LDN - Business

UniCredit raises dividend, bad loan reduction goals

[December 12, 2017]

MILAN (Reuters) - UniCredit on Tuesday raised its 2019 dividend payments target and bad loan reduction goal as the turnaround of Italy's top bank under new boss Jean-Pierre Mustier moved forward.

UniCredit picked the French banker, 56, as its chief executive in mid-2016, tasking him with restructuring the lender, which for years had been dogged by concerns over its weak balance sheet.

Its shares have gained around 80 percent since his appointment.

UniCredit confirmed its 2019 targets for a net profit of 4.7 billion euros ($5.54 billion) and a best-quality capital ratio of more than 12.5 percent.

Mustier has been selling businesses, cutting jobs and shutting branches to strengthen UniCredit's balance sheet. He also pulled off a 13 billion euro ($15.3 billion) share issue, Italy's biggest cash call, in February to bolster the bank's financial strength.

The bank completed on Tuesday the last leg of a key 17.7 billion euro bad loan sale, reducing its holding in the portfolio to below 20 from 49.9 percent, in a move that will add 10 basis points to its core capital ratio.

It said it would cut an additional 4 billion euros in gross impaired debts by the end of 2019 so that they would account for 7.8 percent of total loans by then, down from a previous 8.4 percent goal set in December 2016.

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Unicredit bank logo is seen on a banner downtown Milan, Italy, May 23, 2016. REUTERS/Stefano Rellandini/File Photo

Italian banks are under increasing pressure from the European Central Bank to get rid of loans that turned sour during a harsh recession.

Shares in smaller rival UBI Banca <UBI.MI> dropped 2.8 percent on Tuesday after the lender warned in a bond document the ECB had asked it to submit a new, more ambitious bad loan reduction plan.

Shares in UniCredit rose 0.3 percent by 0823 GMT against a slightly negative sector <.FTIT8300>.

UniCredit now plans to pay out to shareholders 30 percent of its 2019 profits, up from 20 percent previously.

It also raised its post-2019 dividend payout ratio to up to 50 percent, provided its core capital ratio stays above 12.5 percent after the impact of regulatory changes is accounted for.

(Reporting by Valentina Za; editing by Agnieszka Flak and Louise Heavens)

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