MILAN (Reuters) – Italy’s biggest bank UniCredit <CRDI.MI> said on Tuesday it would buy back its stock this year to improve returns for investors, and shed 9% of staff under a new plan to 2023 to cut costs by 1 billion euros (859 million pounds) in Western Europe.
Highlighting the challenge facing retail banks operating in a negative interest rate environment, UniCredit forecast underlying net profit of 5 billion euros in 2023, only slightly above the 4.7 billion euros expected this year.
The bank, which is still struggling to lift its share price after years of successful restructuring, said it was raising this year’s capital distribution to 40% of underlying net profit by adding a share buyback to a proposed 30% dividend payout.
It aims to lift the overall ratio to 50% in 2023.
UniCredit Chief Executive Jean Pierre Mustier – a former investment banker who took over in mid-2016 and embarked on a balance-sheet clean up, cutting costs and shedding non-core assets – said UniCredit would only consider small bolt-on acquisitions.
“No M&A and that’s it,” he told a media call.
Mustier has said that while mergers and acquisitions (M&As) are necessary, low bank valuations at present prevent them because the required capital raising would excessively dilute shareholders’ stakes.
UniCredit trades at roughly half the value of its tangible assets.
UniCredit also said it sees revenue growing an average 0.8% annually in 2018-2023, and costs falling by 0.2% over the same period.
(Reporting by Valentina Za; Editing by Silvia Aloisi and Christopher Cushing)