vehicles.
After the announcement, shares of UniCredit rose 15.92% in afternoon trading hours on Tuesday, and an index of Italian banks increased by 3%.