ROME— UniCredit UNCFF 2.30% SpA said it plans to expand by hiring staff and investing in digitization as part of a three-year strategic plan that includes share buybacks and bigger dividends.
The plan, the first since Chief Executive Andrea Orcel took the helm in April, targets annual revenue growth of about 2% and profit growth of 10% through 2024.
UniCredit, Italy’s second-largest bank by assets, said it would distribute at least €16 billion, equivalent to $18.2 billion, to investors in dividends and share buybacks over the next three years. It said it would invest €2.8 billion in its digital and data infrastructure over the same period.
UniCredit’s shares rose about 7% after the bank unveiled the plan.
“We will move out of a period of retrenchment and restructuring into an era of purpose, growth and value creation,” said Mr. Orcel.
The bank’s new strategy marks a shift from years in which its primary focus was shoring up its capital position. To that end, Mr. Orcel’s predecessor, Jean-Pierre Mustier, raised €13 billion in fresh capital, sold many assets, including billions of euros in bad loans, and slashed 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.
Italy’s economy, where UniCredit makes about half of its revenue, is projected to grow by slightly more than 6% this year, after gross domestic product shrank 9% in 2020 amid pandemic-related lockdowns. The eurozone economy is set to grow 5% this year.
But economists warn that Europe’s economic recovery, with which banks’ revenue 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 strong progress in reducing mountains of bad loans that had dogged them for years, some of them a hangover from the global financial crisis.
UniCredit and other Italian banks are still sitting on largely unused provisions for loan losses accumulated during 2020’s pandemic-related recession. Government-funded schemes, such as furlough programs to help businesses, helped banks avoid a new wave of bad loans, as happened during the financial and sovereign-debt crises.
Still, the pandemic, a prolonged period of negative interest rates and a need for costly investments in information technology and staff retraining are forcing many banks in Europe to re-evaluate their strategies. Last year, Intesa Sanpaolo SpA acquired UBI Banca SpA, overtaking UniCredit as Italy’s largest lender by assets.
Unlike his predecessor, Mr. Orcel has said he is open to considering acquisitions of other banks. He held talks for six months with Italy’s Finance Ministry to buy some of the assets of troubled lender Banca Monte dei Paschi di Siena SpA, which was nationalized in 2017. UniCredit’s talks with the government broke down in October, however.
The bank said it will hire an additional 3,600 employees to reinforce its business network and to make the bank more digital.
Before taking the helm of UniCredit, Mr. Orcel left Swiss bank UBS Group AG in 2018 after being offered the chief executive post at Spanish lender Banco Santander SA by its powerful chairwoman, Ana Botín. But the deal fell through months later after Santander said it couldn’t justify his €50 million-plus compensation package.
Mr. Orcel sued Santander for about €100 million in damages, later reduced to up to €75 million, alleging the bank offered him a contract and broke it. Ms. Botín and Santander have defended their U-turn on Mr. Orcel’s hiring, saying an offer letter doesn’t 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 [email protected]
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