In an announcement this Wednesday Italy’s largest bank by assets, Unicredit said that up to 18,200 jobs would be cut as part of cost-cutting efforts

The three year plan is part of an overhaul which aims to avoid the need for a capital increase. Milan-based UniCredit will cut costs by approximately €1.6 billion by 2018, with most reductions due to hit commercial banking operations in Austria and Germany, writes Chad Bray for The New York Times.

Back Office Jobs London Unicredit

Job cuts part of overall restructuring plan at UniCredit

A further part of the planned overhaul involves taking direct control of its operations in Eastern Europe. Underperforming businesses will be revamped or shut down, including retail banking in Austria and leasing business in Italy.

Other European banks have announced similar programs as they struggle to meet strict European Union regulatory requirements that require them to hold more capital. UniCredit has been criticized by investors worried about the possibility that regulators may force it to raise more capital.

Credit Suisse and Standard Chartered are among a number of lenders that have announced plans to raise capital and cut jobs. Quarterly profit at UniCredit declined almost 30% year on year in Q3, falling from €722 million to €507 million.

Share prices rises slightly after announcement

After the announcement shares in UniCredit rose to €6.02 in afternoon trading in Milan, an increase of 1.7%. The job cuts will affect approximately 14% of UniCredit’s total workforce of around 126,800.

According to the bank around 6,000 of those losses will derive from the sale of its business in Ukraine and a planned joint venture with the asset management division of Banco Santander.  Jobs will also be cut in Austria, Germany and Italy.

UniCredit also revised a number of goals, revealing that it has an annual profit target of €5.3 billion and is aiming for an 11% return on tangible equity by 2018. In Q3 net interest income fell 6.3% to €2.93 billion, down from €3.12 billion in Q3 2014. Net interest income measures what a bank earns from lending after taking away payouts on deposits and other liabilities.

Operating costs rose 1.6% to €3.38 billion in the third quarter, up from €3.33 billion in Q3 2014. Results were affected by impairments for loans, which increased by 33% to €1.01 billion in Q3, up from €754 million in Q3 2014.