Italian bank Monte Paschi di Siena (BMPS) today announced plans to cut 2,600 jobs and close around 500 branches in a bid to turnaround the troubled lender.
BMPS, the world's oldest bank still operating today, unveiled the overhaul as it posted a net loss of 1.15 billion euros (USD 1.3 billion) in the third quarter, sparking volatile trading in its shares.
Losses linked to loans led to the result, which compared to a net profit of 255.8 million euros in the same period a year earlier, the bank said.
But under new chief executive Marco Morelli, the bank now aims to cut costs by closing about a quarter of its 2,000 branches and slashing personnel costs by nine percent over three years.
It targets net profit above 1.1 billion euros in 2019 under the vast three-year overhaul, it said.
Italy's third-biggest lender will also seek improvements of its loans and risk reduction.
The bank, which last year posted its first net profit in five years, will also rein in administrative costs and kickstart its commercial business by speeding up the digitisation of services for customers, it announced.
The bank was found to be Europe's weakest major bank in tests undertaken by the European Banking Authority at the end of July and its finances have raised concerns for the broader Italian banking sector.
The BMPS overhaul "is the kind of bitter pill the Italian banking sector as a whole better get used to taking if it wants to avoid being the biggest threat to the eurozone's stability," said Spreadex analyst Connor Campbell.
The bank had announced a rescue plan in late July that entailed offloading non-performing loans worth 27.6 billion euros into a separate entity, while seeking investors to inject new capital of up to 5.0 billion euros into the bank.
It aims to carry out the capital increase by the end of this year, it said today.
The operation will be launched "in the seven to eight first days of December if the market conditions are met", Morelli, who took over the helm last month, told reporters.
Bad loans at BMPS rose to 45.6 billion euros at the end of September.
Italy's troubled lenders overall hold 360 billion euros of bad loans -- about a third of the eurozone's total.
Its CET1 fully loaded capital ratio -- the benchmark followed by regulators for the amount of funds a bank has available to absorb losses -- slid to 11.5 percent in September, from 12.1 percent in June.
Shares in the bank have collapsed by more than 70 percent since the start of the year, but had firmed in recent days on the Milan stock exchange, to close more than 28 percent higher yesterday, at their highest level since early July.
Volatility returned after today's announcements, and the shares closed down nearly 15 percent.
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