The chief executive of UniCredit, the Italian lender that lost €11.8 billion (Dh46.12bn) last year as it wrote off bad debt and restructured, said that it is going back to banking basics as it tries to turn the corner.
Having recently ditched its asset management arm and announced a plan to cut 14,000 jobs by 2019, Jean Pierre Mustier said the bank would be focusing on the business of taking deposits and giving out loans to companies and individuals and steering clear from the kind of complicated banking that led to the financial crash of 2008.
“UniCredit has a very good business model, to be a simple European commercial bank, simple because simplicity is important today for the client,” Mr Mustier said in an interview in Abu Dhabi yesterday.
“Post-2007, the inflation of the balance sheet and the complexity is gone so you go back to the traditional banking model and the traditional activity,” he said. “We have been doing that by simplifying and restructuring. We want to be a simple pan-European commercial bank.”
Mr Mustier said he was banking on revenue from commercial banking in Germany and retail banking in Italy to prop up profit growth. About 48 per cent of the bank’s revenue comes from Italy, while 22 per cent is sourced from Germany. Austria makes up 10 per cent of revenue inflows and the balance comes from Central and Eastern Europe, he said.
UniCredit has been buffeted by faltering growth in Europe and bad debt in Italy in recent years. It has, however, been taking measures to improve its financial situation.
The bank last year agreed to sell its asset management arm Pioneer to France’s Amundi for €3bn, a move that will help to boost its capital. The Italian lender also announced this year that it had struck a deal with trade unions to cut jobs.
Mr Mustier said that years of loose monetary policy by the European Central Bank was starting to pay off for the economy and that he expected governments in Europe to switch to fiscal stimulus to ensure growth high enough for meaningful job creation.
“Consumption is holding up quite well, fixed investment and trade,” he said. “In 2016 we could have Europe doing better than the US. Monetary policy has been working quite well and we need to make sure that fiscal policy takes over.”
UniCredit, in which the Abu Dhabi fund Aabar has a 5 per cent stake, began selling €13bn of new shares to existing shareholders last week to rebuild its capital.
It is not yet clear, however, if the fund had participated in the cash call and Mr Mustier said the results would be known next week. If Aabar or other shareholders do not buy the shares they are entitled to, they stand to lose 70 per cent of their existing stakes through dilution.
mkassem@thenational.ae
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