In a series of economic storms that has hit Eurozone’s third largest economy following prime minister Matteo Renzi's resignation, Italy's biggest bank plans to raise €13 billion ($13.8 billion) and slash thousands of jobs to boost its finances.
The sweeping overhaul disclosed Tuesday by UniCredit SpA will push the total number of expected job losses at the Milan-based bank to 14,000 by 2019 an estimated 10% of its employees. The layoffs is expected to reduce costs by at least €1.1 billion ($1.2 billion). The bank plans to shift €17.7 billion in bad loans off its balance sheet by packaging and selling them to investors with a follow -up plan to cater for €12.2 billion in the fourth quarter. As part of its survival efforts, Unicredit (UNCFF) also sold some of its businesses. In some kind of relieve from these strategic initiatives, shares in the bank jumped 5% in Milan although is already lost about 50% of its value so far this year.
Italy's banking sector has become a priority concern for investors in recent months. The country has more bank branches than pizzerias, according to the OECD, and they struggle with high costs and low returns. They're also engrossed in a dark shadow of bad loans. The country's banks have accumulated $380 billion of non-performing loans during years of recession.
The most critical case is Monte dei Paschi di Siena, the world's oldest operating bank. It's at the moment in a battle to raise €5 billion ($5.3 billion) after it failed an official test of its financial health earlier this year. If the bank fails to convince investors to raise the cash, a state bailout might be inevitable.
Political and economic uncertainty following the resignation of Prime Minister Matteo Renzi appears to have kept investors from signing on the dotted line. Still, Monte dei Paschi is trying one more time to save itself. Renzi stepped down after voters rejected constitutional reforms he had championed. His departure has plunged Italy's political system into disarray and raised the likelihood of early elections in which Eurosceptic parties could make major gains.
 Reference:CNN World News