By Valentina Za and Lefteris Papadimas
MILAN (Reuters) -UniCredit said on Monday it plans to become Alpha Bank's biggest investor by buying a 9% stake owned by Greece's bank bailout fund, as the Italian lender also agreed to acquire most of Alpha's Romanian business.
The moves are part of CEO Andrea Orcel's strategy to grow fee-yielding businesses, after UniCredit parted ways with its in-house fund manager under his predecessor to raise capital.
Under a commercial partnership with Alpha, UniCredit will distribute its own asset management products to the 3.5 million clients of Greece's fourth-largest bank.
Keen to raise the fee portion of UniCredit's revenues, Orcel has set up internally the "onemarkets" fund products business, working with sector leaders such as BlackRock or Fidelity.
Alpha trades at a value of 3 billion euros ($3.2 billion). UniCredit, which is expected to pay a premium for its stake, said the acquisition would not have much effect on its core capital.
Addressing analysts after the announcement, Orcel confirmed a goal to return more than 6.5 billion euros through dividends and buybacks to shareholders from its 2023 profit, which UniCredit sees above 7.25 billion euros.
Asked about the long-term strategy in Greece, Orcel said nothing was on the cards "in the foreseeable future".
"How am I going to convince people that this is not the first step towards an acquisition of Alpha? For me having a partnership ... on the client side with Alpha ... without consuming any capital and bringing in the quality revenue without anything else ... is the way to go," he said.
UniCredit forecast more than 100 million euros in additional net profit over the medium term after the changes, and Orcel told analysts that Romania accounted for most of this.
Citi analysts said costs at UniCredit's Romania operations amounted to around 38% of income in 2021, while Alpha's unit had a 75% cost-to-income ratio.
UniCredit will pay Alpha 300 million euros to own 90% of the bank resulting from the merger of their Romanian units.
Alpha will retain 9.9% of what will become Romania's third-largest lender with 12% of total assets.
"(It) makes sense to seal this partnership with the acquisition of a significant, but limited, stake in Alpha ... that is what it is, no more," Orcel said.
UniCredit has submitted an offer to the Hellenic Financial Stability Fund (HFSF), which had been expected to start selling in the autumn bank shares it acquired as it helped the sector to restructure in the years following the global financial crisis and Greece's sovereign debt crisis.
Greece has been attracting significant investment as its economy strengthened after the crisis, prompting S&P Global on Friday to upgrade the country to investment grade.
The HFSF said it would soon examine UniCredit's proposal, which was welcomed by central banker Yannis Stournaras.
If the application fails, UniCredit will buy up to 5% of Alpha on the market over the next two years.
Under the partnership with Alpha, UniCredit is also acquiring 51% of Alpha's wholly-owned life insurance unit AlphaLife Insurance Company.
The Romania deal will add a percentage point to Alpha's capital, while the impact on UniCredit's core capital will be a negative 15 basis points.($1 = 0.9448 euros)
(Reporting by Valentina Za in Milan and Lefteris Papadimas in Athens; Editing by Alexander Smith, Sharon Singleton and Jan Harvey)