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The biggest Italian bank Unicredit needs 13 billion EUR to compensate for write-offs of bad loans, so it launched the largest capital increase in the history of the Italian economy. The shareholders will exchange every share for 2.6 new shares issued at price of 8.09 EUR. Only a week ago the largest Italian bank agreed with unions to cut 3,900 jobs in the country. With this agreement, the talks in Italy, Germany and Austria are completed. In December, the CEO of UniCredit, Jean Pierre Mustier, who took over in July, announced cuts of 14,000 jobs by 2019.

For 2016, UniCredit expects a loss of almost 12 billion EUR, due to negative single effects. Without them, the bank would have a profit. Other details the company will present on February 9.

With the emission, the bank accelerated the pace of its restructuring. The capital increase was to begin one week after the presentation of the results for 2016. In the next five weeks to March 10, the bank will offer its shareholders a discount on the current rate of 38%. In the last capital increase of 7.5 billion EUR five years ago, the discount was 43%.

The market expected what price would be set for 1.6 billion new shares, which will be offered in Germany and Poland. One new share will cost 8.09 EUR. The shareholders will be able to exchange every 5 shares for 13 new shares. The banking consortium will guarantee the capital increase, because the bank is the only systemically important for the Italian financial system. The capital increase is at the heart of this strategy. The goal is by 2019 the ratio of the base Tier I to pass over 12.5% ​​from 10.8% at the end of September. The Bank will not pay dividends for 2016 and targets a dividend ratio of 20% to 50% of profits in the coming years.

In addition, Unicredit will accelerate the reduction of bad loans. The European Central Bank insisted the bank to present by the end of February a strategy for how will deal with problem loans, which are worth 17.7 billion EUR. Some analysts showed surprise at the earlier launch of the capital increase. According to them, the management wants to take advantage of the good market environment and to anticipate the presentation of the quarterly results, which could disappoint.

Based on preliminary calculations, UniCredit expect a loss of 11.8 billion EUR, as preliminary estimates earlier this week.

The problem with bad loans could lead to a one-time negative impact on net profit for the fourth quarter. The restructuring will result in removal from 12.2 billion EUR, and this will affect the performance of the year.

