UniCredit Looking to Raise $14 Billion in Latest Bid to Restore Profitability

CEO Jean Pierre Mustier is making a cash call for $14 billion to help fund and facilitate the bank's turnaround.

UniCredit, the largest Italian lender, is facing an uphill climb to returning to profitability in the New Year, with its latest efforts to raise cash via public funds coming up short. The bank is reportedly seeking upwards of $14 billion in cash to help fund a turnaround after earlier cost-cutting measures have come up short, per a Bloomberg report.

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The turning of the page to the 2017 calendar year has hardly been a panacea for European banks, with many leading players still facing dire straits and ambitious cost-cutting strategies. The most common tactic deployed thus far has been job cuts, something UniCredit itself has embarked upon back in December when it opted to cut thousands of jobs.

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Earlier attempts have been met with varied success however. UniCredit previously announced it would cut 6,500 jobs, or up to 14,000 by 2019, though the bank will also be investing billions in digitization. The job cuts themselves are estimated to generate nearly $1.81 billion in annual savings.

As such, the cuts are also in the process of seeing the closure of hundreds of branches. Its latest efforts however are an attempt to undergo a cash call for nearly $14 billion, which is being undergone by its Chief Executive Officer, Jean Pierre Mustier. At an upcoming shareholders meeting, individuals will be asked to approve the conversion of every 10 shares into one new share, with share prices already falling over -40% back in 2016.

Revenue Woes

Arguably the biggest deterrent facing the bank is its revenue setbacks, which are estimated to rise by roughly 0.6% through the next two years. Coupled with other continental woes and growth concerns, UniCredit is also opting to use the capital left over from its write-down on bad loans to help fund the departure of thousands of employees.

It will be interesting to see if other banks follow suit – like other European lenders, UniCredit is feeling the pinch of rising labor costs and a dearth of profitability.

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