On Tuesday, UniCredit increased its 2019 dividend payments target as well as bad loan reductions as the revamp of Italy’s top bank under new boss Jean-Pierre Mustier progressed.
UniCredit chose the French banker as its chief executive back in mid-2016, giving him responsibility to restructure the bank, which for years had been plagued by doubts regarding the bank’s inadequate balance sheet. Its stock price has increased almost 80 percent since Mustier’s arrival.
UniCredit verified its 2019 targets with a goal to produce a net profit of 4.7 billion euros ($5.54 billion) and a best-quality capital ratio of over 12.5 percent.
Mustier has been selling businesses, removing jobs as well as closing branches to boost UniCredit’s balance sheet. Mustier also produced a 13 billion-euro ($15.3 billion) share issue in February, Italy’s largest cash call, to strengthen the bank’s financial strength.
On Tuesday, the bank completed the last leg of a major 17.7-billion-euro bad loan sale, decreasing its holding in the portfolio from 49.9 to below 20 percent, this effort will add 10 basis points to its core capital ratio.
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UniCredit said it would cut another 4 billion euros in gross impaired debts by the end of 2019 to account for 7.8 percent of total loans, less than the previous 8.4 percent goal from December 2016. Italian banks are under significant pressure from the European Central Bank to eliminate loans that that went bad during a cruel recession.
The share price in the smaller rival UBI Banca fell 2.8 percent on Tuesday, following the lenders warning in a bond document the ECB requested the submission of a more motivated bad loan reduction plan.
Shares in UniCredit increased by 0.3 percent by 0823 GMT against a somewhat negative sector. UniCredit intends to pay out 30 percent of its 2019 profits to shareholders, an increase from previous 20 percent. The bank also increased its post-2019 dividend payout ratio to 50 percent, provided its core capital ratio remains above 12.5 percent.