UniCredit to Deepen Cuts as Inflation Costs Run Over $1 Billion

UniCredit SpA plans to cut an additional €500 million in costs by reducing complexity, in an effort to offset higher-than-expected inflation.

(Bloomberg) — UniCredit SpA plans to cut an additional €500 million in costs by reducing complexity, in an effort to offset higher-than-expected inflation.

The Italian lender is speeding up the automation of processes, further reducing layers of bureaucracy and middle management, reviewing outsourcing contracts and investing in digitalization and efficiency, according to people familiar with matter.

The measures seek to counter the impact of stubborn inflation on costs, which the lender now estimates to exceed €1 billion for the duration of its three-year strategic plan, more than double its initial forecast, the people said, asking to not be named discussing confidential information.

A spokesman for the bank declined to comment. 

Since taking over in April 2021, Chief Executive Officer Andrea Orcel has worked to reduce the ranks of top management and cut back on the co-head structures that were a legacy of his predecessor Jean Pierre Mustier. The bank, which has a presence in 13 countries, earlier this month brought in Ali Khan to lead its digital transformation and Gianfranco Bisagni as chief operating officer, as Orcel pushes ahead with a management overhaul to speed up the transformation.

The current strategic plan, announced at the end of 2021, was the first under Orcel. It included a €500 million absolute cost reduction by 2024, net of a €500 million inflation impact and €600 million in additional investments, in order to fund one of the most ambitious shareholder payout plans among European lenders.

Even in a higher-inflation environment than the one used to set the bank’s targets in 2021, UniCredit aims to reach those cost targets while still funding the digital transformation, investing in the business, and preserving the bank’s revenue, according to the people. 

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UniCredit is accelerating investments in digitalization and technology, harmonizing procedures in all countries where it operates, the people said. It’s also renegotiating external procurements at a group level, and reducing the number of outsourcing arrangements, they said. 

As part of the plan UniCredit will further reduce the number of levels of middle management at the bank’s corporate center, hiring younger people and relocating employees to more profitable business areas through training programs, they said. 

In his two years at the helm, Orcel already cut headcount by about 7,700, or roughly 10%, filings showed. The reductions were mostly made in Italy, with 2,900 net cuts, followed by 1,600 net exits in Germany and 1,200 in Austria. Over the period, the bank also hired about 10,800 people for its network and digital functions.

UniCredit’s operating costs fell in the first quarter while revenue increased 18%, “confirming the group’s ability to structurally reduce the cost base while protecting revenue growth,” Orcel said in May. 


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