Italy’s largest bank Unicredit plans to slash 14,000 jobs over next two years

The overhaul process would also include the closure of 944 of its 3,800 branches

UniCredit also plans to close about a quarter of its 3,800 branches (Getty)

Unicredit, Italy’s largest bank by assets, has announced plans to slash 14,000 jobs or about 11 per cent of its staff and raise €13bn (£10.9bn) over the next two years, in a bid to calm investors at a crucial time for the country’s troubled banking sector.

Unicredit plans to use the record share issue in the first quarter for 2017 to help remove almost €18bn of bad debt from its balance sheet and boost profitability.

The overhaul process would also include the closure of 944 of its 3,800 branches, mostly in Italy, as well as simplifying and modernising its IT systems.

The bank’s announcement comes at a difficult time for Italian lenders and the economy with Monte dei Paschi di Siena, Italy’s third largest bank, at risk of failure and early elections expected next year.

Shares in Unicredit, one of the worst performers in European bank stress tests carried out in July, have fallen by more than a half this year and the bank is now worth just under €15bn.

UniCredit chief executive Jean Pierre Mustier said the cuts and fund raising was a “pragmatic plan based on conservative assumptions”.

He added: “We are taking decisive actions to deal with our legacy issues to improve and support recurring future profitability to become one of Europe’s most attractive banks.”

The rights issue, the biggest-ever in Italy, will be launched early next year, and will be led by Morgan Stanley, JP Morgan and other investment banks. UniCredit has been offloading assets as it seeks to tidy up a messy balance sheet.

UniCredit shares jumped 2 per cent on the news, with traders saying its plan seemed realistic. The turnaround, though, would involve €12.2bn in one-off losses in the fourth quarter, including loan writedowns and restructuring costs.

The success of the plan hinges on investors believing it will be a long-term solution. The bank has already raised €14.5bn since the global financial crisis struck in 2008.

Additional reporting by Reuters