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The md goes into detail on the complex operation of a capital increase

21.11.2011

"Additional 72 billion from UniCredit to small enterprises and families"

Ghizzoni: voluntary redundancies in Italy but in Germany and Austria too

by ROSARIO DIMITO
ROME

Mr Federico Ghizzoni, the Stock Exchange is still penalising the Italian banks, and you more than others with the drop of 4.46% at closing yesterday. How do you explain that?
"With regard to our case it is obvious that there is volatility, we expected that, the plan is strategic for us and the market is assessing us".

But the instability is continuing and the spread has risen above the 530 mark since politically Italy is still not out of the tunnel: is this the reason why there is still tension?
People are waiting for the government to be formed and the expected reforms introduced: I think that Mario Monti's solution is satisfactory and I wish him well in starting out on a positive foot with the birth of the new government".

Would you illustrate the main guidelines of the new plan up to 2015: where is Unicredit heading?
We want to focus exclusively on our commercial banking business with the capital resources and the support of our clients and of our franchises. The capital increase was a decision made not only to meet the regulatory requirements for adequate capital but also to satisfy the development ambitions of the bank. This is not a defensive reply; on the contrary, with a capital this large we can serve our clients better and continue to extend credit in Italy and in Europe. Another guideline focuses attention on Italy, a key market which will continue to be so in the plan and we intend to invest in our country. The plan calls for 33 billion in additional credit to small enterprises and about 39 billion to families split between mortgages and consumer credit. We think that Italy will return to profitability levels in keeping with our ambitions: with a return on invested capital (roic) of 12% spread over the group level, Italy should come into line with this trend.

You depreciated 10.6 billion of goodwill and closed your accounts in September with a loss of 9.3 billion. Was that inevitable since there was on the table a softer solution forecasting a projection of higher perspective profits?
"There were three reasons for doing that: the current economic trend had a 60% impact on this decision, the new European accounting rules and a budget without surprises in the future. And then the announcement of the plan also obliged us to adjust the values".

The increase was 7.5 billion in cash. Wasn't that too much in view of the market situation?
"That figure was adjusted and approved unanimously by board of directors. It puts the group in a leading position at the level of capital in Europe. The market will appreciate our decision and therefore the operation will be successful. It is completely underwritten by a consortium of banks".

The banks wanted a discount of 35--45%, was that high?
"The conditions were not determined".

The new Unicredit wants to reposition itself on the retail model and devote itself to families and enterprises. But what does that change considering that the One4C plan was cut on the commercial part?
48 billion in weighted assets were identified for risk (rwa) and which will be reduced to zero since they related to businesses which are no longer core businesses: 20 billion in investment banking assets - jargon “markets” - , 20 billion of business in credit activities not relating to clients, another 8 in commercial and long term real estate and leasing in credits not connected to clients".

Is it not accidental that in wanting to concentrate on commercial banking you actually abandoned the divisional model?
"What we are working on is to create synergies in the individual banks among their various divisions. In Italy private and corporate banking will cooperate to acquire availability and liquidity from the company's clients".

You announced that there would be a revolution in the network where there would be a hub branch to govern groups of branches. Would you please clarify that?
"The model was implemented on 1 November: we have a hub branch and then there are 4 or 5 satellite branches reporting to the main one. The hub manager was delegated responsibility to manage his territory and this means we can be closer and can give faster replies".

Italy is one of the main focuses where personnel reductions of 5200 people is planned between 2011 and 2015: we gather that about 2000 will come from the Capitalia plan and so will the new redundancies be only 3200?
"Redundancies of 5200 are planned, and a good part of these are already included in union agreements signed a year ago; as for the rest, we are convinced we can reach new agreements along the lines of the past".

Why are you reducing personnel only in Italy?
"In Western Europe we have 7400 cuts and 1200 new hires in Central Eastern Europe: the net figures is 6500 which seems identifiable with the number in Italy but there are small reductions in Germany and Austria too".

Again in Italy you foresee organisational streamlining with possible rationalisation of businesses. Which ones?
"The central functions of the holding will undergo significant streamlining: we are merging 16 companies into one in the back office and it areas".

Unicredit is still an international colossus with bases not only in Italy but in Germany, Austria, Turkey, Russia and the Czech Republic. In other areas you will be taking a step back, however. Where?
"We will invest in these growing markets, and in others we are leaders, in Croatia, Bulgaria and Bosnia, for example, but since they do not have high potential, there are no significant investments planned.

Is Pioneer still a pivot for growth?
"A month ago it approved a relaunch plan. It is based on two trends: the captive one serving the commercial network and one for sales development to institutionals".

Soon you will be expanding in China. What are your plans?
"We will open a third branch in Canton and we have a full licence. We are one of the few banks to have one".

The increase in capital will attract new partners. Is it possible that you are not involved in talks with the sovereign funds of Qatar and China?
"We are not looking for sovereign funds. If they want to invest, they are welcome.

Have you received commitment from the foundations forming the historic nucleus of partners?
"It is our conviction that the major shareholders are supporting us in the operation".

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