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Italian UniCredit unveils new strategy at the end of its restructuring


ROME – UniCredit UNCFF 2.30%

SpA said it plans to grow by hiring staff and investing in digitization as part of a three-year strategic plan that includes share buybacks and larger dividends.

The plan, the first since CEO Andrea Orcel took charge in April, targets annual revenue growth of around 2% and profit growth of 10% through 2024.

UniCredit, Italy’s second-largest bank by assets, has announced that it will distribute at least 16 billion euros, or $ 18.2 billion, to investors in dividends and share buybacks over the next three years . He said he would invest 2.8 billion euros in his digital and data infrastructure during the same period.

UniCredit shares rose about 7% after the bank unveiled the plan.

The bank’s new strategy marks a departure from the years when its main objective was to strengthen its capital position. To that end, Mr Orcel’s predecessor, Jean-Pierre Mustier, raised 13 billion euros in new capital, sold numerous assets, including billions of euros in bad debt, and cut thousands of jobs.

The plan comes at a time of economic uncertainty fueled by rising inflation, supply chain disruptions and the new Omicron variant, which is rapidly spreading in Europe, where UniCredit operates.

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The Italian economy, where UniCredit makes about half of its revenue, is expected to grow just over 6% this year, after gross domestic product fell 9% in 2020 amid lockdowns linked to the pandemic. The eurozone economy is expected to grow 5% this year.

But economists warn that Europe’s economic recovery, with which bank income growth is closely correlated, could slow sharply in 2022 after a strong rebound this year.

When the pandemic hit Italy, UniCredit and other banks had made great strides in reducing mountains of bad loans that had haunted them for years, some of them hangovers from the global financial crisis. .

UniCredit and other Italian banks still have largely unused provisions for loan losses accumulated during the 2020 pandemic-related recession. Government-funded programs, such as leave programs to help businesses, have helped banks avoid a new wave of bad loans, as happened during the financial and sovereign debt crises.

Yet the pandemic, a prolonged period of negative interest rates and a need for costly investments in information technology and retraining are forcing many banks in Europe to reassess their strategies. Last year Intesa Sanpaolo SpA acquired UBI Banca SpA, overtaking UniCredit as Italy’s largest lender in terms of assets.

Unlike his predecessor, Mr. Orcel said he was open to considering acquisitions from other banks. He spoke for six months with Italy’s finance ministry to buy part of the assets of ailing lender Banca Monte dei Paschi di Siena SpA, which was nationalized in 2017. UniCredit’s talks with the government failed, however. in October.

The bank announced that it would hire 3,600 additional employees to strengthen its sales network and make the bank more digital.

Prior to taking over as head of UniCredit, Mr. Orcel left Swiss bank UBS Group AG in 2018 after being offered the position of Managing Director of Spanish lender Banco Santander. HER

by its powerful president, Ana Botín. But the deal fell through months later after Santander said he couldn’t justify his compensation of more than € 50million.

Mr Orcel sued Santander for around € 100m in damages, reduced to € 75m afterwards, alleging the bank offered him a contract and severed it. Ms Botín and Santander have defended their turnaround on hiring Mr Orcel, saying a letter of offer does not constitute a contract under Spanish law. A Spanish court is expected to rule on the dispute in the coming weeks.

Write to Giovanni Legorano at giovanni.legorano@wsj.com

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