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UniCredit working on changes to group structure to protect against macro shocks

UniCredit SpA is working on changes to the group structure that will help protect the bank against macroeconomic shocks, CEO Jean Pierre Mustier told analysts during a second-quarter earnings call.

His comments come several weeks after media reports claimed that UniCredit was planning a radical restructure that would ring-fence its Italian business from its international operations. Local media suggested UniCredit was looking into setting up a Germany-based holding company for its foreign assets, a move that would allow the bank to take advantage of the EU's system for handling banking crises.

Separating the domestic business would also allow the bank to fund its non-Italian banking assets more cheaply, because it would create distance from the struggling Italian banking sector, according to the reports.

Responding to an analyst question about the reports, Mustier did not give any details on what shape a group restructuring might take, but said it was important for the bank to be "immunized from economic shocks."

"We don't expect there to be a shock, but it is better to be prepared," he said during the call.

"We are working on the corporate structure. We want the flexibility to react as needed."

A new business strategy will be presented at the bank's capital market day in London in December, Mustier said.

NPE reduction, cost cutting

Italy fell into recession in the fourth quarter of 2018, and S&P Global Ratings has warned that banks in Italy face greater economic risks than their European peers.

Commenting on deleveraging plans, Mustier said UniCredit will ramp up disposals of bad loans in the second half.

Gross nonperforming exposures at a group level stood at €34.4 billion as of the end of the second quarter, compared with €42.6 billion in the same period in 2018.

The bank reduced the number of full-time employees by 274 during the quarter to 84,836, and is now ahead of headcount reduction targets for 2019, Mustier said. UniCredit set itself a goal in late 2017 of cutting the number of full-time employees to 87,000.

Media reports have suggested that UniCredit is considering a cull of up to 10,000 more jobs as part of a cost-cutting strategy.

Mustier said the reports were "damaging for our staff" and that any further cuts would be carried out in a "socially responsible manner."

UniCredit reported a reclassified second-quarter net profit of €1.85 billion, up 81.0% from €1.02 billion a year earlier. But the bank lowered its full-year revenue guidance to €18.7 billion from €19.0 billion on the back of expectations of a prolonged low interest rate environment.