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June 30, 2008updated 04 Apr 2017 1:14pm

UniCredit looks to dominate CEE

UniCredit plans to have around 12,000 branches by the end of 2010, cutting some branches in Italy but opening 1,287 in Central and Eastern Europe (CEE) as it looks to exploit its now-dominant position across the CEE region. Over the course of the next two years, UniCredit wants to up branch numbers in CEE by an average of 36 percent to 4,846 outlets, with a particular focus on Turkey, Russia, Romania and Ukraine (upping branch numbers in these four by 60 percent) The group is also planning to have 50 percent of its 179,853 staff based in CEE markets, up from the 44 percent currently, reducing headcount in Italy, Germany and Austria by 9,000.

By RBI editorial

UniCredit plans to have around 12,000 branches by the end of 2010, cutting some branches in Italy but opening 1,287 in Central and Eastern Europe (CEE) as it looks to exploit its now-dominant position across the CEE region.

Over the course of the next two years, UniCredit wants to up branch numbers in CEE by an average of 36 percent to 4,846 outlets, with a particular focus on Turkey, Russia, Romania and Ukraine (upping branch numbers in these four by 60 percent). The group is also planning to have 50 percent of its 179,853 staff based in CEE markets, up from the 44 percent currently, reducing headcount in Italy, Germany and Austria by 9,000.

Unveiling his group’s Strategic Plan 2008-2010, chief executive Alessandro Profumo stated UniCredit already has by far the biggest CEE franchise of any bank, with total CEE assets of €118 billion ($185.9 billion), a net profit of €2.13 billion and a presence in 20 countries, including untapped markets such as Azerbaijan, Bosnia and Herzegovina, Kazakhstan, Latvia, Lithuania and Tajikistan.

The banks with the next two largest CEE franchises, Austria’s RZB and Erste Group, have 3,015 and 1,915 branches in the region, respectively, and assets of €72.7 billion and €72 billion, according to UniCredit’s figures.

Through to 2010, Profumo forecast that Russia would grow the most, with a pre-tax profit CAGR of 28.5 percent. The next biggest risers would be Ukraine (25.5 percent), Slovenia (19.1 percent), Bosnia and Herzegovina (17.9 percent), Bulgaria (15.8 percent), Slovakia (13.6 percent) and Poland (12.5 percent). Kazakhstan, a country in which UniCredit says it has a 7.4 percent market share of branches, would grow the least, at a CAGR of 1 percent.

The aim is to not just grow branch numbers but also improve productivity: revenues per customer in CEE are forecast to rise to €460 by 2010 from €340 in 2007, compared to €1,065 in UniCredit’s Western European markets. Profumo said its earnings per share target was on track at €0.52-€0.56 for 2008 and said it aimed for compound annual EPS growth of 10 to 12 percent through to 2010.

In a statement, UniCredit said: “The business plan is built on the fundamental belief that in times of stress, banks with a strong franchise and a well diversified revenue base are best protected from uncertainties brought along with such crisis… The industry is going back to basics with a strong emphasis on customer-relationships, local distribution networks and more traditional products. Geographically the differences between more and less mature banking markets will continue to be striking: for the foreseeable future, the CEE region will continue to grow much faster than Western Europe.”

In order to fully leverage on its economies of scale, UniCredit will also build up a multinational IT platform: over the next three years the commercial banking systems in Italy, Germany, Austria and Poland will migrate to one sole group platform (Eurosig). This harmonisation will, said the bank, significantly reduce IT expenses and back-office costs for the network.

Despite the robust investment in CEE – which includes projects like 2,000 new deposit-taking ATMs for the region – direct costs are forecast to rise just 6 percent, from €4.9 billion (29.4 percent of group costs) in 2007 to €5.2 billion (28.5 percent) by 2010. And the overall cost-income ratio of the UniCredit Group is expected to fall, from 56 percent to 51 percent in 2010.

UniCredit – Q1 2008 net profit split,

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