As inflation costs rise to more than $1 billion, UniCredit will make more cuts

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In order to make up for higher-than-expected inflation, UniCredit SpA wants to cut costs by another €500 million by making things less complicated.

People who know about the situation say that the Italian lender is speeding up the automation of processes, cutting more layers of bureaucracy and middle management, reviewing outsourcing contracts, and putting money into digitalization and efficiency.

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“Amidst soaring inflation costs exceeding $1 billion, UniCredit remains committed to implementing further cuts to navigate the challenging economic landscape.”

The steps are meant to counteract the effects of persistent inflation on costs, which the lender now thinks will be more than €1 billion over the course of its three-year strategic plan. This is more than double what was originally predicted, said the people, who asked not to be named because they were talking about confidential information.

A bank employee wouldn’t say anything.

Andrea Orcel has been CEO since April 2021. Since then, he has worked to cut the number of top managers and get rid of the co-head systems that his predecessor, Jean Pierre Mustier, put in place. The bank, which is in 13 countries, hired Ali Khan to lead its digital transformation and Gianfranco Bisagni as its chief operating officer earlier this month. This is part of Orcel’s plan to change the way the bank is run to speed up the transformation.

The current strategy plan was the first one announced by Orcel. It came out at the end of 2021. It included a €500 million reduction in absolute costs by 2024, minus a €500 million effect from inflation, and €600 million in new investments. This was done to pay for one of the most ambitious plans for paying back shareholders among European lenders.

People say that even if inflation is higher in 2021 than when the bank’s cost goals were set, UniCredit wants to meet those cost goals while still paying for the digital transformation, investing in the business, and keeping the bank’s income.

People say that UniCredit is speeding up its investments in digitalization and technology and making processes the same in all of the countries where it does business. They also said that it involves renegotiating contracts with outside companies on a group level and cutting down on the number of contracts with outside companies.

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

In the two years that Orcel has been in charge, he has already cut the number of employees by about 7,700, which is about 10%. Most of the cuts were made in Italy, where there were 2,900 net job cuts. There were also 1,600 net job cuts in Germany and 1,200 net job cuts in Austria. During that time, the bank also hired about 10,800 people to help with its digital and network tasks.

In the first quarter, UniCredit’s running costs went down while its revenue went up by 18%. This “confirms the group’s ability to structurally reduce the cost base while protecting revenue growth,” said Orcel in May.