Unicredit's £11bn restructuring fix to alleviate bad debt problem
Italy’s largest bank UniCredit is restructuring by divesting 14,000 job roles and raising €11bn in a share sale in a bid to streamline its business. The move has been driven by the political volatility affecting the Italian banking sector, which has also been hit by bad debt and low rates of profitability. UniCredit will make the cuts over the next two years, and is planning to boost its capital ratio to enable a dividend payment to investors by 2019. 3,800 branches will be closed down, with around 11% of the bank’s total staff being divested.
The skyline of Porta Nuova's district is seen in Milan, northern Italy March 5, 2015. REUTERS/Stefano Rellandini

UniCredit is cutting 14,000 jobs and raising €13 billion (£11 billion) in a record share sale as part of a plan to streamline its business and restructure its balance sheet.

The move comes at a pivotal moment for the Italian banking sector, which is weighed down with bad debt and low profitability and buffeted by political instability.

The bank, Italy's biggest will make the cuts over two years and will aim to boost its capital ratio – a measure of financial strength – and pay investors a dividend by 2019.

The lender plans shut down around a quarter of its 3,800 branches, while the 14,000 job losses represent around 11% of the lender's total staff.

Chief executive Jean Pierre Mustier said it was a "pragmatic plan based on conservative assumptions, with tangible and achievable targets," according to a BBC report.

The Italian banking crisis is coming to a head after the resignation of former Prime Minister Matteo Renzi last week. Banca Monte dei Paschi, the world's oldest lender and Italy's third-biggest bank, is attempting to raise €5 billion by the end of the year to stay in business.

The sector is carrying more than €300 billion in non-performing loans and may ultimately need an injection of around €52 billion, according to Deutsche Bank analyst Paola Sabbione.

Renzi resigned after losing a referendum aimed at restructuring the Italian parliament.

Mustier told the Financial Times: 'The referendum was a No but it doesn't change our business model. The Monte dei Paschi situation will be solved, and by the year-end. There will be no overhang from Monte dei Paschi."

Here is what happened to Unicredit shares on the news: