UBI Plans to Pay Out 40% of Profit in Dividends in 2022 Plan

(Bloomberg) --

Unione di Banche Italiane SpA, Italy’s fifth-largest bank, plans to pay out 40% of net income to shareholders on average over the course of its three-year strategic plan and may make an extra payment if capital is strong enough.

UBI expects to eliminate about 2,030 positions and close 175 branches through 2022, the Bergamo, Italy-based bank said in a statement on Monday. That’s about 10% of the staff, according to data compiled by Bloomberg. The bank’s goal is to reduce costs to 58.1% of income from the current 62.1%.

The bank sees net income more than doubling by 2022 and it plans to cut provisions for bad loans and invest in digital technology, UBI said. It will also focus on strengthening higher-margin businesses such as private and corporate banking.

Chief Executive Officer Victor Massiah has relied on curbing risk and cutting costs to boost profit as sluggish Italian economic growth and prolonged low interest rates hamper core revenue. UBI expects to sell off a package of bad loans valued at about 800 million euros ($867 million) during 2020 and that will be its last large-scale disposal of soured debt.

While UBI is still focused on a standalone strategy, Massiah said the bank may consider merger opportunities. He also said he expects concentration in the banking sector more broadly.

“We are paired with Monte Paschi once a year for the past six years,” the CEO said at a press conference. “I do not rule out that we can eventually have a wedding with them rather than with others. But I can only repeat that creation of value and clarity of governance must be there.”

UBI was up 4.8% in Milan trading at 3.45 euros as of 2:11 p.m. That puts the shares on course for the highest close since September 2018.

What Bloomberg Intelligence says:

“UBI could play a key role in the consolidation of mid-sized Italian lenders and we expect M&A speculation to continue, despite the bank’s focus on standalone growth.”

-- Georgi Gunchev, Jonathan Tice, banking analysts

Click here to review the research

Highlights From the Plan

  • Net income of EU665m in 2022 vs EU251 million in 2019
  • CET1 ratio at 12.5%
  • Return on tangible equity 8.3% in 2022
  • Says dividend may increase if CET1 above 12.5% in 2022
  • Loan-loss impairments seen down to EU387m in 2022 from EU738m in 2019

©2020 Bloomberg L.P.

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