BPER’s new plan overshadowed by Italy’s debt risk

  • Italian banks plunge as sovereign risk takes center stage after ECB
  • Targets a payout ratio of 50% and a profit of 800 million euros in 2025
  • Bets on the costs of selling insurance, heritage products

MILAN, June 10 (Reuters) – Italy’s fourth-largest bank BPER Banca (EMII.MI) pledged on Friday to double its profits and return at least 1 billion euros ($1 billion) to investors by 2025 , although it failed to allay concerns over Italy lenders that sent its shares tumbling 12%.

BPER presented its 2022-2025 business plan amid a 7% drop in Italian banking stocks (.FTITLMS) the day after the European Central Bank announced serious inflation concerns, prompting markets to rise rate hike forecasts.

The reversal expected from July in the ECB’s monetary stance, of which indebted Italy has been one of the main beneficiaries, pushed risk premiums on Rome government bonds against German Bunds on Friday. safer to a new two-year high.

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Describing targets which broker Bestinver described as “aggressive”, BPER said it would close more than a quarter of its branches and focus on high-paying businesses like insurance and wealth management to boost its profits around 800 million euros, against 384 million last year. year.

“Our plan is an uncommon plan with many growth engines,” CEO Piero Luigi Montani told analysts. “We face several uncertainties, but we will overcome them and, whatever happens, it will be a success.”

Citi analysts noted that BPER’s shares had been strong ahead of the presentation of its new plan and was hampered by several moving elements of the plan and large provisions for loan losses, among others; “but we believe the plan is well thought out [out] and has a high return on capital,” they said.

BPER, which major shareholder insurer UnipolSAI (US.MI) has steered on an expansion path as it builds a broad distribution network for its products, will set up a dedicated division to oversee the insurance business and increase non-life premiums by 80%.

Even as the European Central Bank prepares to buck the trend after years of negative rates that have hammered banks’ lending revenues, BPER said it will increase net fees to account for half of its overall revenues in 2025, compared to 45% in 2021.

The 2022-2025 plan comes after BPER agreed to buy struggling rival Carige this year. He expected cost savings of 155 million euros once the acquisition was finalized.

BPER purchased around 600 branches as part of Intesa Sanpaolo’s 2020 takeover of UBI and said, including 140 recently closed branches, it would cut 600 outlets by 2024 and triple digital investments to over half a billion euros.

It also plans to raise funds from the sale of non-core assets, including its loan collection unit, to add 500 million euros to its capital base.

Sweden’s Intrum (INTRUM.ST), Elliott-backed Gardant, together with public bad debt specialist AMCO, Softbank-backed doValue (DOVA.MI) and DK-backed Prelios, all submitted claims last week. non-binding offers for the recovery of bad debts from BPER. company, three sources told Reuters.

The sale will lead some 140 employees dedicated to the collection of bad debts to leave the group as part of 3,000 overall staff departures partially offset by 1,450 new hires.

The BPER said it would offload 2.5 billion euros in bad loans as part of the agreement to reduce bad loans to 3.6% of total loans in 2025, from 4.9% in the first trimester.

($1 = 0.9401 euros)

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Editing by Elaine Hardcastle

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