BPER's new plan overshadowed by Italy's debt risk

By Andrea Mandala and Valentina Za

MILAN (Reuters) -Italy's fourth-largest bank BPER Banca on Friday pledged to double profits and return at least 1 billion euros ($1 billion) to investors by 2025, though it failed to offset concerns about Italian lenders that sent its shares down 12%.

BPER set out its 2022-2025 business plan on the backdrop of a 7% plunge in Italian banking shares the day after the European Central Bank voiced serious concerns about inflation, prompting markets to ramp up rate hike forecasts.

The expected reversal from July in the ECB's monetary stance, of which indebted Italy has been one of the main beneficiaries, on Friday pushed the risk premiums on Rome's government bonds versus safer German Bunds to a fresh two-year record.

Outlining goals which broker Bestinver described as "aggressive", BPER, said it would close more than a quarter of its branches and focus on fee-earning activities like insurance and wealth management to drive profits to around 800 million euros, up from 384 million last year.

"Ours is an uncommon plan with many growth engines," CEO Piero Luigi Montani told analysts. "We face several uncertainties, but we'll overcome them and, whatever happens, it'll be a success."

Citi analysts noted BPER's shares had been strong in the run up to presenting its new plan and were being hampered by the plan's several moving parts and significant loan loss provisions among other things; "but we believe the plan is well thought [out] and has high capital return," they said.

BPER, which top shareholder insurer UnipolSAI has steered onto an expansion path as it builds a wide distribution network for its products, will set up a dedicated division to oversee the insurance business and boost non-life premiums by 80%.

Even as the European Central Bank prepares to reverse course after years of negative rates which have hammered banks' lending income, BPER said it would boost net fees to account for half its overall revenues in 2025, from 45% in 2021.

The 2022-2025 plan comes after BPER agreed to buy ailing rival Carige this year. It expected cost savings of 155 million euros once it had completed the acquisition.

BPER bought around 600 branches as part of Intesa Sanpaolo's UBI takeover in 2020 and said, including 140 branches recently closed, it would cut 600 outlets by 2024 and triple digital investments to more than half a billion euros.

It also plans to raise money from the sale of non-core assets, including its loan recovery unit, to add 500 million euros to its core capital.

Sweden's Intrum, Elliott-backed Gardant in tandem with state-owned bad loan specialist AMCO, Softbank-backed doValue and DK-backed Prelios last week all submitted non-binding bids for BPER's bad loan collection business, three sources told Reuters.

The sale will lead to some 140 employees dedicated to recovering bad loans to exit the group as part of 3,000 overall staff exits to be offset in part by 1,450 new hirings.

BPER said it would offload 2.5 billion euros in bad debts under the deal to cut impaired loans to 3.6% of total lending in 2025 from 4.9% in the first quarter.

($1 = 0.9401 euros)

(Editing by Elaine Hardcastle)