UniCredit Hit by $8.6 Billion Bad-Loan Charge -- Update

By Giovanni Legorano

ROME--Italian lender UniCredit SpA said Thursday it will book EUR8.1 billion ($8.57 billion) in provisions for bad loans, as part of a balance-sheet cleanup it unveiled in December.

The bank said last month it planned to launch a EUR13 billion rights issue by the end of March--one of the largest Italy has seen--as well as cutting thousands of jobs and selling a large chunk of bad loans.

The move follows a tumultuous year for Italian banks, which have been battered by investor anxiety about the solidity of a sector that struggles with bad loans and low profitability. Italian banking stocks have fallen more than 30% in the past year.

At the end of last year, the Italian government set up a fund to prop up the banking sector, setting the stage for a bailout of Europe's most troubled lender, Banca Monte dei Paschi di Siena SpA.

In remarks issued before the start of a shareholders assembly called to approve the plan, UniCredit said the measures weren't requested by any supervisory authority. The bank will book the provisions in its fourth-quarter earnings.

In December, the bank said it planned to shed EUR17.7 billion of gross bad loans by bundling them into securities to be sold to investors.

The bank also said last month it would cut an additional 6,500 jobs by 2019 on top of those already planned, bringing the total reductions to 14,000, or 10% of its workforce.

The redundancies will require the booking of EUR1.7 billion in costs for the last quarter of 2016, UniCredit said Thursday.

Shares in UniCredit were down 1.2% Thursday morning.

Write to Giovanni Legorano at giovanni.legorano@wsj.com

(END) Dow Jones Newswires

January 12, 2017 05:41 ET (10:41 GMT)

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