UniCredit SpA will continue to speed up its sell-off of bad debts for the remainder of 2018, aided by "supportive" economic conditions in Italy, CEO Jean Pierre Mustier told analysts during a call for the bank's second-quarter earnings.
Mustier said he is taking "decisive" action to de-risk the bank and has lowered the bank's targeted nonperforming exposure level by the end of 2018, to €19 billion — below the €19.2 billion it had targeted for the end of 2019 during a capital markets day in 2016. The bank now has a 2019 target of €14.9 billion.
NPEs, a category that includes bad debt as well as recently restructured loans and those at risk of souring, stood at €22.2 billion as of the end of the second quarter, down from €23.6 billion at the end of the first quarter and €29.7 billion in June 2017.
Mustier, who took on the role of CEO at Italy's largest bank in 2016, has made flushing out bad debt a hallmark of his strategy. The bank is in the middle of a three-year restructuring plan, running from 2016 to 2019, which focuses on the reduction of nonperforming debt and deeps cuts to both employee and branch numbers.
The bank said it has already eliminated 87% of the full-time equivalent jobs and 84% of the branches it had planned to cut by the end of 2019, and its first-half cost-to-income ratio was down 2 percentage points year over year to 55.6%.
Commenting on the bank's exposure to Turkish lender Yapi ve Kredi Bankasi AS, in which it owns a majority stake in partnership with Turkish conglomerate Koç Finansal Hizmetler AS, Mustier said UniCredit is committed to the Turkish market and will remain there for "for the long term."
Mustier was responding to analyst questions about the impact of steep falls in the lira in recent weeks and months on the Turkish bank. The current hit a record low Aug. 6 of 5.43 against the dollar following the previous week's news of U.S. sanctions against Turkey.
Mustier declined to comment on an ongoing legal case that the bank has mounted against hedge fund Caius Capital following a failed inquiry into the regulatory treatment of convertible and subordinated hybrid equity-linked securities, a type of debt issued by the bank.
UniCredit reported a profit of €1.02 billion for the second quarter, up from €945 million during the same period in 2017. Shares in the bank were up more than 3.4% as of just before 3 p.m. Milan time Aug. 7.