UniCredit SpA plans to open 900 new branches in Central and Eastern Europe to significantly bolster its role as the leading bank in the region, Dow Jones cited Chief Executive Federico Ghizzoni as saying at a presentation in London on Thursday.
"We are ready to grow. The intention of the group is to allocate more capital to Central-Eastern Europe," Ghizzoni said.
The 900 new branches, which will be added to UniCredit's 3,860 branches in the region, will be opened in the next five years, said the CEO.
Of these, 300 each are set aside for Turkey and Romania, 120 will be opened in Hungary and the remaining 180 are mainly split between Russia, Bulgaria and Serbia.
Ghizzoni also said the bank was not "thinking of increasing its capital" and that the expansion would not require it to do so. Many of UniCredit's subsidiaries in the region are self-funding, but the Milan-based bank is willing to provide group capital to divisions where that is cheaper than local funding terms, he said.
Due in part to a quick shift towards stricter cost management starting in 2009, UniCredit is currently "overcapitalized" in some countries, the new CEO said when asked if sustaining and growing activity in the region would require an overhaul of UniCredit's core capital strategies.
UniCredit’s recently published quarterly earnings report showed that the bank’s pre-tax profit grew in Q3 to nearly its threefold from the base period to EUR 366 m.
The flash report shows that UniCredit accounted the first instalment of the Hungarian bank tax in the third quarter. In view of that, the EUR 19 m (cc. HUF 5.5 bn) IFRS pre-tax profit indicates that the bank’s profitability is above average in the Hungarian banking sector (in Q3 the sector incurred losses of nearly HUF 60 bn, according to Hungarian Accounting Standards after the accounting of the first half of the special levy.)
Nevertheless, assuming (on the basis of the government’s long-term projections) that the bank tax will remain in effect for a longer period, opening 120 new branches appears to be an overly bold undertaking. According to end-2009 data, UniCredit had 133 branches at the end of last year. The plans of Hungarian banks (e.g. layoffs) are quite contrary to what UniCredit is aiming for and even according to the central bank’s (NBH) Report on Stability, Hungary does/will be at a disadvantage when the parent banks decide how to allocate capital among their subsidiaries. The question is what grade of expansion in its business volume would UniCredit attach to its objective of nearly doubling the number of branches (and whether it would resort to means of merger as well) and how it would schedule its goals for the next five years.
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